O&G decommissioning works in Malaysia is in big demand

O&G decommissioning works in Malaysia is in big demand

Offshore Platform Decommissioning Malaysia

Photo Credit to The Guardian Nigeria


As more oil and gas (O&G) fields in Malaysia and the region approach the end of their lifespan, the demand for decommissioning works is set to surge.

The value of decommissioning contracts in the region, over the next three years, is expected to reach up to RM6bil, according to estimates by industry players.

UOB Kay Hian Research analyst Kong Ho Meng said while there have not been any large tenders awarded by Petroliam Nasional Bhd (Petronas), it expected contracts to be rolled out from next year.

In Malaysia, he said, about 11% or about 35 of the over 300 platforms have been operating for over 40 years, and more than 200 wells have already been identified to be plugged and abandoned.

Decommissioning is a rapidly developing sub-segment in the O&G sector, which refers to works to safely dismantle and remove wells and platforms to prevent environmental damage.

The growing requirement for decommissioning works relates to the commitment from oil majors to reduce their impact to the environment via late-life asset management.

There are two key services for decommissioning – well abandonment services and upstream facilities dismantling.

“In the United States and Europe, decommissioning works are at a mature stage, and the service providers there are quite familiar with the process.

“In the Asia-Pacific region, however, O&G players are not well-equipped to take up big jobs in this sub-sector at the moment,” he told StarBiz.

One strategy being explored by Malaysian O&G players, he said, is the possibility of teaming up with established international decommissioning service providers once the contracts are rolled out.

In its 2019-2021 activity outlook, Petronas noted the requirement for 50, 40 and 60 well abandonment for the local fields in 2019, 2020 and 2021, as well as the need for the dismantling of several platforms or facilities.

“Activities are expected to intensify as considerable assets have been operating beyond 40 years,” Petronas said in the report.

For well abandonment works, Kong said players that provide hydraulic workover units, offshore support vessels and other ancillary services such as slicklines, will be required, with Uzma Berhad and Velesto Energy Bhd seen to be potential beneficiaries.

Velesto has already been participating in plug and abandonment works, and has completed several wells since last year.

“We will continue to increase our participation in these activities,” its president Rohaizad Darus told StarBiz.

According to UOB Kay Hian, other indirect beneficiaries from well abandonment works are DAYANG ENTERPRISE HOLDINGS BHD, Petra Energy Bhd, Icon Offshore Bhd, Perdana Petroleum Bhd and DELEUM BHD

To qualify for facility decommissioning contracts, meanwhile, service players must have yard facilities, underwater and cutting services, and transport and heavy lifting services.

Under UOB Kay Hian’s coverage, the key beneficiary with the track record and assets to execute all these functions, he said, is SAPURA ENERGY BHD

Kong, in the report, added that major offshore commissioning players like Dayang Enterprise and Petra Energy were also looking at opportunities in the decommissioning space.

Moving forward, as decommissioning is still in its infancy in the Asia-Pacific region, he said stakeholders and regulators involved would take time to prepare for the coming wave, with steep learning curves and potential costs for mistakes in the early stages.

Read more at the original news by The Star.

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