ASEAN KEY DESTINATIONS
Petronas project delay impacts firms
INVESTORS sold off shares in Malaysian oil and gas services firms after Reuters reported state-owned Petronas will start a planned US$19 billion petrochemicals complex in 2018, signalling a delay in awarding work contracts for the massive project.
Malaysia's top ten oil and gas services firms by market capitalisation have been popular with investors this year, soaring an average 55 per cent so far, well ahead of the local bourse's 5.2 per cent gain.
News of a further delay to the refinery and special chemicals project took some wind out of the sector, which has been expanding rapidly to capture regional deepwater exploration and production jobs and benefit from Petronas' US$93 billion capital spending in 2011-2015.
By 0733 GMT, Perisai Petroleum was trading down 3.9 per cent, while Alam Maritim was off 3.2 per cent, outstripping a 1.1 per cent fall in the local bourse.
SapuraKencana Petroleum and Wah Seong, both widely tipped to win fabrication jobs from the Refinery and Petrochemical Integrated Development (RAPID) project in southern Johor, fell 3.5 per cent and 2.1 per cent respectively.
"The delay is not totally unexpected given the complications of this massive project," said local investment bank Hwang-DBS in a note to clients, citing the Reuters report.
"However, it is likely to have a negative impact on the local O&G players as the project was expected to create massive spill-over effects with the various jobs to be awarded."
RAPID aims to build a 300,000 barrel per day refinery, which would supply naptha and liquid petroluem gas to specialty chemical plants and produce gasoline and diesel.
Sources with knowledge of Petronas's plans said the oil firm is expected to award about 20 construction job packages valued at about RM2-3 billion (US$620 million-US$930 million) each.
Shares in Dialog Group, currently the only firm with exposure to RAPID as it is building a nearby deepwater independent storage terminal, fell as much as 6.7 per cent.
Hwang-DBS said it believed the second stage of Dialog's terminal could be delayed as the tank capacity was dedicated for RAPID. Maybank Investment downgraded Dialog to a "hold".
Contracts for the refinery in the RAPID complex are expected to be awarded in November or December this year. An industry source told Reuters many of the Malaysian oil and gas services companies had tendered and pre-qualified for the jobs
"Some of the packages could be tendered out to pre-qualified bidders in forth quarter of 2013 or first quarter of 2014," said the source who declined to be named.
"It is believed the whole project will take four to five years to be completed and commissioned in 2018."
Among other firms, Wah Seong told Reuters it was not "greatly affected" by the delay as there were no immediate signifcant projects in its pipeline, while Pantech executive director Adrian Tan said the slowdown would have only a "minimal" impact on on the company's trading division.
Wah Seong shares fell 2.1 per cent and Pantech 2.9 per cent.
Shares in Petronas Chemicals, which will operate RAPID, eased 0.6 per cent. The project aims to grab a chunk of the US$400 billion global market for speciality chemicals used in products from LCD TVs to high-performance tires.Reuters
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