Malaysia’s oil and gas industry in recovery cycle – AmInvestment


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Malaysia’s oil and gas (O&G) industry is in the recovery cycle this year as several sectors within the industry are expected to chart a gradual recovery, such as engineering, procurement, construction, installation and commissioning (EPCIC), said AmInvestment Bank Bhd.

The investment bank said among the sectors is rising EPCIC which would be driven by several activities, including pipeline installations growing by 4.2 times to a base-case scenario of 266 days in 2023 from 64 days in 2021 as more development projects tie in to existing platforms or processing facilities.

“Decommissioning of wells will increase to 18 this year from 15 in 2020, which will rise further to 24 in 2022 and expand to remove 51 conductors, two floaters and one fixed platform,” it said in a research note today.

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AmInvestment Bank said currently, 56% of Petroliam Nasional Bhd’s (Petronas) 350 facilities are operating beyond the assets’ designed life, and 38% of the 750 pipelines, while 45% of the 3,000 wells are idle with over 500 wells expected to be permanently plugged by 2030.

The investment bank also noted that Sapura Energy Bhd’s integrated service platform is well positioned to secure these jobs, given the group’s underutilised heavy installation vessels currently, while former local EPCIC players such as Barakah Offshore Petroleum Bhd is still under Practice Note 17 (PN17) status.

It noted that higher vessel demand to support drilling and projects, rising to 172 this year from 141 in 2020, should support operators such as Icon Offshore Bhd, Perdana Petroleum Bhd and Alam Maritim Resources Bhd.

“Even so, this still represents a 33% decrease from the earlier 2020 plan for 256 vessels notwithstanding Petronas’ prioritisation of local ships. However, the vessel requirement to support production operations is relatively flat year-on-year (y-o-y) at 131 vessels this year,” said AmInvestment Bank.

It added that the number of rigs is expected to rebound to 22 in 2021 from 14 in the second half of 2020 (2H20) due to plummeting oil prices and the movement control order (MCO).

“While this is below the earlier 2020 target of 26 rigs, we expect Velesto Energy Bhd to experience improving asset utilisation towards the second half of the year,” said AmInvestment Bank.

However, some segments could still struggle as hook-up and commissioning activities will decline this year by 20% y-o-y to 3.5 million man-hours due to resource limitation and Petronas’ optimisation plan to “uberise” marine vessels onto a single digital platform.

Likewise, offshore maintenance and construction are expected to decline by 10% y-o-y to 10.1 million man-hours.