by DayakDaily Team
KUCHING: The resolution of gas distribution rights in Sarawak will ease market concerns over Petronas upstream investments in the region, economists opine.
According to a report by Kenanga Investment Bank Bhd’s (Kenanga IB) research house, with the Petroleum Development Act 1974 (PDA) remaining as the country’s overarching framework of oil and gas industry governance, Petronas will continue its large-scale operations, including LNG exports.
At the same time, Petroleum Sarawak Bhd (Petros) retains the right to explore Sarawak’s oil and gas resources, with close collaboration with Petronas.
“All in all, Sarawak will be the gas aggregator in Sarawak mainly for domestic usages, implying that the LNG export business is still with Petronas.
“This in our view, removes the overhang on Petronas upstream capital expenditure (capex) in Sarawak and we do not think that the capex cut will be as severe as implied by the markets since August 2024,” Kenanga IB’s research team said.
It noted that Petronas’ operations includes LNG exports, which account for approximately 27 per cent of its topline.
“This development is positive for upstream service providers, particularly maintenance-focused players, as Petronas’ upstream activities in Sarawak are likely to remain unaffected by the gas aggregation agreement,” it added.
Sarawak’s control over domestic gas distribution (six per cent of its production in 2024 as reported by Sarawak Energy) is also expected to grow to 30 per cent by 2030 through initiatives in gas-based infrastructure development, supporting hydrogen plants and other downstream projects.
But to achieve this target, the research analysts pointed out that it would depend on the successful rollout and adoption of these planned downstream initiatives.
All in, Kenanga IB is optimistic that in the coming months, the oil and gas (O&G) industry might also see improving sentiments as Petronas might ramp up its drilling activities in Sarawak as the months-long overhang clears up.
Meanwhile, several upstream O&G firms that rely on Petronas’ annual capex recorded a rise in their share prices today. At market close, Sarawak-based Dayang Enterprise Holdings Bhd (Dayang) share price was up 2.56 per cent to 2.00 while Velesto Energy Bhd’s share price rose 3.13 per cent to 0.165. – DayakDaily
