Corpapp Blog

KUALA LUMPUR: Ramunia Holdings Bhd and Coastal Contracts Bhd have proposed a collaboration to undertake tendering, bidding and fabrication in relation to works on topsides, jackets and structures for the oil and gas industry.
This article appeared in The Edge Financial Daily, January 29, 2010.

Ramunia told Bursa Malaysia yesterday that its wholly owned Ramunia Fabricators Sdn Bhd and Coastal Contracts’ wholly owned Pleasant Engineering Sdn Bhd had signed a memorandum of understanding (MoU) to facilitate the proposed collaboration. Pleasant Engineering owned a yard with facilities to carry out fabrication and engineering works in Sandakan, Sabah, measuring about 52.37 acres, it said.

The MoU would lapse in two years, or upon the signing of a binding agreement or upon a two-month termination notice by either party.

PETALING JAYA: Wah Seong Corp Bhd is in negotiations with The Orleans Group of West Africa, as it is interested in acquiring Orleans’ strategic partner, Socotherm, for its pipe-coating business in Nigeria.

Wah Seong anticipates a hive of activity in gas field developments, gas distribution, and deepwater field exploration and development.

“West Africa is a strategic region for oil and gas service providers like Wah Seong. It sees great opportunities in that market for its business, in particular the deepwater oil and gas segment,” a source said.

Originally, Orleans and Socotherm had a 40:60 pipe-coating joint venture in West Africa. In December last year, Orleans bought over Socotherm’s 60% interest.

Having acquired 100% of Socotherm’s pipe-coating assets, OSK Research said, Orleans would soon sell them to Wah Seong.

“A new joint-venture company would be set up and Wah Seong would then lease these assets back to the joint-venture company,” OSK said.

In the meantime, the source said that Wah Seong was actively evaluating merger and acquisition (M&A) targets, particularly those that complement its core business in pipe coating or engineering. It is also looking for businesses with recurring income.

Wah Seong’s internal long-term target is to grow its business by 25% – or 15% if via M&A.

The company’s orderbook currently stands at RM1.4bil with a burn rate of RM400mil to RM500mil a year.

“Based on the company’s experience, the orderbook has fluctuated between RM1bil and RM2bil. Wah Seong is currently bidding at a much higher rate of RM5.3bil and at this volume, the company is confident of maintaining a healthy orderbook size,” the source said.

OSK continues to like Wah Seong for its M&A news flow as well as for its commanding market leadership in the pipe-coating business in Asia. It maintains a “buy” rating with a RM3.35 target based on a price/earnings ratio of 14 times financial year 2010 earnings.

“We like the company’s market leadership in the provision of pipe coating and corrosion protection in Asia as well as its potential in taking over the number two world ranking from Socotherm.

With Socotherm in the picture, Wah Seong will gain access to key oil and gas markets like Europe, South America, Africa and Australia, where Socotherm has a reputable standing.

In the first half of 2009, Socotherm – which filed for creditor protection in August last year – reported a net loss of 57.2 million euros, widening from 14.9 million euros a year earlier, with sales of 84.2 million euros, down 42.1%.

Socotherm shares have been suspended from trading since the start of August. It is now undergoing a debt restructuring exercise.

MOSCOW, Jan 28 — Rosneft, Russia’s largest oil producer, has discovered a strategic new field in East Siberia that analysts said today could potentially add 4 per cent to the company’s proven and probable reserves.

Rosneft shares outperformed the market on the discovery of the Sevastyanovo deposit, which company spokesman Nikolai Manvelov said could hold more than 150 million tonnes of crude.

This is 30 percent more than Rosneft’s entire output in 2009.

“The field is large and located near the ESPO pipeline, which is designed to ship Russian oil to eastern markets,” Alfa-Bank oil and gas analysts said in a note.

Russia, currently the world’s largest oil producer, deems oil deposits to be strategic if their reserves exceed 70 million tonnes. Their development by a foreign firm requires special governmental approval.

Natural Resources Minister Yuri Trutnev told Prime Minister Vladimir Putin about the project in an address yesterday, published on the government’s website, www.government.ru.

“We can report today on the opening of the Sevastyanovo deposit, with reserves of more than 150 million (tonnes). This is a strategic deposit,” Trutnev said. He did not say when production might potentially begin at the deposit.

State-controlled Rosneft plans to boost oil and gas condensate production by around 4 percent to 117.6 million tonnes in 2010, largely through the ramp-up of production at its Vankor field in the Arctic.

“Sevastyanovo might be the next core growth driver for Rosneft after Vankor, providing the company with further production growth after 2015,” VTB Capital analysts said.

“The discovery of a field as big as Sevastyanovo could potentially add around 4 percent to the company’s 2P (proven and probable) reserves,” they said.

Rosneft’s Moscow-traded stock rose 3.7 per cent by 1751 Malaysian time, compared with a 2.3 per cent rise on the wider market. Its London-traded stock was up 4.3 per cent.

The Sevastyanovo field, in the eastern Siberian region of Irkutsk, was discovered within the Mogdynsky licence area, which Rosneft purchased at auction in 2006.

“In 2010, Rosneft plans to spend a significant amount of financial resources on exploration in eastern Siberia around Vankor, as well as in the south, in the Irkutsk region,” the Alfa-Bank analysts said.

“The region lacks infrastructure and therefore fiscal incentives are crucial in order to maintain exploration momentum in the region.”

Russia introduced a zero export duty for 13 East Siberian fields, including Vankor, from Dec 1. Officials in the Finance Ministry, however, have argued that these breaks should be replaced with a uniform tax on excess profits.

UniCredit analysts said the discovery of Sevastyanovo, a field similar in size to the Salym group being developed by Royal Dutch Shell and Gazprom Neft, would support any push by Rosneft to retain the current tax breaks.

“We believe the announcement supports the company’s long-term growth outlook and view the discovery as a potential argument to be used in discussions with the government on keeping the current tax breaks,” UniCredit said. — Reuters

HANOI, Jan 25 — Vietnam’s current level of recoverable reserves of crude oil and gas are enough for another three decades of production, a state-run newspaper said today.

Vietnam has not been able to explore all its oil resources to come up with precise data on recoverable reserves, the Tien Phong (Vanguard) newspaper said, quoting chairman Dinh La Thang of state oil and gas group Petrovietnam.

“Counting the reserves we have discovered so far, production can last another 30 years,” Thang said in the interview, adding Petrovietnam was expanding exploration to boost reserves.

Petrovietnam has said that, excluding reserves at foreign oil fields, it added 34 million tonnes of crude oil and gas equivalent last year to recoverable reserves, which stood at 127 million tonnes at the start of 2009.

The group said it projected adding between 35 million and 40 million tonnes of crude oil equivalent to its reserves this year, stepping up exploration abroad to meet rising domestic energy demand.

Petrovietnam has forecast crude output this year would fall about 6 per cent to 15 million tonnes, or 301,000 barrels per day, due to ageing oilfields. — Reuters

IPOH: A big Indian company has expressed interest to build an oil refinery in Perak involving a US$5 billion (RM17.15 billion) investment, Menteri Besar Datuk Seri Dr Zambry Abdul Kadir said today.

Without disclosing the company’s name, he said the state government had signed an agreement of understanding to realise the project with the company during Prime Minister Datuk Seri Najib Razak’s visit to India recently.

“Though some people have said I followed the prime minister to discuss the dissolution of the Perak State Legislative Assembly, I would like to announce that the agreement was among several agreements that we had signed in India,” he told reporters after chairing the state executive council meeting here.

Besides that, he said The Red Snapper (M) Sdn Bhd had signed a memorandum of agreement with Rocking Pixels Inc to set up a studio in Perak to produce 3D animation for television, movies and gaming.

“I have also given an offer letter to biotech company Biofarm that is ready to build its research and development centre in Perak.

“Besides that, during the visit, Perak Bio Corporation Sdn Bhd had signed a joint understanding with Dr Reddy’s Laboratories Ltd, India’s second biggest pharmaceutical company,” Zambry said.

The menteri besar said Perak Bio Corporation had also signed an agreement with Saamya Biotech India to produce pharmaceutical products using fermentation-based biotech processes at Taman Farmasi, Seri Iskandar near here, next year.

He said the state government was looking for the best formula and approach to ensure the investment applications are processed quickly so that the investors would not lose interest if their applications took too long.

“Among the approaches we have decided is that we will set a timeframe for all members of the government or relevant departments to inform the Perak State Investment Committee of the status of a processed application,” he said. — Bernama

SINGAPORE: At least 10 Long-Range (LR) tankers storing a total one million tonnes of gas oil are mostly anchored off southern Singapore and Malaysian waters, as weak prompt demand encourages traders to store for future sale, traders and shipping brokers said on Wednesday.

About seven LR2 tankers, measuring 80,000 to under 160,000 deadweight tonnes (DWT), and three LR1 tankers — 45,000 to under 80,000 DWT — are moored off Singapore, Malaysia and the Indonesian Riau Island of Karimun, traders and shipbrokers said.

The vessels are chartered by European trading houses Vitol, Sempra, Mercuria, Trafigura and Glencore, as well as oil major Shell and US investment bank Morgan Stanley, they added.

“Most of the vessels anchored off Singapore will remain where they are for the time being, especially the Mercuria and Vitol ones, as they are designated as floating storages,” said one distillates trader.

Traders said the East-West arbitrage window had shut and the economics of moving barrels West was unviable for now.

“The East-West EFS has never been able to break through US$11 (RM37.73) a barrel for any of the months, which is the level needed to make money,” said another trader.

“For the traders who want to do arb, it’s going to take a lot of courage because they would be swimming against the market and potentially losing millions of dollars.”

February East-West EFS swaps were traded at between US$4 and US$10 a barrel this week. As a result, it has become a waiting game for most traders eyeing more shipments to Europe. — Reuters

DUBAI Jan 27 — Petronas has emerged as a regular supplier of gasoline to Iran, oil traders said, even as the threat of tougher US sanctions has forced other companies to halt their business there.

State-owned Asian firms have less exposure to US political pressure to halt dealings with Iran and firms from energy-hungry China and India have continued to seek deals there, while Western companies have limited contacts.

Tehran’s gasoline imports could be a target for stricter economic sanctions in the row over Iran’s nuclear programme, which the West says is used to develop weapons. Tehran says it needs nuclear generation of electricity.

Petronas, which has secured about 500,000 barrels of fuel storage at the port of Fujairah in the United Arab Emirates, has been selling on average about 16,000 barrels per day of the motor fuel monthly to Tehran since the fourth-quarter of 2009, traders said.

The company was not immediately available for comment.

“They came out last year sometime in the second-half of the year, but it was sporadic sales at first, it hasn’t been until the past few months that we see them doing more,” a Middle East based trader said.

“The storage option certainly now gives them the flexibility, and it allows them to participate more in supplying Iran monthly.”

Petronas, facing declining production at home, is a 10 per cent stakeholder in Iran’s South Pars 11 project. The field is part of the world’s largest gas reservoir.

The company also has long established close political ties with Iran.

“Petronas is one of those companies which won’t be exposed much if the US starts to enforce tougher sanctions for companies selling gasoline to Iran,” an Asian based trader said.

“Companies like Petronas see an opportunity and will step in to plug the gap, they could very well be buying the fuel from companies who no longer do business with Iran.”

In November, Swiss-based Glencore, one of the world’s largest independent commodities and energy traders, ended nearly three decades of business supplying fuel into Iran as it looked to avoid the fallout from US sanctions ahead of a potential public listing.

India’s Reliance Industries, which operates the world’s largest oil refining complex and oil major BP also cut business dealings with Iran.

“Iran has survived more than 30 years under (a) different sanctions regime, and it will continue to survive,” a US based trader said.

“It’s all about the money, as long as you can make money selling them oil there are always going to be companies out there ready and willing to do business.”

Iran, the world’s fifth-largest crude oil exporter, lacks the refining capacity to meet local demand and is heavily reliant on international markets to source gasoline supplies. — Reuters

CARLYSS (Louisiana): Global Industries, Ltd announced on Jan 26 that its majority Malaysian-owned affiliate, Global Offshore Malaysia Sdn Bhd has been awarded a contract for transportation and installation of offshore facilities for projects in Malaysia.  

Global Industries, Ltd is a leading solutions provider of offshore CONSTRUCTION [ ], engineering, project management and support services including pipeline construction, platform installation and removal, deepwater/SURF installations, IRM, and diving to the oil and gas industry worldwide.

SHAH ALAM: Almost resigned to losing CEO Tan Sri Mohd Hassan Marican, Petronas adviser Tun Dr Mahathir Mohamad believes his replacement should come from within.

When asked to comment on the possible exit of Hassan, the former prime minister said: “He’s already reached retirement age and has been there for a long time.

“Everyone has to retire at some time.”

When asked on Hassan’s potential replacements, Dr Mahathir said they should come from within the organisation.

“It is important for his replacement to come from Petronas to ensure continuity.

“An outsider will find it tough to learn the business and taking in an outsider could also cause resentment,” he added.