THERE was a time when redeveloping marginal oil fields was a “hot” topic among local oil and gas services players.
Some of these companies’ aspirations to move upstream, however, are shattered as Petrolaim Nasional Bhd (Petronas) has reiterated that it would not dish out any more new risk sharing contracts (RSC) at below US$80 per barrel.
“We don’t see any future awards of RSC contracts at prices below that,” says president and chief executive officer Tan Sri Shamsul Azhar Abbas.
It will be re-developing the brownfields on its own via Vestigo Petroleum Sdn Bhd, a subsidiary that was set up less than two years ago to develop small and mature fields.
“We reckon the time has come for us to say that we are capable of doing this ourselves rather than award to other international or local players,” he says, explaining that the upstream unit of the national oil company has garnered the capabilities and knowledge from its partners over the years.
To recap, Petronas’ upstream unit Petronas Carigali Sdn Bhd has established Vestigo in July 2013 to complement the former’s upstream activities with the focus on small, marginal and mature fields.
Previously, some of these ventures were done via strategic partnerships with other industry players.
So far, Petronas has dished out five RSCs. They are: the Berantai field to Petrofac and Sapura Kencana Petroleum Bhd in January 2011; the Balai-Bentara cluster offshore Sarawak to a consortium comprising Roc Oil Malaysia (Holdings) Sdn Bhd, Dialog Group Bhd and Petronas Carigali in August 2011; the Kapal, Banang and Meranti cluster to Coastal Energy KBM Sdn Bhd in June 2012; the Tembikai-Chenang cluster to Vestigo in October 2013; and the Tanjong Baram field to EQ Petroleum Developments Malaysia Sdn Bhd and Uzma Energy Venture (Sarawak) Sdn Bhd in March 2014.
Petronas has introduced the RSC model since 2011 to unlock the value of its strategic hydrocarbon assets. Marginal fields are those with reserves of less than 30 million barrels of oil.
Some 20 over marginal oil fields were identified with redevelopment potential.
But that was when oil prices range at US$90 to over US$100 per barrel.
“Due to the technology and higher costs needed to extract oil from the fields with low reserves, production cost can range around US$60 per barrel depending on the specific field,” an analyst explains.
Based on the assumption of an average of US$55 per barrel for 2015, marginal oil fields are no longer economically viable for Petronas.
As Shamsul had said, getting an RSC at current oil prices is a “dream”.