Firms boost gas activity in S-E Asia

Development comes after years of under-investment

“In the last two to three years, Indonesia and Malaysia have witnessed a good size of discoveries, which added on to the momentum overall.” Prateek Pandey

KUALA LUMPUR: Energy companies are ramping up exploration activities in South-east Asia to boost natural gas output and meet long-term demand growth, drawn by recent discoveries and improved investment policies, company executives and analysts say.

Malaysia and Indonesia have recently seen successful upstream discoveries, including a major discovery by Mubadala Energy in the South Andaman Block, following years of underinvestment in the sector since the 2015 oil price crash.

As economic and population growth will spur continued gas demand in the region, which is expected to peak before 2040, “there is an important window of opportunity for investments in gas and LNG (liquefied natural gas),” said Stefano Raciti, Mubadala Energy’s chief operating officer at an industry conference in Kuala Lumpur this week.

“In South-east Asia, we believe this means continuing investing in exploration and expanding in gas production,” he added.

Mubadala is working on expanding output at its Pegaga gas field in Malaysia where two energy majors will be involved for the first time through recent acquisitions.

France’s Totalenergies announced last month it bought a 50% stake in Malaysianheadquartered Sapuraomv and Chevron is acquiring Hess which has assets in Malaysia.

Separately, Indonesia’s Pertamina and Malaysia’s Petroliam Nasional Bhd (PETRONAS) acquired Shell’s 35% stake in the Inpex-operated Masela natural-gas block.

In January, PETRONAS awarded production-sharing contracts for six exploration blocks under a 2023 bidding round, and launched a fresh bid round this year for the exploration of 10 blocks and clusters to potential investors.

Indonesia also plans to offer more oil and gas blocks in the North Sumatra basin this year following a major discovery by Mubadala Energy in the South Andaman Block and is reviewing its fiscal regime to attract investments for unconventional resources.

United Arab Emirates-based Mubadala Energy announced last year in December, it had discovered a major deep sea gas reserve in Indonesia’s South Andaman Block, which analysts said is the world’s second-largest deep water discovery this year.

Mubadala said the discovery was achieved through the Layaran-1 exploration well at the South Andaman Block and that the discovery had estimated potential gas-in-place of more than six trillion cubic feet.

The company drilled a 4,208m deepwell at 1,207m of water depth to make the discovery.

The South Andaman Block is located around 100km off northern Sumatra.

“In the last two to three years, Indonesia and Malaysia have witnessed a good size of discoveries, which added on to the momentum overall.

“That pushes for more interest in exploration,” said Rystad Energy analyst Prateek Pandey.

Malaysia will likely drill around 30 exploration wells this year and 35 wells in 2025, up from eight in 2021, he said, while Indonesia will see around 40 wells this year, versus 20 wells during the Covid pandemic.

While the number of exploration wells in Indonesia will slightly decrease in the second half of the decade, Malaysia’s will be consistent through to 2028 due to successful bidding rounds seen in the last three to four years, added Pandey.

Increased flexibility in production-sharing contracts and better fiscal terms have also attracted more investments into the region.

Indonesia said in September it had made improvements in its oil and gas terms allowing contractors to have equity shares of over 50% in some new blocks.

“As an investor coming from outside of the country, we need to have certainty in terms of investment policies and regulation in upstream activities.

“And we see that happening for the last five years,” said Yuzaini Yusoff, Indonesia country head for Malaysia’s national upstream company PETRONAS Carigali.

“For upstream, we are focusing on expansion in exploration ... Eastern Indonesia is where a lot of unexplored basins are situated.” — Reuters