Stop work order for Petronas LD plant
Published on: Wednesday, July 01, 2015
Kota Kinabalu: A stop work order has been issued for Petronas 'Lahad Datu regasification plant – the third and seen crucial for Petronas Gas expansion plans – in views of security concerns over there.The nature of the "security concerns" was not stated but the state's East Coast had been prone to almost 20 kidnappings since Sipadan in 2000 and have uncontrolled immigrant colonies said to act as spies for kidnappers linked to the Abu Sayyaf. "The Lahad Datu plant was supposed to be the next catalyst for Petronas Gas as it continues to plan for energy security, "said an industry analyst.
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Following the plunge in crude prices late last year, Petronas planned to reduce its capital expenditure by up to 15pc. The national oil corporation was earlier reported to have said it plans to reduce its operating expenses by between 25pc and 30pc."Oil and gas prices have a minimum impact on the business of Petronas Gas," says the oil and gas expert. He adds gas molecules transported by Petronas Gas are owned by Petronas.In a recent report, Petronas president and CEO Datuk Wan Zulkiflee Wan Ariffin was quoted as saying the lower crude prices will benefit Petronas as they allow cost-savings.Low crude prices have benefited downstream oil and gas players as investors are increasing their investment in oil and gas products. "Capacity for storage tanks has been good," he adds.
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In addition, he says although Petronas had announced its intention to reduce its capital expenditure, projects that has been allocated and budgeted for prior to the announcement will remain, as the company may have to incur additional default costs."Projects awarded and kick-started can't be deferred once they start the ball rolling," he adds.
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Renegotiated Gas Transportation Agreement (GTA) and Gas Processing Agreement (GPA) have helped boost the performance of Petronas Gas Bhd. Despite fluctuations in oil and gas prices, analysts say the implementation of the two agreements on April 1 last year with main supplier and parent company Petroliam Nasional Bhd (Petronas) will help sustain Petronas Gas' earnings, based on a different calculation.The agreements could sustain the gas infrastructure and utility provider's profitability as earnings calculations in the new agreements are based on its capacity and efficiency.Charges to the infrastructure and utility provider have been affected by Petronas' export volumes and petroleum-product prices. The expert says in the latest GTA and GPA, Petronas Gas increased its fixed reservations charges to 97pc from 50pc on previous agreements.He adds under the new agreements, a performance-based structure (PBS) is based in Petronas Gas' overall equipment effectiveness (OEE) in meeting targets. Previous structures were based in a 30 share of Petronas' export margin sales, vulnerable to fluctuations in oil and gas prices."The PBS is affected by oil and gas commodity price movements and export volumes," he explains. For Q1 ended March 31, Petronas Gas' earnings rose by some 7pc to Rm449.0 mil from RM418 mil a year ago on the back of higher revenue of RM1.1 bil.In its quarterly report, the company said the higher revenue was due primarily to higher capacity booking by Petronas and higher reservations charges as a result of the new GTA and GPA.TA Securities Holdings Bhd in a recent research report says: "Management (Petronas Gas) explained that the (earnings) increase was attributable partly to lower repair and maintenance expenses. However, this is only a timing issue and related costs will be realised in the following quarters."The stockbroking firm says Petronas Gas announced lower operating expenses contributed by lower staff costs. "We believe this could be due to lower bonuses, which appear to be the trend across the Petronas group," it explains.Despite reporting higher earnings, analysts expect Petronas Gas' earnings growth to remain subdued until late 2017.The implementation of the GTA and GPA will ensure Petronas Gas' revenue from its gas transportation and gas processing segments is expected to remain fairly unchanged, despite fluctuating oil and gas prices faced by the industry.Petronas Gas' gas transportation and gas-processing segments represented some 63pc of its total revenue for Q1FY15.Stay up-to-date by following Daily Express’s Telegram channel.
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