A tripartite partnership between Talisman Energy Inc, Coastal Energy Co and local company Petra Energy Bhd is understood to be close to winning an enhanced oil recovery (EOR) contract for both oil and gas reserves from national oil company Petroliam Nasional Bhd (Petronas) for the PM9 oilfield off the coast of Terengganu, industry sources say.

It is understood that initially, Coastal Energy and Petra Energy had banded together to bid for the oil portion of the block while Talisman had wanted the gas portion. But the drastic fall in oil prices changed the operating environment.

“Talks with Petronas were ongoing. If not for the massive dip in oil prices, the companies [Talisman, Coastal and Petra] would have concluded the deal late last year,” says a source.

Neither Petra Energy’s nor Petronas’ officials were available for comment.

Declining to offer an educated guess, sources say the EOR contract could be worth a “substantial amount”.

The pending award has sparked considerable interest as it indicates that Petronas still has contracts to dish out despite the price of oil crashing close to 57% since last June when it was around US$115 per barrel. Last Friday, oil was trading below US$50 a barrel.

Petronas had also said that it could cut capital expenditure by between 15% and 20% this year.    

Industry sources say the EOR contract is premised on Petra and its partner Coastal’s performance on the risk service contract for the Kapal, Banang and Meranti oilfields in Block PM316 off the peninsula that was awarded in July 2012. Coastal is the operator of the cluster fields with 70% equity interest while Petra has a 30% stake.

Coastal and Petra stayed ahead of schedule and spent less than the stipulated amount on the project, which earned them brownie points from Petronas and put them in the front row for other jobs, such as the one for PM9.

Oil was discovered in the Kapal field first in December 2013 and some 10,000 barrels per day (bpd) were produced. The amount would have increased by now.

“Compared with the rest, Coastal and Petra have done absolutely well,” says the source, who is an oil and gas executive.  

Meanwhile, a tussle between Talisman and Coastal was sorted out at parent level. Both parties are linked to Spain-based Repsol SA, which had acquired Talisman for US$8.3 billion late last year.

Repsol and Cepsa, also Spain-based, have their origins in state-owned petroleum company Compañía Arrendataria del Monopolio del Petróleo, SA (Campsa), which was set up in 1920. Campsa’s assets were distributed in 1992 to the largest private petroleum companies in the country, including Repsol and Cepsa.

Cepsa owns Coastal, which explains the recent truce between the latter and Talisman. However, the equity structure of the partnership is unclear.

Nevertheless, the EOR contract would boost Petra’s bottom line. For its nine months ended Sept 30, 2014, net profit was RM28.2 million on revenue of RM417 million.

It is also not clear what sort of capital outlay will be required for the job but as at Sept 30, 2014, Petra had cash and bank balances of RM59.6 million as well as short-term and long-term debt commitments of RM253.1 million and RM86.6 billion respectively.

Petra has also been divesting assets, such as its 51% stake in Bumi Subsea Sdn Bhd and 70% in Jurutera Perunding Sdn Bhd, likely shoring up its coffers. The sale of the two assets, however, only raised about RM530,000.    

Since hitting a record high of RM3.14 on June 19 last year, Petra’s shares have fallen more than 55% and closed at RM1.30 last Friday.

While Petra and its partners could be popping the bubbly soon, another company that could benefit from the award is Perisai Petroleum Teknologi Bhd.

About a year ago, Perisai was rumoured to be Talisman’s partner in bidding for the PM9 job. They were the favourites to win because Talisman’s blocks — PM3CAA, PM314 and PM305 — were located close to PM9. But Perisai dropped out of the deal for reasons unknown.

Its mobile offshore production unit (MOPU) that was slated for the job thus became idle. This and other complications saw Perisai’s shares lose more than 70% of their value from a year ago and hit their lowest level since the first quarter of 2009. The stock closed at 47.5 sen last Friday.

Perisai has a decent set of assets, including three jackup rigs, a floating production, storage and offloadingvessel, the MOPU Rubicon, three anchor handling tug supply vessels, three crew boats and a derrick lay vessel.

This article first appeared in The Edge Malaysia Weekly, on February 2 - 8 , 2015.

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