Singapore, 7 February 2011 - In 2011, the Malaysian Oil & Gas industry will see more strategic collaboration in joint venture developments with fellow ASEAN countries, acquisition of proven or marginal fields, rapid investments in new technology to tap into new oil and gas boundaries, and Enhanced Oil Recovery (EOR) to improve on the nation's reserves recovery ratio and reservoir management practices.
This is in conjunction with the Malaysian government's announcement of its Economic Transformation Programme (ETP) in its 12th Malaysia Plan and the unveiling of Petronas' new Board of Directors (BOD).
According to Frost & Sullivan Asia Pacific Program Manager of Energy & Power Systems Practice Razeen Khalid, the newly restructured BOD and management committee of Petronas consists of more leaders familiar with the industry and will bring more focus to exploration, development and production activities in the market.
"The Malaysian governments has also announced revisions in its Petroleum Income Tax Act, with new tax exclusion incentives to be given to domestic investments in order to attract investments into the oil & gas sector," adds Razeen.
He continues, "This incentive is expected to bring in foreign investments for the capital intensive deepwater projects as well as attract private investors for smaller, marginal field initiatives."
With mixed results in their foreign investments over the decade, it is expected that Petronas will re-focus and strategize for more domestic investments both in greenfield developments and brownfield enhancement activities.
Razeen says, "Malaysia's rising economy brings the nation closer to being a net importer of oil, putting a need for bigger reserves discovery. In view of this, the Government and Petronas have aligned a capital expenditure allocation of approximately RM40 billion for 2011. This huge domestic investment will benefit local oil and gas service providers and contractors of all sizes."
Investments in new technology will also be crucial to tap into the un-worked deepwater, high temperature and high pressure boundaries of domestic fields. A staggering RM13 billion will be invested in 2011 on exploration and development efforts on 4 deepwater projects, mainly the Gumusut-Kakap, Kebabangan, Malikai and Jangas fields.
The Malaysian government has also chalked out ambitious plans to develop Malaysia as the regional oilfield services hub. This is expected to increase domestic and foreign investment into this sector with many private sector participants having shown interest in this sector. Currently, the Malaysian oilfield services and equipment market is estimated to be around RM2 billion annually.
Razeen adds, "Malaysia's offshore producing fields are more mature than those of its Southeast Asian neighbors such as Brunei, Indonesia, Thailand and Vietnam. This translates to more opportunities for Joint Development Agreements or Production Sharing Agreements (PSA) in Exploration and Developments, Asset Commissioning and Asset Management for various Offshore Support Services, all of which will continue to drive growth of this sector and make Malaysia stand out as the Regional Oilfield Services Hub. The recent PSA between Petronas and Brunei National Petroleum Company is a good start to the year."
Brownfield services and Marine support services will also continue to be high growth subsectors with an estimated RM2 billion worth of contracts in offshore maintenance and marine provisions up for grabs. Another subsector attracting a lot of interest is decommissioning services.
"Of the 900 odd offshore structures in the Asia Pacific region, around 600 of these are over 20 years old. Decommissioning is new to the region and many countries, including Malaysia are developing their own regulation for decommissioning. The opportunities for service providers are enormous going by the costs involved for decommissioning. While the average cost to plug and abandon a well is estimated to be USD750,000, the average cost to decommission a platform is USD2.5 million," Razeen says.
2011 will also see emphasis on Enhanced Oil Recovery (EOR) activities. Currently, Malaysia's average recovery ratio of approximately 23% is far from the industry leaders' 42-45% range. A recovery ratio of 23% means that for every 100 barrels of oil in the ground, only 23 barrels are brought to the ground while the remaining 77 barrels remain yet to be recovered. A big push in reservoir management initiatives is certainly underway.
"While the typical primary and secondary recovery methods such as facility upgrades, de-bottlenecking, pipeline optimization works, well production enhancements, acid stimulations, side-track drilling and more prudent reservoir management still go on, EOR activities in the form of concerted efforts in gas, water, microbial, and chemical injection methods, together with thermal recovery solutions will increase the recovery ratio, that is, the total extraction from the reservoir of the producing fields," says Razeen.
He continues, "Exxonmobil Exploration and Production Inc. (EMEPMI) leads these effort via its estimated RM6.5 Billion Tapis Rejuvenation project on 7 of its shallow water, brownfield developments with an estimated 20 Million barrels of oil equivalent reserves to be added. EOR projects of a massive scale similar to this have never been done in Malaysia, so this is an encouraging start."
Another area that is likely to see a spate of investments is the development of marginal fields. Under the economic transformation program, the Malaysian government has indicated that developing marginal fields will be a priority.
A significant portion of Malaysian hydrocarbon reserves are locked in small fields with less than 30 million barrels of recoverable hydrocarbons. With increasing oil prices and innovative solutions, these fields can be exploited economically. Development of marginal fields will continue to gather momentum during 2011.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.
Corporate Communications – Asia Pacific
P: +603 6204 5832
F: +603 6201 7402
Corporate Communications – Asia Pacific
P: +603 6204 5910