Singapore (Platts)--31Jan2011/233 am EST/733 GMT

Malaysia's national oil company Petronas Monday awarded its first ever risk service contract for the development and production of the Berantai gas field offshore Peninsular Malaysia, kickstarting development of the country's marginal oil and gas fields.

Petronas awarded the RSC to local companies Petrofac Energy Developments, Kencana Energy and Sapura Energy Ventures, a subsidiary of Sapuracrest Petroleum.

Under the terms of the contract, Petrofac, with a 50% equity interest will be operator of the field, while Kencana and Sapura will own the remaining 50% interest on an equal basis.

The Berantai field is located about 150 km offshore Terengganu. The development of the Berantai field will involve the provision of one well-head platform with 18 wells together with a related pipeline linking it to another existing platform, and the provision of a floating production, storage and off-loading vessel, Sapuracrest said in a statement Monday.

A second well-head platform is expected to be installed in a subsequent phase.

The RSC will be for approximately nine years, commencing from January 31, 2011. The project is targeting first gas by end of December 2011 with the first development phase of 18 wells expected to be completed before the end of 2012. The total development cost including for the subsequent phase is estimated at this juncture at $800 million excluding the FPSO, Sapuracrest said.

"The RSC model strikes a balance in sharing of risks with fair returns for development and production of already discovered fields," Petronas said in a statement.

In this arrangement, Petronas remains the project owner while the contractors are service providers. Upfront capital investment will be contributed by the contractors, which will receive payment commencing from first production and throughout the duration of the contract, it added.

The new arrangement facilitates direct participation of Malaysian companies in the country's upstream oil and gas activities, in line with Petronas' efforts to leverage on their existing capacity while fast-tracking their capability in development and production in a structured manner, the company said. Malaysia has 106 marginal oil fields containing 580 million barrels of oil with Petronas having firmed plans to develop 25% of the fields to replenish its oil reserves and generate new revenue streams, the company's president and CEO, Shamsul Azhar Abbas, was quoted as saying by local media Friday.

A marginal oil field is defined as a field that can produce 30 million barrels of oil equivalent or less.

Petronas also expects to award an RSC for the Sepat oil field soon, Abbas said. The Malaysian government late November cut the tax rate from 38% to 25% for marginal field development, and also waived the export duty on oil produced and exported from marginal fields.

--Mriganka Jaipuriyar, mriganka@platts.com

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