Southeast (SE) Asia is in a period of explosive growth. Energy demand levels are soaring, and a wide variety of oil and gas majors, state-owned companies, and independents are positioning themselves to supply a growing demand for hydrocarbons.

Some of the world's most pioneering oil projects have been and are being implemented, mostly in the frontier deep waters off Malaysia, Indonesia, and Brunei. But it is the region's natural gas potential that is drawing the most attention.

The trend for natural gas demand in Asia is forecast to be three times higher than the global average for at least the next two decades. (Image courtesy of Chevron; Source: DOE IEA International Energy Outlook)

There is a broad consensus on the growing role for gas in the world's future energy mix – gas consumption on a global basis is forecast to grow 50% by 2035. Asia is expected to be the center for this growth, which is projected to grow at three times the rate of global demand, driven by the economic powerhouses of China and India. This puts the region at the heart of the future global economy and at the top of many energy companies' lists as a priority market.

This pique has sparked a resurgence of SE Asia's oil and gas industry, accompanied by a proliferation of joint ventures, mergers, and acquisitions among contractors and suppliers as the region scales up its expertise and technologies to better meet future needs.

Established SE Asian producers such as Malaysia and Indonesia are well positioned geographically to help supply these markets and meet their own fast-growing demand, and they will be assisted by supplies emerging from Thailand, Vietnam, the Philippines, and Australia.

Malaysia, Indonesia

Malaysia is the region's second-largest producing nation, with an average output of 1.63 MMboe/d and hydrocarbon reserves estimated at 20.56 Bboe.

National oil and gas company Petronas recently raised its capital expenditure budget to US $100 billion. CEO, Datuk Shamsul Azhar Abbas, said the company's capex was intensified "to outpace rising costs, upgrade asset integrity, enhance the yield of existing/legacy assets, drive growth, and venture into more challenging and greenfield plays such as enhanced oil recovery, deep water, and unconventional hydrocarbons."

To achieve this, Petronas will drill more than 50 exploration wells offshore Malaysia alone and with its partners over the next three years in hope of repeating successes such as its NC3 and Spaoh discoveries made last year in the SK 316 and SK 306 blocks offshore Sarawak. These found an estimated 3 Tcf of gas and 100 MMbbl of oil, respectively. Petronas already has an average production of 1.1 MMboe/d.

Indonesia, meanwhile, has stated its intention to increase oil production to 1 MMb/d within the next few years by offering new exploration rights and seeking to encourage more application of enhanced production techniques on existing wells through new fiscal incentives.

Pertamina CEO Karen Agustiawan spoke of the company's aspirations to shape the global energy business as one of the best 15 oil companies in the world on the sidelines of the World Economic Forum (WEF) held recently in Jakarta.

"Our strategy in increasing upstream production is focusing on domestic operations, aggressive international expansion, and improving our capability through strategic alliances," she said.

Agustiawan added, "Our focus is on domestic operations. Some of our oil fields are mature. It is natural that production at mature fields declines, so we will use sophisticated technology, such as secondary recovery alternative methods [like] water or gas flooding, to retrieve oil."

LNG projects being evaluated, developed, and producing in SE Asia underpin much of Chevron’s growth plans and long-term cash flow. (Image courtesy of Chevron)

Chevron's gas focus

Chevron has more than 150 Tcf of unrisked gas resources worldwide, with more than half – about 80 Tcf – in the Asia-Pacific region.

Jim Blackwell, Chevron executive vice president, technology and services, most recently president of the company's Asia Pacific upstream affiliate, said the company has big plans in the region.

According to Blackwell, Chevron is the largest producer in Thailand, Indonesia, and Bangladesh, and the largest resource holder in Australia and is active in China, Vietnam, Cambodia, Myanmar, and the Philippines.

As the largest IOC in the region, Chevron has production capacity of 720,000 boe/d, proved reserves of 2.6 Bboe, and a total estimated resource base of 17.7 Bboe..

With Asia's growth in gas consumption expected to be three times the global rate, Blackwell said Chevron's existing SE Asia production coupled with its LNG projects have positioned it to be a leading supplier to fuel the area's growth.

Chevron has key projects to supply gas to growing markets through pipelines, including its US $3.1 billion Platong II development in Thailand that will expand its capacity by an additional 40%. "The project will have a production capacity of 440 MMcf/d. We're now in the offshore installation phase, and the project will start up this year, ahead of schedule," Blackwell said. Chevron operates the project with a 70% working interest."Using our experience from Thailand, we're also designing our Vietnam Block B project," he continued. "The planned production is 520 MMcf/d, and we expect to reach a final investment decision later this year."

The Block B project will involve investment of $4.3 billion, with the company holding a 43% interest.

Blackwell also talked about the massive $4.7 billion Chuandongbei project in Central China, which is leveraging its expertise in sour gas technology. The project consists of three gas fields with a resource base of 5 Tcf. The fields will be developed in three stages, achieving total production capacity of 560 MMcf/d. Chevron has a 49% stake. But it is the company's LNG portfolio that is one of its big priorities in the region. Most of the LNG investments are in Australia, a preferred supplier for the Asian markets.

According to Blackwell, Chevron has five LNG developments and two potential expansions in the Asia Pacific region, all in various stages of maturity. "By 2017, our LNG portfolio, driven by Gorgon and Wheatstone, is projected to deliver more than 500,000 barrels of net oil-equivalent per day," he said.

Additional SE Asia LNG projects include the Gendalo-Gehem project in Indonesia, currently in FEED, and the Browse project in Australia that has moved into the design phase.

Feeding Asia’s hunger for gas, BP’s LNG carrier Northwest Shearwater conveys North West Shelf gas from Australia to receiving terminals, mostly in the Far East. (Image courtesy of BP)

BP looks East

Another major increasingly looking to the East with its LNG investment dollars is BP. CEO Bob Dudley stated recently that BP increasingly is looking to the East to invest, while rationalizing its positions in the more mature OECD markets.

BP believes it is well positioned to capture a significant portion of the region's gas demand growth over the next decade by being a leading player in the Asia-Pacific LNG market through interests in the Tangguh project (Indonesia), VICO (Indonesia), and North West Shelf (Australia).

The world-class Tangguh gas resource was discovered in Berau-Bintuni Bay, Papua, Indonesia in the mid-1990s. The discovery led to the sanctioning of the Tangguh LNG project, which has been key to BP's LNG growth aspirations. The project started production in 2009.

BP is continuing to explore and appraise potential resources to expand the existing LNG facility with a third train now underpinned and work under way to identify resources for a potential fourth.The UK major also holds equity in China's largest offshore gas field, Yacheng 13-1. The field was brought onstream in 1996, and currently 80% of its gas (200 MMcf/d) is delivered to Hong Kong to provide 20% of its electricity.

Also, late last year BP sold its Vietnamese upstream businesses and associated interests to TNK-BP but retained a 35% interest in offshore Block 06.1. BP operates the block, which contains the Lan Tay and Lan Do gas fields, some 370 km (230 miles) offshore southeast Vietnam. BP also has a 32.67% interest in the 370-km (225-mile) Petrovietnam-operated Nam Con Son pipeline that transports gas onshore from the Lan Tay and Rong Doi fields.

The level of upstream activity under way and planned by majors and independents such as Chevron and BP as well as by established state-owned heavyweights such as Petronas and Pertamina – all of which are increasing their capex plans for the region – underlines SE Asia's role as the gateway to the fastest-growing energy market in the world.

Sidebar

Murphy’s Asian wildcat hunt

US-based Murphy Oil Corp. has planned to drill 19 exploration wells in SE Asia in 2011 and 2012 in countries including Brunei and Indonesia. In the former, it is planning a program of 10 exploration wells, beginning in 3Q 2011, with the first of six probes on its CA-1 block and a further four on the CA-2 block.

In Indonesia, Murphy has four exploration wells planned for its Semai II and South Barito licenses, and in Malaysia, it has three wells lined up for mid-2012 in deepwater blocks H and P.

Murphy has been something of a trail blazer in the region, particularly in Malaysia, with existing operations on fields such as Kikeh and Sarawak. Kikeh was Malaysia’s first deepwater field development and employed the first truss spar floating production unit outside of the Gulf of Mexico. The field came onstream in August 2007.

Murphy is carrying out a workover program on Kikeh, which at present is producing around 52,000 b/d of oil and 65 MMcf/d of gas.

The company is focused on expanding its operations in Malaysia and has six fields targeted for sanction by year-end 2011 – Patricia and Serendah in Block SK 309 (already sanctioned and planned to be onstream in 2012 and 2013, respectively); South Acis and Permas & Endau in SK 311 (both planned to be onstream for 2013); Siakap North in Block K (also planned to be onstream by 2013); and the deepwater Rotan discovery in Block H (onstream by 2014).