Being Unconventional Helps PETRONAS Grow Unconventional Oil, Gas Business

With unconventional oil and gas projects becoming an integral part of its business, Malaysia’s national oil company (NOC) Petroliam Nasional Berhad (PETRONAS) is adapting to the challenges by adopting an unconventional mindset.

Currently, PETRONAS has unconventional resources in four countries, namely coal bed methane in Australia, shale gas in Canada and China and shale oil in Argentina. Each is in a different phase of resource development. In 2008, the company acquired a stake in Australian coal-bed methane venture Gladstone LNG (liquefied natural gas), its first venture into the business segment. Later, two developments in Canada operated by Progress Energy Canada Ltd. were acquired in December 2012.

The interest in unconventional resource business arose from a desire by PETRONAS to increase its hydrocarbon reserves beyond conventional oil and gas resources found in Malaysia and other countries.

“Unconventional means to not be bound by or adhere to accepted practices. It is just in the last 10 years that the term has been used to describe the resource,” Neil Horbachewski, the Canadian-born vice president of the Unconventional Division in PETRONAS’ Upstream business said. 

He explained that “what we do is very straight forward – we all drill and frack wells,” adding that “industry competitors basically do the same thing but the distinguishing factor is how to execute efficiently and have the right mindset to achieve positive results. This will be very important to make PETRONAS a leader in development of unconventional resources.”

PETRONAS’ unconventional projects in Canada are located in Deep Basin in Alberta and North Montney in British Columbia (BC). The latter, operated by Progress Energy now produces around 500 million cubic feet of gas a day, is expected to supply 12 million tons per annum of gas to sister company Pacific Northwest LNG (PNWLNG) LNG export facility at Prince Rupert on the west coast of BC.

Last month, the NOC indicated its intention to proceed with the PNWLNG Project upon receipt of the final regulatory approval from the Canadian authorities.

“Together with its partners, PETRONAS is ready to proceed with the (PNWLNG) project on condition that it receives the remaining regulatory approval from the Canadian Environmental Assessment Agency,” Wee Yiaw Hin, executive vice-president and CEO for upstream business at PETRONAS said Oct. 8, as reported by Bloomberg.

Need for Unconventional Thinking

Given its current and potential future involvement in unconventional oil and gas projects, Horbachewski is determined to see through a change in PETRONAS’ thinking that began in 2008, in paving the foundations to achieve a thriving unconventional resource business.

“It doesn’t all just hinge on technology. It’s everything from the processes and policies to a way of operating. We have to have a manufacturing mindset,” he said.

On shale oil and gas production, which took off in a big way in North America, he noted that “exploration of shale is not about finding the reservoir. It’s about vastness of the resource and leveraging efficiencies to drive down costs.”

Apart from exploration, North American shale oil and gas production became a success as there was a very competitive oil and gas industry that pushed innovation, extensive infrastructure and an easily accessible market. In addition, investors felt assured given firm regulatory frameworks provided by federal, state and provincial governments.

“Not to be underestimated is the role of the public, one with a sophisticated enough understanding of the oil and gas sector,” Horbachewski said.

Keeping the public informed is crucial and PETRONAS – through Progress Energy Canada – works closely with stakeholders and aboriginal groups to build strong relationships and understanding of the benefits of the development.


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