Assets disposal will enable Petronas to focus on Rapid

PETALING JAYA: As Petroliam Nasional Bhd (Petronas) looks to sell its Deep Basin oil and gas assets in Canada, analysts say the move will allow the firm to focus its capital spending on the domestic market, particularly the Refinery and Petrochemical Integrated Development (Rapid) project.

BMI Research said while it did not expect Petronas to completely exit its Canadian upstream projects, further investment in that country is expected to remain subdued due to the weak pricing environment and regulatory hurdles.

“Petronas has repeatedly stated that it remains keen to monetise gas resources in the country’s western coast, in the form of LNG exports, capitalising on shorter shipping routes to several key Asian markets,” it said in a research note.

The recently reported plan to sell some of the oil and gas assets owned by its Canadian unit, Progress Energy, marks another withdrawal by Petronas in Canada after the oil giant scrapped plans for a US$29bil (RM122bil) LNG export project in British Columbia in July.

The assets to be sold include fields held by Progress Energy, which can produce 5,500 barrels per day of oil equivalents, as well as ownership in three gas plants and a pipeline network.

BMI Research, which is a unit of Fitch Group, said Petronas’ retreat from its Canadian LNG venture would allow the company to focus its capital spending on higher-priority downstream projects in the domestic market.

These include the Pengerang Integrated Petroleum Complex, which consists of the Rapid project.

“These projects are closely aligned with Petronas’ long-term strategy to move up the downstream value chain and will significant- ly improve Malaysia’s self-sufficiency in refined fuels and petrochemicals over the coming years,” it said.

The research house also expects Petronas’ overall appetite for overseas investments to remain subdued over the coming years.

This is due to weak oil prices, continued focus on spending cuts and the need to advance higher-priority projects at home.

“As for overseas projects, Petronas will continue to be conservative in its selection and adhere to strict capital discipline, with priority given to a select group of projects,” it said.

One such project, it said, would be its activities in Iraq, where the group held stakes in four producing fields – Garraf, Halfaya, Majnoon and Badra – and is working to more than double production.

Petronas has also recently expressed interest in acquiring upstream licences in Brazil and Iran, despite these investments being exploration plays that will not generate nearterm returns.