Malaysia is poised to emerge as a top petroleum investment spot moving into 2013, as state-backed Petronas places a renewed emphasis on maximizing domestic oil resources, after years of international expansion.
As Malaysia's fields mature, its oil production has gradually fallen from a peak of 862,000 barrels per day in 2004 to 630,000 barrels per day in 2011, according to the U.S. Energy Information Administration. Realizing that the country could lose its position as a net oil exporter, fresh attempts had been made by the Malaysian government since 2011 to enhance production from existing and marginal fields, as well as boosting the development of new fields in deeper offshore areas.
Besides having state-backed Petronas plough investment dollars into developing the country's oil assets, the Malaysian government put in place attractive tax-reduction measures in 2011 to attract foreign oil companies into its offshore industry. For example, foreign companies investing in marginal fields only pay 25 percent taxes from 2011, down from the original 38 percent. On a case-by-case basis, foreign companies could also be exempted from both capital expenditure taxes and export duties.
Malaysia's Oil Sector Sees Influx of Investment Dollars
Malaysia, especially in the second half of this year, has started to reap the fruits of its tenacious promotion efforts.
The country has inked an enviable string of high-profile deals in 2H 2012, most of which are concentrated in the prolific Sarawak Basin. Based on the signed contracts, it appears that foreign investors are most keen to invest in the Sarawak Basin and the Sabah region, as the areas are already home to established petroleum producing blocks.
If investment activities in November and December can be used as a projection of Malaysia's offshore focus moving into 2013; the next year is certainly shaping up to be a robust one.
Petronas announced Nov. 1 that for the first time, since its incorporation in 1975, it struck oil in significant quantities off the coast of Pahang. Petronas Carigali – Petronas' oil and gas exploration unit – and Lundin Petroleum jointly discovered additional oil reserves under a production sharing contract (PSC) in the offshore Bertam oil field in Block PM 307.
"With the addition of these reserves, the Bertam field now contains recoverable oil reserves of 64 million barrels," Malaysia's Prime Minister Razak commented on the discovery on his personal website.
Following right on the heels of the country's discovery in Pahang, Petronas went on to sign a new PSC with Shell Malaysia Nov. 27 to explore for oil on Block SK319 offshore Sarawak. The agreement sees Shell undertake an initial three year exploration program to explore an area totaling 1,053 square miles. The exploration campaign is to further explore the mature carbonate pinnacle play in Central Luconia, said Shell in a statement.
In December, Singapore jumped onto the Malaysian offshore bandwagon. Singapore-listed RH Petrogas revealed Dec.7 it entered a PSC with Petronas for Block SK 331 onshore Sarawak. Like the PSC which Petronas inked with Shell, RH Petrogas is committed to a three-year program which includes seismic reprocessing, new seismic acquisition, exploration drilling and specialized geological and geophysical studies. Block SK 331 – which lies across 4,479 square miles – overlaps the giant Bintulu LNG processing facility.
But perhaps, the most exciting project is the PSC which Petronas awarded to a three-member partnership Dec. 13. In a statement emailed to Rigzone, Petronas revealed that oil giants ConocoPhillips and Shell will join Petronas Carigali to develop its SB311 block offshore Sabah. The project – with details still under wraps among the three partners – will see two wildcat wells drilled, 249 miles of 2D seismic data acquired and existing 3D seismic data re-processed.
Petroleum Services Sector Benefit
Leveraging on the government's interest in promoting the country's petroleum industry, local oilfield service providers have found themselves moving into a boom cycle. This is especially true for top-side maintenance service providers, where domestic companies had made substantial progress in marketing themselves.
For example, Malaysia's SapuraKencana Petroleum was awarded Nov. 2 two offshore services contacts worth $274 million. The first contract was awarded Petronas to Allied Marine & Equipment, a wholly-owned subsidiary of SapuraKencana Petroleum, for inspection, repair and maintenance services utilizing specialized vessels, equipment and personnel. The second contract was awarded by Hess Exploration and Production Malaysia to Kencana HL – also a wholly-owned subsidiary of SapuraKencana Petroleum – for the commissioning of the Kamelia-A wellhead platform in the offshore Kamelia field.
For low-side maintenance however, foreign contractors continue to play a key role. A sector report by the Oxford Business Review published at the end of last year noted that while top-side maintenance is competitive in Sarawak, domestic companies were unable to penetrate the low-side sector due to the specialized nature of the industry.
Meanwhile, the floating production storage sector (FPS) is also riding on the petroleum wave as increased exploration activities means that there will be an increased need for production and storage facilities. A high-profile deal that took place in the FPS industry is MISC's sale of its stake in the Gumusut-Kakap Semi-FPS to Petronas Carigali for $307.5 million Nov. 30. The semi-FPS, scheduled for delivery by mid-2013, will be able to produce 150,000 barrels of crude per day from subsea wells. The facility – the first of its kind in Asia – will be installed in waters 3,937 feet offshore Sabah.
Moving into 2013, despite its aging oil fields, Malaysia's petroleum industry looks set to start the year on an optimistic note. Activities in 2012 proved that Sarawak and Sabah still inspire confidence on the part of both local and foreign investors, and that foreign investors are still well-received. In this respect, Sarawak and Sabah will continue to play a critical role in Malaysia's exploration and production sector.
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