Petronas eyes divesting its 49% stake in offshore natural gas block

The firm needs to raise cash as global oil price fluctuates.

Malaysia's state-owned Petronas is planning to divest up to a 49.0% stake in its SK316 natural gas block offshore Sarawak, in order to raise cash and reduce development cost amid sustained pressure on its operations from volatile global oil prices, according to BMI Research.

The block on offer contains the producing NC-3 gas field, which supplies gas to MLNG-9, a newly commissioned ninth train at Petronas' giant LNG export complex in Bintulu (annual LNG export capacity of 19.0bcm).

A joint-venture (JV) between Petronas and Japan's JX Nippon, MLNG-9 has an annual LNG export capacity of about 4.8bcm and is gearing up to begin commercial operations in Q117.

Here's more from BMI Research:

SK316 also includes the Kasawari gas project, a deepwater, sour gas development estimated to hold about 3.2trn cubic feet (equivalent to 90bcm) of recoverable gas resources, as well as smaller exploration acreages.

While the SK316 block stake offer is at an early stage and concrete bids are yet to emerge, we remain positive that the sale will go through as planned.

Possible access to additional LNG exports could appeal to the likes of Thailand's PTT PCL and Indonesia's Pertamina, firms that are gradually bolstering LNG positions to offset rising domestic gas demand amid declining production.

Malaysia's high quality, lower-cost gas plays could also attract interest from firms in South Korea and Japan, large LNG buyers seeking greater supply diversification and with limited investment opportunities at home.

Bulk of the funds generated from the stake sale will reportedly be used to support further development phases at the Kasawari field. Despite promising below-ground prospects, development has progressed slowly due to the field's deepwater, high-cost structure, and the relative inexperience of domestic engineering firms involving carbon dioxide removal.

Potential integration of a foreign partner could dilute the project's cost burden. Any future gas output from Kasawari will likely be designated for exports, given Malaysia's comfortable surplus in gas.