Kencana Petroleum Bhd hopes to start recouping its portion of investment, estimated at US$200mil, in the Berantai marginal oil field development within two years.
Kencana is part of a consortium, which includes SapuraCrest Petroleum Bhd and Petrofac Energy Developments Sdn Bhd to develop and operate an oil and gas field in Berantai, Terengganu estimated to cost a total of US$800mil.
Its investment will start getting paid back within two years, because the plan is to have one well-head platform with 18 wells installed within two years. But the first gas will have to be produced by the end of 2011.
Kencana's wholly-owned unit Kencana Energy Sdn Bhd holds a 25% stake in the joint operating agreement between the consortium partners, thus it has to pump in a quarter of the total marginal field development cost.
The consortium was awarded by Petroliam Nasional Bhd (Petronas), the latter's first risk-service contract (RSC) to develop and produce petroleum resources from this specific marginal field over a nine-year period starting from Jan 31, 2011.
The consortium aimed to extract most of the petroleum resources, if not all, within seven years. While Petronas will own all the oil produced from the marginal field, the consortium will be paid a fee for extracting the oil.
Kencana is to fund its investment portion via internal funds, borrowings and proceeds from equity/ debt fund raising exercise. It had raised RM400mil through a private placement and we will raise another RM400mil through bonds and warrants. These fund raising exercises would be sufficient to tie the company over for the Berantai field development.
If this consortium executed its development and production plan successfully, there was a possibility that the capital and consortium could roll over into another project.
Petronas recently announced its intention to develop discovered marginal oil fields within the country using RSCs, that will see niche foreign development and production players collaborating with local oil and gas service providers.
The national oil company has decided to develop marginal oil fields now, due to the strong crude oil prices, as it seeks to replenish its oil reserves and generate a new income stream.
Malaysia has 106 marginal oil fields containing 580 million barrels of oil, with Petronas having firmed plans to develop a quarter of the 106 fields. A marginal oil field is defined as producing 30 million barrels of oil equivalent or less.
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