KUALA LUMPUR (NewsRise) -- Petronas Gas and Sabah Energy Corporation have mutually terminated a pact to jointly develop a liquefied natural gas project in the Malaysian state of Sabah.
"In view of the prolonged uncertainty of the regasification terminal Lahad Datu Project, the parties to the Shareholders Agreement have mutually agreed to terminate the said SHA effective 10 February 2016," Petronas Gas said in a stock exchange filing.
In September 2013, Petronas Gas, which processes natural gas and operates pipelines in Malaysia, had offered Sabah Energy to acquire up to a 20% equity stake in the project. The estimated 0.76 million metric ton per year plant was scheduled to start operation last year but a violent insurgency in 2013 led to an indefinite suspension of the project.
"Hence, security concerns and the current low crude oil prices environment are likely to be main reasons for the project abortion," Alex Goh, an analyst at AmInvestment Bank wrote in a research note.
Goh kept a Hold rating on the company with an unchanged fair value of 24.40 ringgit a share, based on sum-of-parts valuation. "Our fair value and forecasts are unchanged as we had not incorporated any contributions from the proposed Lahad Datu regasification terminal, given that management had not given any guidance of when the project would have commenced," Goh said.
Petronas Gas, a unit of Malaysia's national petroleum company Petroliam Nasional, is currently constructing another regasification terminal in the southern state of Johor. The plant will have an annual capacity to process 3.5 million tons to meet the rising demand for gas.
The facility, which costs 2.7 billion ringgit ($620 million) to build, is expected to start commercial operations by the end of 2017. Regasification involves vaporizing natural gas, which has been converted into liquid form for shipping, back into its gaseous state.
Petronas Gas currently operates a regasification terminal in the western Melaka state that can handle up to 3.8 million tons a year. It processes liquefied natural gas transferred from ships before feeding into its pipeline network that spans more than 2,500 kilometers across Malaysia.
The company owns six gas processing plants in Malaysia that processes more than 2,000 million standard cubic feet per day of raw gas on behalf of its parent.
As the Pengerang regasification termal capacity is similar to the existing Malacca regasification facility's 530 million standard cubic feet per day, we expect the Pengerang project to contribute approximately 300 million ringgit per annum to the group's earnings before interest and tax once it starts operation, Goh of AmInvestment Bank said.
While the benchmark FTSE Bursa Malaysia KLCI ended 0.03% lower, shares of Petronas Gas closed 0.18% down at 22.28 ringgit and that of Petronas Chemicals gained 0.29% to end at 6.96 ringgit.