Billions of ringgit going into risk service contracts, more oil discoveries plus billions to spend in capex
THE future looks stimulating for the local oil and gas industry, with billions of ringgit of investments going into risk service contracts (RSCs), more discovery of deepwater reserves, plus tens of billions of ringgit in upstream capital expenditure (capex).
The potential in technologically demanding areas such as enhanced oil recovery, asset integrity, integra-ted operations and deepwater exploration is expected to provide opportunities for local players to develop indigenous technology.
Besides marginal fields development, analysts and industry players see the merger between SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd into SapuraKencana Petroleum Bhd, the liquefied natural gas regasification terminal and the Pengerang Integrated Petroleum Complex, as major highlights of the industry in the year 2012.
According to Frost & Sullivan, Petroliam Nasional Bhd (Petronas) is expected to award more RSCs to potential oil and gas industry players for the development of marginal fields with at least 22 identified for this year onwards, with estimated investments of RM22 billion.
"Considering around RM750 million to RM1 billion per field cluster for development, the total expenditure for 22 marginal fields could be RM16.5 billion to RM22 billion," Frost & Sullivan director of energy practice Subramanya Bettadapura told Business Times.
Currently, he said, RSCs for three marginal fields have already been signed and more RSCs are expected to be signed from this year onwards.
Out of the 105 marginal fields identified under the Economic Transformation Programme, as announced in 2010, he said 25 fields have been marked for development under the new RSC arrangement.
The first RSC for the development of Berantai marginal field offshore Peninsular Malaysia was awarded in January 2011 to a consortium comprising Petrofac Energy Development Sdn Bhd, holding a 50 per cent working interest, and Kencana Energy Sdn Bhd and Sapura Energy Ventures Sdn Bhd (each holding a 25 per cent interest).
This was followed by the award of the SFRSC licence on August 2011 to ROC Oil Holdings Sdn Bhd, with a 48 per cent interest, Dialog Group Bhd (32 per cent) and Petronas Carigali Sdn Bhd (20 per cent) for the development of Balai cluster fields offshore Bintulu, Sarawak.
In July last year, a RSC licence was awarded to a group comprising Coastal Energy (70 per cent interest) and Petra Energy Bhd (30 per cent) for the development of Kapal, Banang and Meranti cluster of small fields offshore Peninsular Malaysia.
On the prospect of the development of marginal fields, Subramanya said small platforms such as mobile offshore production units and small floating, production, storage and offload vessels are the solutions for developing such small fields.
"With more marginal fields coming into the concept development stage, there are further opportunities for the providers of the solutions to compete," he said when asked on the outlook for the Malaysian oil and gas industry in 2013 as well as its progress last year.
Moving forward, Subramanya said Malaysia has the potential to become the regional hub for oil and gas in this region, especially in the deepwater and services segment.
"Malaysia's deepwater reserves potential is estimated to be 10 billion barrels of oil equivalent (bboe). Of this, only three bboe have been discovered so far. So, this leaves another seven bboe yet to be discovered," he said.
In terms of investment, Subramanya said the upstream capital expenditure is estimated to be upwards of RM75 billion for the next four years. Besides the development of marginal fields, he said other major highlights of last year are the merger of SapuraCrest Petroleum and Kencana Petroleum to form SapuraKencana Petroleum Bhd; Malaysia's first liquefied natural gas regasification terminal in Sungai Udang, Malacca; and the development of RM135 billion Pengerang Integrated Petroleum Complex in Johor.
Meanwhile, Malaysian Oil and Gas Services Council president Sofiyan Yahya said the next few years will present a period of great opportuni-ties for the local oil and gas services sector as a direct impact of the major investments made by Petronas.
"With the number of projects in the coming years that will keep the industry busy, it will also be an opportunity for the local services sector to be creative and innovative, and promote Malaysia as a centre of research and development.
"The potential in technologically demanding areas such as the enhanced oil recovery, asset integrity, integrated operations, deepwater exploration and other challenges mean that we have greater opportunities to develop our own technology, and in future be able to export homegrown expertise.
"The oil and gas industry has always been a global industry, and the Malaysian services sectors are now familiar with working to global standards as part of the normal business delivery, therefore there is no better time to grow into international players on the platform of the boost of activities locally and in the region in the coming years."
Shell Malaysia chairman Iain Lo said Malaysia's economic resilience in 2012 was remarkable, especially against the backdrop of a European financial crisis and sluggish growth in China. The year saw the growth in domestic demand for energy that required the industry to draw on all its resources.
"As an industry, we have made investments to increase capacity over the years, so we are able to meet the demand growth. The Gumusut-Kakap development, a deepwater joint venture between Petronas, Shell, ConocoPhilips and Murphy, is an example - its early production added 25,000 barrels per day of oil to the country's production.
"To address issues pertaining to production decline, we will continue investing in new fields as well as extending the life of existing fields with the aim to maintain the production levels," he said.
For example, he said, Shell is working with Petronas Carigali to extend the life of the oil fields in the Baram Delta and North Sabah by employing new enhanced oil recovery technology.