Possible delays in awarding of Sarawak-based PSCs

Petroliam Nasional Bhd (Petronas) and a consortium led by Japan's JXTG Holdings Inc are among the companies interested in buying a stake in India's Bina oil refinery, a source close to the matter said.

Ongoing tussle over O&G rights seen as a dampener

PETALING JAYA: The ongoing tussle between national oil company Petroliam Nasional Bhd (Petronas) and the Sarawak government could possibly lead to delays in the awarding of the production sharing contracts (PSCs) in the state, according to Kenanga Research.

The research house said Petronas had opened up nine exploration blocks for bidding earlier this year, of which four fields are located within Sarawak’s boundaries.

“We anticipate Petronas to continue pursuing the case and the ongoing tussle to persist, possibly delaying awards of

Sarawak-based PSCs,” it said in a report yesterday.

In May, Petronas has challenged the Sarawak government in the Federal Court on its sole authority of the upstream oil and gas activities in the country.

However, the Federal Court had dismissed Petronas’ application to commence proceedings.

On July 1, the Sarawak government said in a statement that it had begun exercising its power under the relevant state laws, and that regulations made under the ordinance on licensing had been approved by the state government and the process of implementing it would commence immediately

In response, Petronas said in a statement that it maintained its stance that it has exclusive ownership of the petroleum resources in Malaysia and is the sole regulator of the upstream sector in the country.

“Moving forward, Petronas will closely monitor the situation, including seeking views and guidance from the federal government, being the sole shareholder of Petronas, in carrying out our duties,” Petronas said.

Meanwhile, Kenanga said that an increase in oil royalties for the state might limit Petronas’ capital expenditure.

“With the recent switch in the government, we believe oil royalties would increase to 20%, which was promised in the Pakatan Harapan’s manifesto,” it said.

Presently, Petronas provides 5% of oil royalties for states that have oil and gas (O&G) resources, namely, Sarawak, Sabah and Terengganu.

Nonetheless, Kenanga reckoned that Petronas’ 2018 capex allocation of RM55bil would continue as it was a long-term plan.

“Once the royalties hike is implemented, we think Petronas’ future capex might be exercised with greater prudence due to lower revenue,” it said.

Despite the oil price increase, Kenanga expected the O&G sector to see modest and volatile earnings.

“We believe the sector is currently at an inflection point whereby contract flows are picking up but earnings, which have been depressed, have not caught up as projects are still in infancy stages,” it said.

Kenanga said crude oil prices would remain stable this year, buoyed by collaborative production cuts among Organisation of the Petroleum Exporting Countries (Opec) and non-Opec members.

It has maintained its oil price forecast at US$65 per barrel and expects activities in the local O&G sector to be focused on maintenance works.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Business , oil , petronas , sarawak


Next In Business News

MDEC appoints Richard Loh as CITO
Stats Dept: Services PPI for 2Q inched up slightly
Ringgit slightly lower on downward oil trend
DoJ: Over US$1b in misappropriated 1MDB funds repatriated to Malaysia
Kenanga maintains 'market perform' on Pavilion REIT
Quick take: Mr DIY falls after earnings miss expectations
Semicon and tech stocks top gainers
Quick take: MI Technovation shares at five months high
MR DIY sales to bounce higher in coming quarters
Trading ideas: MI Technovation, T7, Stella, Focus Dynamics, MR DIY

Stories You'll Enjoy