Energy firms boost gas exploration in South-East Asia to meet growing demand


JAKARTA /KUALA LUMPUR (Reuters): Energy companies are ramping up exploration activities in Southeast Asia to boost natural gas output and meet long-term demand growth, drawn by recent discoveries and improved investment policies, company executives and analysts said.

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 growth 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 Malaysian-headquartered SapuraOMV and Chevron is acquiring Hess which has assets in Malaysia.

Separately, Indonesia's Pertamina and Malaysia's Petronas acquired Shell's 35% stake in the Inpex-operated Masela natural gas block.

In January, Malaysian state energy firm 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 ten blocks and clusters to potential investors.

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

"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 8 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 at."

(Reporting by Emily Chow; Editing by Florence Tan and Miral Fahmy) - Reuters

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Energy , Big Projects , South-East Asia

   

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