Dialog, Petronas end risk service contract

PETALING JAYA: Petroliam Nasional Bhd (Petronas) has terminated one of five small risk service contracts it awarded in recent years, in the latest casualty of an oil rout which has lasted more than a year.
Dialog Group Bhd in a filing with Bursa Malaysia yesterday said BC Petroleum Sdn Bhd, a company it jointly owned with Roc Oil Malaysia (Holdings) Sdn Bhd and Petronas Carigali Sdn Bhd for the development of the Balai Cluster fields offshore Bintulu, Sarawak, has ceased operations and terminated its small field risk service contract (RSC) with Petronas by mutual agreement.
Oil production from the Balai field in the Balai Cluster Risk Service Contract (RSC) area, commenced on Nov 6, 2013.
Dialog said the decision was made due to the difficult business environment and persistent depressed oil price.
A termination by mutual agreement was signed on Wednesday with Petronas, with an effective termination date of Dec 1, 2015.
BC Petroleum was 32% owned by Dialog's wholly owned subsidiary, Dialog D&P Sdn Bhd, 48% owned by Roc Oil Malaysia (Holdings) Sdn Bhd and 20% held by Petronas Carigali Sdn Bhd.
The small field risk service contract was signed by Dialog D&P, Roc Oil and Petronas Carigali with Petronas on Aug 16, 2011 and subsequently novated to BC Petroleum.
With the termination of the contract, BC Petroleum will receive the balance of the capital expenditure reimbursement within the first half of 2016.
"Dialog's total losses amounting to approximately US$10 million (RM42 million) had been substantially provided for in the group's financial results. As such, the termination is not expected to have any material effect on the earnings, net assets and gearing of Dialog for the current financial year ending June 30, 2016," it said.
Petronas' remaining RSCs are for the Berantai field to Petrofac and Sapura Kencana Petroleum Bhd in January 2011; the Kapal, Banang and Meranti (KBM) cluster to Coastal Energy KBM Sdn Bhd in June 2012; the Tembikai-Chenang cluster to VESTIGO Petroleum in October 2013; and the Tanjong Baram field to EQ Petroleum Developments Malaysia Sdn Bhd and Uzma Energy Venture (Sarawak) Sdn Bhd in March 2014.
Petronas is reportedly eyeing another round of capital expenditure and operating expenditure review to target cuts up to RM50 billion over the next four years.