Petronas needs bigger spending

CAPEX TARGET: Analysts expect group to raise expenditure by 56pc to RM71 billion annually

PETROLIAM Nasional Bhd (Petronas) needs to ramp up its capital expenditure (capex) by 56 per cent this year to RM71 billion annually over the next three years.

This will help the national oil group meet its 2011-2015 capex target of RM60 billion annually, analysts said.

Consequently, it will result in more aggressive contract rollouts, which will reignite the oil and gas sector, they added.

In its fourth-quarter results last year, Petronas' capex rose 18 per cent to RM14 billion. This pushed its 2012 capex by 11 per cent to RM46 billion.

AmResearch Sdn Bhd, in a research note, said the RM46 billion, however, fell far short of the expected average of RM60 billion annually, or some RM300 billion over the five years.

"We expect the pace of contract rollouts to reignite, underpinned by the affirmation from Petronas president and chief executive officer Tan Sri Shamsul Azhar Abbas that the group will focus on ramping up domestic production this year."

Since the beginning of the year, the total contracts awarded to industry players have reached RM4.2 billion, 4.4 times more than RM972 million in the fourth quarter 2012.

These include the RM2.4 billion Malikai tension leg platform production facility for the joint venture between Malaysia Marine & Heavy Engineering Holdings and Technip, and over RM1 billion of marine charter contracts awarded to Alam Maritim Resources and Perdana Petroleum.

"In the second half of 2013, we expect the award of the three blocks of RM8 billion-RM10 billion umbrella tender for hook-up, construction and commissioning works, delayed from the fourth quarter 2012.

"In the second half of 2013, the rollout of the second phase of the North Malay basin gas cluster project, which will involve a large central processing platform at the Bergading field and multiple satellite well-head platforms, should sustain the re-rating momentum," AmResearch said.

The research firm has reaffirmed its "overweight" recommendation on the oil and gas sector.

"In view of the multiple flows of contracts this year, we maintain our 'overweight' call on the sector with 'buy' calls for SapuraKencana Petroleum, Bumi Armada, Dialog Group and Alam Maritim."

Petronas' net profit last year decreased 17 per cent year-on-year to RM49 billion, despite slightly higher revenue. This was due to higher operating costs and impairment losses on property, plant and equipment, largely in Egypt.

AmResearch said excluding the RM1.5 billion gains from the listing of Gas Malaysia, and the disposal of equity stakes in Centrica plc and APA Group, Petronas' core net profit for 2012 still contracted 16 per cent to RM48 billion.