- Upstream reported that Shell has launched the tender for a 3-year engineering contract for its delayed pilot chemical enhanced oil recovery (CEOR) project at the mature St Joseph oilfield off Sabah, Malaysia. But Petronas is relooking at the second CEOR at Angsi field, off Peninsula Malaysia as the projected cost of the vessel-based solution exceeded its budget of US$1bil while there appears to be some technical challenges to the disposal of polymer mix.
- The St Joseph CEOR project centres on the deployment of a barge-shaped CEOR vessel to inject an alkaline-surfactant-polymer cocktail into the reservoir of the mature oilfield. The project start-up is now set to slip into 2015 from the earlier schedule of 2014, with tenders now being rolled out for the contract packages.
- The CEOR vessel is shaping up to be a leased work barge to be equipped with an integrated module now estimated to weigh in at between 250 and 500 tonnes. The vessel is designed to inject up to 2,500 barrels per day of water plus alkaline-surfactantpolymer cocktail.
- Shell had commissioned Technip to carry out conceptual studies on the St Joseph CEOR. Technip is among the 10 engineering outfits shortlisted to bid for the detailed design and follow up engineering lasting up to three years on the pilot CEOR project.
- The nine other invited contractors are Ranhill Worley, MMC Oil & Gas Engineering, Foster Wheeler, Leighton Engineering, Dialog, Mecip, Fluor, RNZ and Aker Solutions. Bids are due in November this year, with contract award slated in 1Q 2014. We understand that Bumi Armada was earlier interested in supplying the vessel, but the group does not have a design outfit or fabrication yard to support this bid.
- Shell has also recently carried out yard surveys in preparation for an impending tender for the fabrication of the integrated topsides module aboard the St Joseph CEOR vessel. Separate bids could be called in soon from Malaysian yard operators for the topsides fabrication contract widely expected to be awarded before the end of the year. We expect Malaysia Marine & Heavy Engineering Holdings, SapuraKencana Petroleum and TH Heavy Engineering to bid for this project.
- Shell is also expected to organise separate tenders for water treatment as well as the supply and mixing of the alkalinesurfactant-polymer cocktail. The St Joseph pilot will also serve as the reference for potential CEOR projects at Shell-operated fields in the North Sabah basin off East Malaysia.
- Shell and Petronas are carrying out joint CEOR studies on the South Furious, SF-30 and the Barton fields also off Sabah under a US$12bil EOR production sharing contract signed in 2011.The 2011 PSC also covers water-alternate-gas EOR at the Baram Delta group of oilfields. The improvement in the recovery efficiency could potentially add another 90,000 to 100,000 barrels of oil equivalent per day in production and extend field life to beyond 2040.
- Beside the above projects, there are also other CPP projects for Sepat, Bergading, Bokor and Dulang fields which will be open for tenders next year, As such, we expect order flow momentum to gain traction over the next 2-3 years, with the value of oil & gas contracts having surged by 4.9x YoY to RM27bil in 9M2013.
- Hence, we maintain our OVERWEIGHT call on the sector with our top pick being SapuraKencana Petroleum while our other BUYs are Alam Maritim, Bumi Armada, Malaysia Marine & Heavy Engineering Holdings, Dialog Group and Petronas Gas.
Source: AmeSecurities
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