Petronas to dish out mega contracts?


Petronas may soon dish out mega contracts for local and foreign firms to develop marginal oil fields. And reports say the frontrunners are believed to be Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd.

“The local players will tie up with foreign oil and gas majors in a consortium where the former would have a minor role as it is something new to them. The locals need to learn,” The Star quoted an industry source as saying. (In other words, the locals can’t handle the job themselves?)

According to Kencana’s Annual Report for 2010, Mokhzani Mahathir has a 39 per cent interest in the firm, mostly via Khasera Baru Sdn Bhd.

The Edge cited industry sources as saying oil and gas contracts for the development of marginal oil fields are scarce but these contracts could be worth about RM3 billion. It added:

The Edge had earlier reported that Kencana and its technical partner London-based Petrofac Ltd have emerged as frontrunners to bag the exploration of the Berantai O&G field at PM309.

Kencana is also understood to be ahead of the race for the US$250 million engineering, procurement, construction and commissioning job at Block PM313, the Sepat oilfield. Reports have said that Petrofac has secured a US$280 million contract from Petronas Carigali covering work on the Sepat offshore early production system with the first oil expected before end-2011.

Industry players note that the O&G player has the requisite expertise in drilling after making several acquisitions last year.

What I don’t understand is, if Petronas lacks the resources or expertise to develop marginal oil fields by itself, why can’t it engage the foreign expertise directly and learn rather than allowing another private firm to share profits, which rightfully should go to public coffers. Is this what Najib means by ‘economic transformation’ and ‘public-private partnership’?

The Star’s P Gunasegaram puts it this way:

It is pretty obvious what these foreign partners would do – extract concessions (pardon the pun) from Petronas in return for taking local partners. Petronas might as well directly give money to these local companies instead!

The only way to do this is to let anyone compete openly for marginal fields, with some slight, clearly prescribed preferences for local companies or those with JVs with local companies. And then give the contract to the best bidder.

We must realise that large rewards come with large risks and competition breeds competence. Otherwise, Petronas’ latest bid to award multi-billlion-ringgit marginal oil fields to local companies will become just another means of dispensing patronage.

Worse, this opens up avenues for Petronas to be pillaged and plundered, eventually seriously undermining its role of raising valuable revenue for the Government.

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27 Jan 2011 12.58pm

Key words : ‘Enhanced Oil Recovery’ and ‘Marginal Oilfields’. No more new discovery???

27 Jan 2011 12.55pm

Petronas to award marginal oil field contracts by April

Malaysia: Enhanced oil recovery planned for Tapis oil field Tapis is the Mother of Malaysian oilfield. Like what Ghawar is to Saudi Arabia

Study the ‘Blue’ line carefully. It is not ‘If’ but a matter of ‘WHEN’ it will cross the ‘RED’ line.

Cinta negara
Cinta negara
27 Jan 2011 5.24am

Is Mukhriz’ “bizarre” dismissal of GFI report that Malaysia lost RM888 billion in nine years in illicit capital outflows a pre-emptive strike by Mahathir to forestall full inquiry into corruption and financial scandals under his premiership?

25 Jan 2011 1.27pm

Petronas would probably have studied and came to the conclusion that a full turnkey outsource (with some leakages for local company(s) to participate) was the better choice.

If Petronas were to extract certain packages and give them to local companies, then it would not be called a full turnkey. Such an arrangement would require the principal to assume certain key responsibilities instead of outsourcing them completely to the turnkey project holder.

The key point in contention here is basically not the full turnkey concept but the untold arrangement of whose company(s) will be getting the opaque leakages.

Phua Kai Lit
Phua Kai Lit
24 Jan 2011 8.42am

Sorry to go off topic.

But may I bring your attention to this item:

26 Jan 2011 11.38am
Reply to  Phua Kai Lit

Online gambling sites do the same thing.

24 Jan 2011 8.42am

Gerakan K, “Where art thou?…curling your tongue on the ice-cream cone…” Some creeps are simply lucky, unlike Anil, he has to locked his eyes at his computer almost the whole day to earn a decent and dignified living!!

24 Jan 2011 3.50am

Marginal well/field: An oil or gas well/field the production of which is so limited in relation to production costs that profit approaches the vanishing point. ….Karim acknowledges that such developments are dramatically limited by the availability of rigs. In any case, this is also redefining the face of the Malaysian E&P sector because traditional partners of Petronas in production sharing contracts (PSCs) are reluctant to take on the new challenges posed by marginal fields. This has forced Petronas to find new partners willing to participate in enhanced oil recovery (EOR) operations. He believes the initial key oil rate at PM304… Read more »

24 Jan 2011 2.08am

Ali Baba , Ali baba on the go.

1 Malaysia, Ali Baba as usual.

Andrew I
Andrew I
24 Jan 2011 1.54am

Since the cat has been away, the mice have come out to play. Thanks to Gerakan K for introducing me to RPK, from whom I’ve learnt a thing or two. One thing I’ve learnt is that Petronas used to be pretty well run by someone who now works for the Singapore government. He achieved this by not awarding Petronas contracts to people unless they were very, very good. To cut the long story short, since he didn’t play ball, he had to go. So now we have a middleman for the middle man for the middle man. Isn’t that great?… Read more »

23 Jan 2011 11.21pm

Looks like Ali Babaism is being actively encouraged as that’s pretty much what the “local parties” will be contributing to these marginal oilfield exploration contracts since all th etechnical expertise lies with foreigners!

Are the contracts competitively bid for or is Petronas paying over the top and making all sorts of minimum guarantees since the cost of the local parties will unnecessarily add to overall costs unlike one where Petronas contracts directly with overseas exploration companies?

we are all of 1 Race, the Human Race