Wednesday, 31 November 2007

M3nergy plans to expand FPSO

KUALA LUMPUR: Oil and gas field services provider M3nergy Bhd says it may expand its floating, production, storage and offloading (FPSO) facilities in future when opportunities open up in its exploration and production division.  

The company currently owns and operates one FPSO facility. It also operates a floating, storage and offloading (FSO) facility for Carigali Hess Operating Co Sdn Bhd. 

M3nergy group managing director and chief executive officer Datuk Shahrazi Sha'ari said with the move into exploration and production or upstream side of the business, there would be a need for more FPSO facilities.  

"The strategy is to capitalise on our expertise in offshore oil drilling and enter into joint ventures

with major oil partners to strengthen our FPSO component bid," he told reporters after M3nergy AGM yesterday. He said if the Cluster 7 offshore marginal field off the coast of Mumbai, India, were commercially viable, it would need one FPSO facility by the middle of next year.  

M3nergy has a 30% interest in the consortium that was awarded the Cluster 7 service contract for a period of 13 years in March 2006.  

Shahrazi said the FPSO facility would cost up to US$150mil and the company might look for partners to share in the acquisition cost.  

He added that this would likely be fund managers or other institutional shareholders. "We would like to own at least three FPSO facilities. Alternatively, we would also like to operate them for others," he said. 

Owning three FPSO facilities would put M3nergy in the top 10 league of companies in the world that own such facilities. 

Meanwhile, Shahrazi said the company was in the process of conducting seismic studies on the Ujung Kulon oil and gas block in the south-western portion of Java, which it was awarded a contract in March. 

According to M3nergy's annual report, the oil field has an estimated range of oil in place of between 300 million and 400 million barrels and an expected recoverability rate of between 20% and 30%. The company would receive 25% of the proceeds from the production of oil and 40% of the gas post-tax.  

Shahrazi did not discount the possibility that it might enter into partnerships with others for the

block but, at this stage, it was too early to tell.  "We're constrained by our agreement where we cannot enter into partnerships for at least a year, so any news on this would have to be after next March," he said.  Shahrazi said both blocks it had stakes in were viable, with existing wells that were shut down when production became uneconomical due to lower crude prices then.  

Crude oil last settled at US$93.53 per barrel for December delivery on the New York Mercantile

Exchange on Monday. Production for the Indian block is expected to start in the second half of 2009 while the Indonesian block is expected to start in 2012. 

Going forward, Shahrazi said the exploration and production division might overtake the FPSO/FSO division to become the major revenue earner due to the high price of crude.  

For the 18-month period ended June 30, the company posted a net profit of RM700,000 on revenue of RM272.89mil. 

M3nergy, an associate company of Melewar Industrial Group Bhd, had accommodated a change to its financial year to June 30 to harmonise it with other listed companies in the Melewar group.