Analyst: O&G enters the season of spending

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KUCHING: Oil prices in a steady state, along with the credit market being in a resilient phase, has created a conductive environment for a higher degree of investment.

Global exploration and production (E&P) spending was set to rise to RM1.5 trillion (US$490 billion) in 2011 with oil companies spending more on exploration, development and production activities, said Maybank Investment Bank Bhd (Maybank IB) analyst Wong Chew Hann.

In its research report, Maybank IB further stated that against this backdrop, oil and gas (O&G) activities were expected to pick up in 2011. The factors generally pointed Q&G sectors heading into the season of spending.

Looking on the industry front, Petronas Group’s (Petronas) capital expenditure (capex) plan was seen as an offshore booster.

The company would spend RM40 billion in capex in financial year 2011.

Majority of the spending would be redirected to domestic field development.

Petronas’ commitment to spend a higher RM6.2 billion, which showed an increase of 67 per cent from RM3.7 billion, over the next three years to develop 50 to 60 wells signified the intent to search for higher recoverability from the existing fields and developed new complex frontiers.

In addition, a vast majority of Petronas’ spending would be for the upstream activities. Domestic deepwater, shallow, brown and marginal fields would see accelerated development.

Some critical projects such as regasification plant in Berantai had been identified for a fast track development whilst several projects, suspen-ded in 2008-09 would be revived this year.

Deepwater activities were expected to play a prominent role in the development of Malaysia’s O&G sector. Petronas blueprint suggested that six new deepwater projects would be implemented over the next 15 years.

Based on the given report, the group had identified deepwater projects would contribute up to 40 per cent of Malaysia’s production by 2020 as it was one of the most effective ways to increase reserves and production.

Meanwhile, shallow waters also hold a very promising prospect.

Shallow water fields in Malaysia and the Jointly Developed Area (JDA) with Thailand also offer plenty of untapped resources with varying field sizes and hydrocarbon prospects. While multiple new open water blocks were open for development, there was a need to construct 65-70 fixed structures for these operations over the next five years.

In a related case, marginal field development would see rapid progress as Petronas aimed to optimise development and production activities. Small, marginal fields would be developed through innovative solutions to achieve a faster pace of O&G discoveries.

According to the analyst, unlocking marginal fields potentially could lift Malaysia’s annual oil production by 55,000 barrels per day (bdp) by 2020 considering that a significant proportion of Malaysia’s remaining sources lay in fields of sub-20 million barrels of recoverable oil.

Up to 90 hotspots in 25 marginal fields had been identified in Malaysia water with 10 fields ready for development.

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