Sabah: Offshore opportunities

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In line with a broader, nationwide policy of exploiting offshore oil and gas sources, recent moves in Sabah to develop a new gas field and link it up with the Sabah Oil and Gas Terminal (SOGT) should pay dividends for the state as it seeks to advance its energy and development plans.

On May 16, the Kebabangan Petroleum Operating Company (KPOC) announced it would develop the offshore Kebabangan gas field, which will be linked via a pipeline to SOGT, currently under construction at Kimanis. The decision to develop the Kebabangan field coming as Malaysia seeks to develop its oil resources and stem a decline in oil and gas production.

KPOC is jointly owned by state oil firm Petronas, ConocoPhillips and Shell. Petronas Carigali – the Malaysian national oil and gas giant’s upstream arm – will be the field’s main operator.

Located in depths of 100-400 metres, the gas field is part of the Kebabangan cluster production-sharing contract that KPOC operates. Roughly 135 km of pipelines will channel gas to SOGT, with first production from the field expected at the end of 2014.

When completed, SOGT will have an onshore gas terminal and compression station, as well as terminal facilities for oil, including loading jetties for tankers. The complex will have the capacity to handle up to 1bn cu feet of gas and 300,000 barrels of crude oil per day. The crude oil and condensate received and stored at the terminal will be exported through single-point moorings located offshore Kimanis.

A few days after the Kebabangan agreement was announced, news came that another deal had been struck related to SOGT – the building of a gas-fired power station at Kimanis, a spinoff of SGOT that will supply power to Sabah’s grid, as well as to the terminal itself.

According to the official Malaysian news service, Bernama, on May 23, Kimanis Power was scheduled to sign an engineering, procurement, construction and commission contract with a consortium led by CTCI Corporation of Taiwan. Other members of the group include CTCI Malaysia, CTCI Overseas Corporation, SCHB Engineering Services and SYNERLITZ (M).

The consortium will develop, construct and commission the 300-MW combined- cycle gas-fired power plant in Kimanis, as well as its related infrastructure and facilities. Located on an area of approximately 16 ha, the first generation block is scheduled to be completed in December 2013. The Kimanis power plant is one of SOGT’s major spinoffs and is expected to form an important component of the state’s electricity grid.

The launching of SOGT also marks the start of another massive infrastructure project – the Sabah-Sarawak Gas Pipeline (SSGP). Still under construction, SSGP will run some 500 km to Petronas’s liquefied natural gas (LNG) plant at Bintulu, Sarawak. When completed, the SSGP will link Sabah and Sarawak’s gas sectors.

The SOGT project is designed to help support the development of the state’s economy. As of part of this, Petronas recently gave an assurance that it will consider local contractors in awarding future contracts, following a call from the Sabah Oil and Gas Contractors Association (SOGCA) for more opportunities.

SOGCA has raised concerns recently about the number of projects local contractors receive from the Malaysia hydrocarbons company. According to SOGCA, contractors from Sabah are usually appointed as subcontractors, while primary contractors usually hail from Peninsular Malaysia or Sarawak.

In reply, Chief Minister Musa Aman confirmed on May 9 that Petronas had given its assurance that more local qualified oil and gas contractors would also be considered for projects in future.

As many recognise, Sabah’s development will require investment in the downstream components of its oil and gas industry. But there is debate even within the ruling coalition as to the best way to ensure such development.

On May 17, it was reported in the local press that Herbert Timbun Lagadan, the vice-president of Parti Bersatu Sabah, one of the parties within the ruling coalition, Barisan Nasional (BN), had said that for Sabahans to truly benefit from SOGT, it was essential that a refinery be built in the state, as that would be the only way to help local companies to tap into the huge potential the industry would create.

Sabah has an important role in the national government too, supplying a solid delegation of BN deputies to the federal parliament. The hope of many in Kota Kinabalu is that this influence may ensure greater focus on the downstream end of these industries in Sabah, thus fulfilling the nation’s – and the state’s – energy and development needs.

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