More oil and gas contracts for Malaysian players in Q1 2020: Report

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An oil rig off the coast of Johor, Malaysia.
JANUARY 03, 2020 - 12:14 PM

MALAYSIAN oil and gas service providers can expect contract awards to improve in the first three months of the new year, compared with the decline in 2019 - on the back of not just seasonal lumpiness in the first and fourth quarters, but also momentum from longer-term projects.

That’s according to a recent report by AmBank analyst Alex Goh, who noted that Saudi Aramco has picked Sapura Energy and Malaysia Marine & Heavy Engineering Holdings for its long-term agreement programme - opening up the field to offshore projects in Brazil, Mexico, the Middle East and West Africa that may be worth as much as US$150 billion over the next decade.

And, despite the drop in contract awards, the recovery in rig and vessel charter rates is still strong, as growth in offshore activities has pushed up utilisation rates, Mr Goh also noted.

Even as the value of Malaysian contract awards fell by 6 per cent year on year in 2019, to RM11.5 billion, he found cheer in how utilisation rates in the tight market have neared 70 per cent even amid the retirement of older rigs and a slowdown in new output from Chinese yards.

The house held to its “overweight” call on the sector, “as prospects have radically brightened with rising asset utilisation globally, which supported service providers’ improving results”.

Still, it said the oil and gas sector faced a downgrade to “neutral” on risks to global crude prices such as higher-than-expected output from United States shale and producers like Brazil; rising take-up of fuel-efficient or electric vehicles that guzzle less oil; and exits from oil and gas stocks by global funds hewing to an environmental, social and governance (ESG) investment mandate.