The Malaysian upstream oil and gas sector has maintained high levels of activity in recent months with tendering on a field development project and positive exploration drilling results offering opportunities down the supply chain.

Malaysia’s state-owned Petronas Carigali has launched a tender for conceptual studies for the revised Phase 3 of the Bokor development offshore Sarawak in East Malaysia.

Petronas is asking engineering companies to bid for a conceptual studies contract for a downsized shallow-water EOR project for Phase 3 of Bokor.

The tender is open to all comers; however, with local content being a key factor, many international big hitters may look for domestic bidding partners.

“Even with the reduced scale, we estimate that the cost of the entire Bokor Phase 3 development off Sarawak will still reach above US $1 billion,” said AmResearch. “Petronas is likely to call for an international tender to attract cost competitive bids for the massive volume of work but local content requirements may mean that the Bokor tender is likely to attract bids from a consortia with international and local interests.”

AmResearch said that excitement remained in the Malaysian oil and gas sector due to Petronas remaining committed to its infrastructure spending in its upstream and downstream activities, which are “currently underpinned by the Refinery and Petrochemical Integrated Development (RAPID) in Pengerang, Johor.

“Although packages had been recently awarded to multiple foreign contractors, there is still likelihood that some of the smaller jobs may be awarded to the local yards,” AmResearch added with regard to Bokor Phase 3.

Ophir project

Octanex has secured project financing for up to $120 million for the development of the Ophir field offshore Malaysia.

Octanex is a 50% shareholder in Ophir Production, which was awarded the Ophir Risk Service Contract (RSC) in June 2014.

The Ophir oil field will be developed via a simple stand-alone development with first oil expected in December 2015. This involves the drilling of three production wells from a single wellhead platform producing into a leased tanker for storage and offloading of crude.

The capital cost of the development is estimated at $135 million.

Tembakau-2

Sweden’s Lundin Petroleum has completed the first well in its 2014 Malaysian drilling campaign with the successful drilling and testing of the Tembakau-2 appraisal well in Block PM307 offshore Peninsular Malaysia.

The operator is now pushing ahead with development studies for the prospect.

“The appraisal drilling results from Tembakau are positive. We are incorporating the results of the well into an updated resource estimate,” said Ashley Heppenstall, president and CEO of Lundin. “We will now move forward in reviewing conceptual development options, and I am hopeful that this will lead to another commercial development project in Malaysia.”

Tembakau-2 was drilled by the jackup rig West Prospero to a depth of 1,450 m (4,757ft) at a water depth of 68 m (223 ft).

The well targeted stacked gas reservoirs in Miocene-aged sands in a large, low-relief, structure discovered by Lundin’s Tembakau-1 well in late 2012.

Tembakau-2 lies 3.7 km (2.2 miles) south of the discovery well and penetrated 22 m (72 ft) of gross gas sands in four sand intervals between 900 m and 1,300 m (2,953 ft and 4,265 ft). The main two reservoirs penetrated were fully cored, and the well was comprehensively logged.

The reservoir deliverability was measured through production testing. The “I20” sand produced at stabilized flow rate of 447.6 Mcm/d (15.8 MMcf/d) of gas over an eight-hour period on a 64/64-in. choke, and the “I10” sand produced at stabilized flow rate of 450.4 Mcm/d (15.9 MMcf/d) of gas over an eight-hour period on a 72/64-in. choke.

Each perforated interval was 3 m (10 ft). The gas produced is dry with about 0.5% CO2. Multiple samples were obtained for further laboratory analysis. The data gathered will be analyzed and integrated with 3-D seismic information to update the current gross contingent resource estimate of gas and to provide reservoir information for conceptual development studies, Lundin said.

The well has been plugged and abandoned, and the West Prospero rig has moved to the Bertam oil field wellhead platform location, also in Block PM307, to start development drilling.

Lundin holds a 75% stake Block PM307, while Malaysia’s state-owned Petronas Carigali has the remaining 25%.

Lundin operates seven blocks in Malaysia: PM307, PM308A, PM308B, PM319, SB303, SB307 and SB308.

Marjoram-1

On the exploration front, Shell has made a gas discovery with the deepwater Marjoram-1 exploration well offshore Sarawak.

The Marjoram-1 well is located 180 km (112 miles) off the Malaysia coast in Block SK318 at a water depth of 800 m (2,625ft). Earlier this year, Shell made the Rosmari-1 gas discovery in the same block.

Block SK318 is operated by Shell with an 85% stake, with the remaining 15% held by Petronas Carigali.

“Our strategy to expand our heartland areas through technologically advanced exploration is delivering tangible success in deepwater in Malaysia,” said Andrew Brown, Shell’s upstream international director. “We have a long history in the region, and the addition of new natural gas resources this year ensures we are able to continue to provide cost-effective, reliable, cleaner energy options for the future.”

Petronas profits

In the financial world, Petronas reports that its second-quarter 2014 net profit increased by 38% compared to the same quarter in 2013, mostly thanks to stronger oil production and sales of LNG.

Net profit in second-quarter 2014 rose to $6.63 billion from $4.80 billion a year earlier, Petronas said. Revenue in the quarter increased 14.7% to $26.85 billion from $23.40 billion a year earlier.

Petronas has in recent years invested heavily in Canadian shale assets, Iraqi oil fields and explored for new reserves in Malaysia as part of its five-year $94.38 billion capex program that ends in 2015.

Chief executive Shamsul Azhar Abbas said declining oil prices and rising operational cost could hit earnings in the second half of this year.

“Things are not going to be easy moving forward,” he told reporters. “It is getting harder to develop oil and gas, and cost continues to increase.”

Shamsul said crude oil prices are expected to fall closer to $95/bbl in the remaining part of the year. Oil prices averaged $108.9/bbl in the first six months of 2014. Petronas’ total domestic and international production rose by 6.3% in the second quarter to 2.2 MMboe, as the company increased output in Malaysia, Iraq, South Sudan and Canada.

Petronas plans to increase its overseas net profit contribution to 20% from 11% over the next five years, Shamsul added.

The photo on the home page is courtesy of Petronas.