Executive chairman Ngau Boon Keat told StarBizWeek that the recently awarded 15-year small field risk service contract (SFRSC) from Petroliam Nasional Bhd (Petronas) has opened a new growth area for the oil and gas service provider.

On Tuesday, Dialog announced that the group together with ROC Oil Malaysia (Holdings) Sdn Bhd and Petronas Carigali Sdn Bhd had bagged the SFRSC for the development and production of marginal oil fields from the Balai Cluster, Sarawak estimated to cost up to US$950mil (RM2.8bil).

Dialog is a multi-discipline technical service provider for logistics (tank terminals), engineering and construction, catalyst handling, plant maintenance, fabrication, e-Payment technology and solutions, specialist products.

Ngau: ‘We will provide such services in Malaysia, and later, internationally.’

The joint venture company for the SFRSC will be 32% owned by Dialog’s unit – Dialog D&P Sdn Bhd – while ROC Oil Malaysia, which is part of the Australian ROC Oil group, and Petronas Carigali will own 48% and 20% interests respectively.

The development and production of the petroleum located offshore Bintulu, Sarawak would be carried out in two phases – the pre-development phase, estimated to cost between US$200mil and US$250mil (between RM599mil and RM749mil) and which is scheduled to commence this year, taking up to 18 months to complete, as well as the development phase estimated to cost between US$650mil and US$700mil (between RM1.95bil and RM2.09bil).

The group will submit a field development plan for all or some of the fields on the successful completion of the pre-development phase and agreement on the economic viability of the fields.

Production from all the fields in the cluster is planned to be online within 24 months from commencement of the development program.

Ngau says there are huge opportunities and development potential for the group in upstream oil and gas activities.

“Moving up the value chain into oil field development and production can propel us to grow more than 10 times larger in size eventually. We will provide such services in Malaysia, and later, internationally,” he says.

For the Balai Cluster joint venture, Ngau says Dialog will bring its expertise as a multi-discipline technical service provider to the table and at the same time, learn more about marginal oil field development and production from ROC Oil.

“It is a learning opportunity in many ways for us and also, Petronas Carigali,” he says.

Ngau says it is still too early to release numbers on the oil reserves in the Balai Cluster.

“We have some indicative estimates but we do not want to mislead people. We will release the numbers after we can confirm them by appraisal.”

Regarding the group’s proposed equity fund raising from shareholders, Ngau says, “We chose this method because we want to benefit all shareholders so that they can continue to participate in the growth of the company as well as other business opportunities in upstream activities that will come along.”

On Thursday, Dialog announced that it was proposing to raise up to RM638mil via a rights issue with warrants.

The exercise would be on the basis of two rights shares and one free warrant for every 10 shares held.

Meanwhile, Ngau says Pengerang, Johor has the potential to rival Singapore’s Jurong Island as a major energy and petrochemical hub in the future.

“The upcoming independent deepwater petroleum terminal at Pengerang, Johor will be the deepest (24 metres) such facility in South East Asia. Jurong has limited land and is finding it hard to grow further. Pengerang is a green field.”

To recap, in early June, Dialog entered into a joint venture agreement with Vopak Terminal Pengerang BV, a unit of the Royal Vopak group, for the development of an independent deepwater petroleum terminal at Pengerang, Johor worth RM5bil.

Both parties had set up a joint-venture company – Pengerang Terminals Sdn Bhd – in which Dialog would hold a 51% stake and Royal Vopak the remainder.

There are huge opportunities and development potential for the group in upstream oil and gas activities.

Pengerang Terminals would then invest in a 90% stake in the “first-phase company” Pengerang Independent Terminals Sdn Bhd with the balance stake to be held by the State Secretary Johor (Inc).

The first phase RM1.9bil terminal will have an initial storage capacity of approximately 1.3 million cu m, with seven vessel berths, and is expected to be commissioned in 2014.

The independent deepwater petroleum terminal will provide storage, blending and distribution services for oil products and will be capable of handling ultra large crude oil carriers (ULCC).

Ngau points out that the RM5bil Pengerang terminal, when completed in the next seven years, would comprise a total storage capacity of five million cu m, covering 500 acres of reclaimed land.

“Its advantages will include having deepwater (24 m) jetty facilities capable of handling VLCCs and ULCCs (very large and ultra large crude oil carriers), a sheltered harbour and its strategic location – being next to international sea lanes.”

Ngau says the Pengerang jetty facilities will allow tankers to collect or deliver crude oil without using a Single Buoy Mooring (SBM) system.

“The SBM is expensive but Singapore’s Jurong has to use it as they do not have our natural deepwater.”

Ngau adds that Petronas is investing in a RM60bil integrated refinery and petrochemical complex in Pengerang, Johor, which is expected to be commissioned by the end of 2016.

Known as the Refinery and Petrochemicals Integrated Development (Rapid) project, it will comprise a crude oil refinery with a 300,000 barrels per day capacity, a naphtha cracker that will produce about three million tonnes of ethylene, propylene, C4 and C5 olefins per year, and a petrochemicals and polymer complex.

“In five to 10 years, it is going to be very exciting in Pengerang. Eventually, over the years, we could potentially see US$100bil (RM298bil) in private investments flowing into Pengerang as other multinationals are also looking at the area. These multinationals are also our potential customers in areas such as maintenance and usage of our deepwater jetty facilities. We are working hand-in-hand with the Government to promote more investments.”

Ngau says Dialog’s planned RM5bil investment in the Pengerang terminal could jump three-fold to RM15bil in the future if the “right business opportunities come in and we are required to invest.”

In Johor, Dialog will expand the storage capacity of its Tanjung Langsat tank terminals from 400,000 cu m to 650,000 cu m by the end of this year.

“We are talking to more customers – so it could be eventually expanded to one million cu m.