The Malaysian oil and gas industry is expected to see a rise in activity in 2011 following the government's announcement of new tax incentives for the sector and a restructuring of national energy company Petronas' management committee and board of directors, Frost & Sullivan said in a report Tuesday.
In 2011, the Malaysian oil and gas industry will see more strategic collaboration 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 or EOR, to improve the nation's reserves recovery ratio and reservoir management practices, the business research and consulting firm said.
"The newly restructured BOD [board of directors] 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," Razeen Khalid, Asia Pacific Program Manager of Energy & Power Systems Practice, said.
Moreover, the Malaysian government's revisions in its Petroleum Income Tax Act is expected to bring in foreign investments for the capital intensive deepwater projects as well as attract private investors for smaller, marginal field initiatives, Khalid said.
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, the report said.
NEED FOR BIGGER RESERVES DISCOVERY
Malaysia is close to becoming a net importer of oil, putting the need for bigger reserves discovery, Khalid said.
In view of this, the government and Petronas have aligned a capital expenditure allocation of approximately MR40 billion ($13.15 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 unworked deepwater, high temperature and high pressure boundaries of domestic field. A staggering MR13 billion will be invested in 2011 on exploration and development efforts on four deepwater projects, mainly the Gumusut-Kakap, Kebabangan, Malikai and Jangas fields, according to the report.
There will also be an emphasis on EOR activities in 2011, Frost & Sullivan said.
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, the report said.
While the typical primary and secondary recovery methods such as facility upgrades, debottlenecking and pipeline optimization works 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, Khalid said.
Exxonmobil is leading this effort via its estimated MR6.5 billion Tapis rejuvenation project on seven of its shallow water, brownfield developments with an estimated 20 million barrels of oil equivalent reserves to be added, the report said.
MARGINAL FIELDS TO SEE SPATE OF INVESTMENTS
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, it said.
The Malaysian government has also chalked out ambitious plans to develop Malaysia as the regional oilfield services hub, Khalid said. This is expected to increase domestic and foreign investment into this sector with many private sector participants having shown interest in this sector.
Brownfield services and marine support services will also continue to be high growth subsectors. Another subsector attracting a lot of interest is decommissioning services, the report said.
Of the 900 odd offshore structures in the Asia Pacific region, around 600 of these are over 20 years old. The opportunities for service providers are enormous going by the costs involved for decommissioning, Khalid said. While the average cost to plug and abandon a well is estimated to be $750,000, the average cost to decommission a platform is $2.5 million, he added.
