Upstream activity set to rebound in Southeast Asia: Malaysia
From WorldOil, January issue
This first article of a seven-part series on Southeast Asia provides an overview of
several major players in the region, examining recent activity trends and finding that
most of these countries are poised for renewed growth.
Kurt S. Abraham, International Editor
A little more than two years after the Far Eastern economic crisis gripped Southeast Asia, the
region's upstream oil and gas sector appears headed for a recovery. Indeed, all of Southeast Asia seems to
be awakening from an economic slumber induced by the financial crisis that hit in late 1997. Cautious
optimism is returning to several countries and the regional E&P industry. The benefits of higher oil prices
came too late to alter 1999 budgets, but the picture is brighter for 2000. Capital investment for E&P should
exceed 1999 outlays in most countries.
This article describes what has occurred in the up-stream sectors of four countries during the past two
years and what the prospects are for improved performance in the near future. Regionwide, industry
executives seem to agree that several factors need to improve, in order for Southeast Asia to mount a full
recovery.
These include a rebound by the region's natural gas market, which is going to need more time
than the oil sector to sort itself out; a reduction in the massive oversupply of seismic data worldwide; and
people reestablishing their "hunches" about various oil prospects. Already, there are some changes in the
market that should push gas demand higher.
Observers also point out that throughout the greater Far East, Japan's economy is at least as big as all the other economies, including Australia's, put together. So if a 1%-to-3% increase occurs in Japan's economy, it can have an enormous effect on energy usage by the entire Far East.
For instance, if Japan is recovering - knowing that the rest of the economies are going to be pulled through - that alone will translate to many additional LNG cargoes.
So, the feeling among many industry leaders is that once Japan recovers, the Southeast Asian countries will follow suit, and there could be 6%-to-7% growth, once again, in the region within three to five years. This is why many operators remain bullish about the region, taken as a complete picture.
The four major players in Southeast Asian E&P are Indonesia, Malaysia, Thailand and Viet Nam.
MALAYSIA:
In various incarnations, the dominant 14-party coalition known as Barisan Nasional has controlled
Malaysia's government since the nation gained independence in 1957. In the last general election in 1995,
Barisan Nasional won an overwhelming majority - 162 out of 192 parliamentary seats.
After a decade of strong economic growth that averaged 8.7% annually, Malaysia was hit hard by the Asian
crisis. However, a recovery is underway. The economy should show minor growth in 1999 after shrinking
7.3% during 1998.
State firm Petronas (through its operating arm, Petronas-Carigali) and Esso Malaysia (Exxon) dominate an
E&P sector that has been stable despite see-sawing oil prices. On average, six rigs drill 70 to 80 wells
annually. There are three areas of principal activity: offshore Peninsular Malaysia, and offshore Sarawak and
Sabah states on the northwest side of Kalimantan Island. Separately, additional work is done in the
Malaysia-Thailand Joint Development Area (MTJDA), offshore in the Gulf of Thailand.
Despite the dominance of Petronas and Esso, several other operators are involved in Malaysia. In fact, three
new operators - Amerada Hess, Santa Fe Snyder and YPF - entered this market in 1998 by signing new
PSCs (production sharing contracts). This had been the goal of Petronas when, in the mid-1990s, the
company devised a flexible PSC, to attract more investors to small fields. The firm also loosened terms for
all PSCs in 1997. In January 1999, Murphy Oil signed for three PSCs as operator.
Petronas-Carigali and the foreign operators face a significant challenge in their goal to keep Malaysian oil
output up, to a range of 600,000 to 630,000 bpd. This will require them to find substantial new reserves, yet
recent experience shows that the majority of new reserves are coming from incremental growth in existing
fields, while oil discoveries are trending smaller and smaller.
The best exploration prospects for finding incremental reserves of crude are near, or adjacent to, existing
fields, where additional small pockets of oil are situated. Deepwater areas are also considered high on the
list of prospectivity. Petronas acknowledges that, with improved seismic techniques, it can now look at
deeper horizons, as well as identify high-pressure horizons in shallower waters.
A number of development projects at small oil fields are underway offshore. After putting Yong and Raya
fields onstream, Esso is developing Larut field on its PM5 Block, and similar work is progressing on Shell's
F 23 SW satellite and Asam Paya field, straddling the Malay / Brunei border. Another 10 or more oil and
gas fields are considered probable for development, with onstream dates ranging from 2001 to 2005.
Petronas-Carigali's strategy, as mentioned earlier, is to keep oil output from slipping below 600,000 bpd, so
new projects are geared to that goal. Officials are not happy with a 36% average oil recovery rate, so they
hope to utilize new technologies to boost that figure. If improvement can be achieved, Petronas officials say
they are not greedy - they do not expect to improve to 50%, but a gain to 40% or 41% is something they
believe is doable.
It also is cheaper, they point out, than drilling to find new discoveries. Convinced that technology will permit them to do what was not feasible 10 years ago, Petronas officials say they will go back to many older wells and see what kind of measures can be applied to squeeze out additional reserves.
Natural gas is playing a larger role. Reasons include expanding industrial usage, gas discoveries
outnumbering oil finds and new oil pockets becoming smaller. Gas output was about 4.7 Bcfd during 1997
and 1998. Petronas would like to begin drilling for gas in deepwater areas, too, but that program was
delayed until the effects of low oil prices in 1998 and early 1999 have passed.
Full article:
Special Report - Southeast Asia
Upstream activity set to rebound in Southeast Asia
worldoil.com |
