Malaysia's $30 bln drive reverses oil decline, boosts gas

Fri Jun 14, 2013 4:53am EDT

* Oil output to rise above 600,000 bpd as Gumusut-Kakap ramps up

* Gas production headed for fresh high before 2020 -Wood Mackenzie

* Malaysia ranked 4th in added oil, gas reserves in 2012 -Wood Mackenzie

By Florence Tan

KUALA LUMPUR, June 14 (Reuters) - Malaysia's $30 billion push to find more oil and gas is paying off, with domestic crude output bouncing off a recent 20-year low and natural gas production on track to hit a record high before the end of the decade.

Southeast Asia's second-biggest oil producer expects its crude and condensate output to rise to more than 600,000 barrels per day (bpd) in the next five years as new big fields start up and natural decline is stemmed at mature fields.

Malaysia's oil output is not likely to rise much higher than that as most recent finds have been gas, although production of liquids may briefly approach former levels near 700,000 bpd when some of the new fields hit their peaks.

"It'll go above 600,000 bpd of total liquid production from Malaysia and then it will plateau," Wee Yiaw Hin, the head of exploration and production for state oil and gas company Petronas, told Reuters.

Recent discoveries offshore Sarawak and Sabah, however, could push the country's gas output to a record high by 2020, ensuring Malaysia will remain one of Asia's largest suppliers of the liquefied form of the fuel, and easing worries that falling reserves and rising domestic demand could curb LNG exports.

Gas makes up about 60 percent of Malaysia's total oil and gas output, and the shift in production will be increasingly important not only for Petronas, but also to the government, which gets nearly half its budget from the state oil company.

Malaysia's natural gas output is expected to rise to a record 7 billion cubic feet per day in 2018, up from about 6 billion now, according to energy consultancy Wood Mackenzie.

Petronas, which owns and manages Malaysia's oil and gas resources, previously forecast 2013 pre-tax profit of 89 billion ringgit ($29 billion), flat on last year, with lower oil prices offsetting a 2 percent rise in total production.

AGGRESSIVE PLAY PAYS OFF IN GAS

Petronas and partners made 24 discoveries last year, including two overseas, adding 2 billion barrels of oil equivalent to the country's reserves, Wee said.

According to Wood Mackenzie, Malaysia ranked fourth globally in terms of reserves added in 2012.

"We very seldom see a Southeast Asian country in the top 10 and that success is in Sarawak in gas," said Craig McMahon, lead Southeast Asia analyst at Wood Mackenzie.

One of Malaysia's biggest gas finds is in Block SK310 offshore Sarawak, where Newfield Exploration estimates initial gas in place at 1.5 trillion to 3 trillion cubic feet.

Petronas spent around 93 billion ringgit ($30 billion) over 2008-2011 to reverse falling output, mostly at home. Its success is in sharp contrast to neighbour Indonesia.

Indonesia, Southeast Asia's largest oil and gas producer, has seen its liquids output drop to around 830,000 bpd, about half 1990s levels; while its gas output has dropped to 8.2 billion cubic feet a day, down 12 percent from 2010.

Indonesia has also been pushing to reverse its declining output, setting ambitious targets, but has struggled to attract new international oil and gas investors.

"Petronas is very much the regional poster child when it comes to NOCs (national oil companies)," McMahon said.

Malaysia's revised exploration and development tax treatment attracted ExxonMobil and Royal Dutch Shell, deepwater specialists like Murphy Oil Corp and smaller firms such as Newfield Exploration Co, McMahon said.

This year, Petronas and its contractors have already made three new discoveries in the first quarter and more are expected, Wee said. "Our exploration programme in Malaysia continues to be very aggressive," he said.

Malaysia was the second-largest LNG exporter in 2012, according to BP's review of world energy, shipping 24 million tonnes from its liquefying plant in Bintulu in Sarawak, mostly to Japan, South Korea and Taiwan.

Petronas plans to make a final investment decision later this year to build a second floating LNG (FLNG) terminal offshore Sabah, while its first FLNG project is still underway.

With a ninth train to be added at Bintulu, a total 6.3 million tonnes per year of new LNG capacity will be onstream in 2015-2016.

With gas output set to rise, Petronas could also renew some expiring term contracts for LNG, McMahon said.

OIL REVERSAL

Much of Malaysia's added oil output will come from the Shell-operated Gumusut-Kakap and Malikai fields offshore Sabah.

Gumusut-Kakap alone will add up to 120,000 bpd when the Sabah Oil and Gas Terminal in Kimanis is completed next year, Petronas' Wee said.

"In the next three to five years, we will be able to sustain or even grow our production from these new projects," Wee said.

Malaysia's liquids output in 2012 was at 586,000 bpd, according to Petronas. It fell to its lowest in 20 years at 569,000 bpd in 2011. ()

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