KUALA LUMPUR (March 15): Petronas Gas Bhd (PetGas) said on Friday that it has made the final investment decision for the development of a new compressor station costing up to RM650 million in Jeram, Selangor.

A final investment decision in the oil and gas industry typically takes years to make and is a sign that a project will proceed as proposed following extensive studies and planning. The project owners will then sanction the budget, allowing contractors to purchase materials as well as equipment to begin work.

The project involves construction of a two-unit gas compressor to boost capacity of the Peninsular Gas Utilities (PGU) pipeline network to meet rising demand for gas starting from 2026, PetGas said in an exchange filing. This project is targeted to be completed in 2026, it said.

The project is part of the PGU III expansion and falls under the incentive-based regulation framework, which will play a crucial role in determining the cost recovery of the project through the transmission pipeline tariff, PetGas said.

PetGas runs the 2,623km PGU network that mainly pipes gas to power sectors, petrochemical plants and other industries across Peninsular Malaysia. The pipeline has capacity to transport up to 3,500 million standard cubic feet per day of gas, according to the company’s website.

The final funding proportions for the compressor project will be determined later after taking into account factors such as internal cash requirements, gearing levels, interest costs, and market conditions, PetGas said.

“There will be no material effect on the earnings per share, net assets per share of the group and gearing for the financial year ending Dec 31, 2024 (FY2024),” PetGas added.  

In FY2023, PetGas reported a 10.58% increase in net profit, reaching RM1.82 billion compared to RM1.65 billion in the previous year. Full-year revenue rose by 4.63% year-on-year to RM6.45 billion thanks to higher fuel gas prices.

At the time of writing, PetGas shares were trading two sen or 0.11% lower at RM17.80, resulting in a market capitalisation of RM35.2 billion.