PETALING JAYA: Dialog Group Bhd
’s production sharing contract (PSC) with Petroliam Nasional Bhd (PETRONAS) is expected to help grow the former’s upstream business.
MIDF Research in a report said the PSC is in line with Dialog’s strategy to further develop its upstream capabilities, notably in new field development, rejuvenation and redevelopment of mature oil and gas (O&G) fields.
“This is expected to create a robust platform for generating long-term sustainable revenue from O&G production in the block.
“Furthermore, we anticipate that upstream activities will remain robust, adding to the opportunity for Dialog to strengthen its upstream capabilities,” said the research house.
Dialog announced last week that it had signed a 14-year PSC with PETRONAS for the Raja Cluster Small Field Asset, with its subsidiary Dialog Resources Sdn Bhd holding a 100% stake and acting as the operator.
The contract includes a two-year pre-development phase for feasibility studies, followed by a two-year development phase targeting first production, as well as a 10-year production phase.
MIDF Research said the Raja Cluster is located on the East Coast offshore of Peninsular Malaysia, with three major O&G fields – Rhu, Ara and Janglau.
It added that the Raja Cluster had a close proximity to existing O&G infrastructures such as refineries and storage units.
“This allows for a synergistic development and rapid monetisation of resources, consequently making the development of the field more efficient, operation and cost-wise.
“It should be noted that the cluster is composed of several layers of hydrocarbon packages, which solidified its PSC status.”
MIDF Research said the block in which the cluster resided holds about 290 million barrels of oil equivalent per day of recoverable reserves, indicating that the cluster may have 1% to 5% of the estimated volume.
“However, it should be noted that smaller clusters often have complex fault systems which may require costly development and additional anti-leakage measurements. Nevertheless, given Dialog’s expertise in technical services, we believe this particular risk could be mitigated.”
MIDF Research said it is positive on the PSC, in light of the anticipation that the upstream division will continue to be resilient in the coming years.
“We believe this strategy to expand into the upstream segment will reinforce its position as an integrated technical service provider, locally and regionally.
“Potential downside risk to this PSC include financial commitments during pre-development phase, reservoir risks, labour and expertise risks, changes in raw material prices and uncertainties in economic, political and regulatory conditions.”
