Southeast Asia gas development gains momentum

While exploration and development have leveled off or slumped in some regions of the world, they have taken off in Southeast Asia.

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Billions to be invested in E&P

Judy Maksoud
International Editor

While exploration and development have leveled off or slumped in some regions of the world, they have taken off in Southeast Asia.

BP's $20-billion investment strategy for 2003 focuses on five core areas, one of which is Asia's LNG market. Indonesia's Tangguh LNG project will be one of the projects moving forward. Unocal expects to spend nearly $300 million offshore Thailand alone this year and has committed to considerable developments offshore Indonesia. ExxonMobil will develop several fields off Australia, and Murphy Oil will continue developments off Malaysia.

India

The biggest news offshore India is Reliance Industries Ltd.'s meteoric rise. Reliance began a three-year, $350-million exploration program last April, and has since seen a 100% success rate from the Krishna-Godavari block wells.

Last year, India's state-owned Oil & Natural Gas Corp. announced it would invest $9.5 billion over the next five years to increase domestic oil production. Part of this money is committed to redeveloping the 1.6-Bbbl Bombay High oil and gas field, India's largest field, in the Arabian Sea.

ONGC has 21 deepwater petroleum exploration licenses. Plans are in place for four deep-water drilling projects (totaling 47 wells) in the Kerala-Konkan, Krishna-Godavari, and Cauvery basins. In mid August 2002, ONGC announced plans to drill 37 deepwater wells over the next two years.

Cairn Energy, which has a long history in India's offshore, announced in an interim report that exploration would continue in the company's holdings off both the east and west coasts. Off eastern India, exploration work consists of reviewing and evaluating data following a successful exploration program on block KG-DWN-98/2. Off western India, exploration drilling has resulted in five discoveries in the last two years. One of these was the Lakshmi discovery, where Cairn discovered estimated oil recoverable reserves of 66 MMbbl in April 2002. Cairn plans more drilling on the Ravva field in 2003-2004.

Indonesia

Indonesia is still looking for foreign investors, particularly to increase oil production. Last year, the country planned to offer more than 20 blocks for lease. Failing to attract much interest, the Ministry of Mines and Energy amended the offering early this year, announcing that only 11 new blocks are on offer in the latest exploration licensing round.

In late September, China National Offshore Oil Corp. entered a heads of agreement to acquire BP's 12.5% interest in the Tangguh LNG project.

Tangguh LNG partners signed a 25-year LNG supply contract to provide up to 2.6 million metric tons/year of LNG to the Fujian LNG terminal project in China, beginning in 2007.

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Though some investors are leaving Indonesia, others see promise. Last June Kerr-McGee sold its last holding in Indonesia. Petronas not only bought Kerr-McGee's last stake, but bought into the Karapan PSC offshore Java as well.

Eni and Unocal announced late last year they would spend $35 million on exploration over the next six years. Exploration will focus on the 1,807-sq-km Muara Bakau block in Makassar Strait off South Sulawesi.

Unocal resumed deepwater exploration earlier this year and plans to drill 16 wells, including seven wildcats in 2003.

In March 2003, Unocal began development drilling from West Seno, the first deepwater field off Indonesia. The field is scheduled to come on production in mid-June.

Santos announced plans to bring the Oyong gas field in the East Java Sea onstream by 4Q 2004. Oyong field holds an estimated 90 bcf of recoverable gas and 5 MMbbl of oil.

Malaysia

Murphy Oil Corp. saw a productive year offshore Malaysia and is gearing up for another in 2003. The company announced a $952-million capital program for 2003. Over 75% of the capital budget will be allocated to upstream operations, which include an extensive drilling program in deepwater Malaysia on blocks K and H off the coast of Sabah. Murphy expects to spend $486 million on development, some of which will go to the shallow-water West Patricia development offshore Sarawak. West Patricia is scheduled to go onstream in 2Q 2003.

Japan's Nippon Oil Corp. expects to begin gas production from the Serai field off Sarawak in 2Q 2004. Peak production is expected to reach 8.5 MMcm/d. The company expects to begin gas production at the Jintan field, also in block SK-8, in 3Q 2003. Gas produced from both fields will be liquefied by Malaysia LNG Tiga.

Late last year, Murphy announced the first deepwater oil find off Malaysia with the Kikeh discovery off Sabah. Appraisal well results indicate preliminary recoverable reserves between 400 and 700 MMbbl.

In 2003, Murphy plans to drill and test a different well location on the Kikeh structure to further define reserves and oil flow characteristics. The company hopes to sanction a development project by year-end. First production is expected by 2007.

Brunei

Brunei might well be the beneficiary of deep-water successes offshore Malaysia. Murphy's Kikeh-1 well success has raised the country's profile. Block J, to be operated by TotalFinaElf in a consortium with Amerada Hess and BHP Billiton, and block K, to be operated by Shell in a consortium with ConocoPhillips and Mitsubishi Corp., could see exploratory drilling.

Last February, Brunei awarded 5,000-sq-km deepwater block J off the coast of Darussalam to a joint venture made up of BHP, TFE, and Amerada Hess. In March, TFE signed a production sharing agreement with the Brunei National Petroleum Co. for the block.

Philippines

Malampaya was the first natural gas project offshore the Philippines. In 3Q 2002, Shell Philippines Exploration estimated expenditures for developing Malampaya at $300-$400 million. This revelation puts the future of the development in question. As of late last year, there were no drilling plans for Malampaya in 2003.

Last summer, the Philippines and Jebco signed a joint cooperation project to shoot seismic over the western Sulu Sea ahead of 2003 licensing.

The only other noteworthy event off the Philippines was the mid-year award of an exploration license for the Reed Bank area to Sterling Energy. The Reed Bank basin covers 71,000 sq km northwest of Palawan and is estimated to contain up to 5 tcf of gas.

Vietnam

Vietnam's offshore had a busy 3Q 2002. SOCO Vietnam made its third and fourth discoveries with the 16-1-Voi Trang-1X exploration well in block 16-1, followed by a discovery on the C prospect, the largest prospect on block 9-2 in the Cuu Long basin.

In late October 2002, Vietsovpetro announced two new major oil and gas discoveries off the coast of Southern Baria-Vung Tau province. Next up for exploration are block 17 in the Cuu Long basin and block 0.43 in Nam Con Son.

Early this year, Petronas and Petrovietnam signed a petroleum contract and formed the Lam Son Joint Operating Co. JV to explore and develop blocks 1/97 and 2/97. The blocks are in the Con Son basin adjacent to Petronas-operated blocks 1 and 2. The JV expects to conduct geological and geophysical studies in 2003 and plans to drill at least one exploration well in 2004.

Petronas and its partners plan to drill seven exploration wells this year. Petronas plans to develop the Ruby field with a new platform and nine additional wells in 2004. The company is also discussing the development of the Emerald gas field in blocks 1 and 2 with Petrovietnam.

Late last year, BP announced a gas and condensate find with the Hai Thach well on block 5/2 in the Nam Con Son basin. BP is reportedly working on a development plan to produce the field for domestic use.

In late November 2002, the $1.3-billion Nam Con Son development delivered first gas. The project will produce about 3 bcm/yr of gas for the next 20 years.

Cambodia

In April 2002, ChevronTexaco and partner Mitsui were awarded 6,278-sq-km block A off Cambodia. Chevron initially planned to begin drilling by April 2003. Anti-Thai demonstrations in Cambodia in February 2003 halted discussions between Thailand and Cambodia over development of the contested 30,000-sq-km area.

Thailand

The Gulf of Thailand saw a flurry of activity last year. In late July 2002, a Thai-European consortium led by PTT Exploration & Prod-uction (Pttep) awarded a $33 million contract to Japan's Nippon Steel Corp. to build and install the 13th wellhead platform at Bongkot gas field.

Pttep is continuing exploration in the area and plans to tie in satellites as new reserves are identified.

The Arthit structure will also see development soon. Pttep applied for a license to produce gas from the 4,000-sq-km Arthit structure. The field is to go onstream in 2006.

While a number of fields move into production, exploration activity continues. There has been noteworthy exploration success in the Jarmjuree field. The North Jarmjuree production area lies in the Gulf of Thailand, about 125 mi offshore Bangkok in a water depth of 250 ft. The third successful well of a six-well drilling program was announced in late July. Northern Jarmjuree will be the location of one of four or more new Thailand platforms.

In July 2002, Unocal Thailand said gas production began at the Phase II development on Pailin field. Unocal also ramped up gross oil production last year from the Yala-Plamuk complex, to more than 16,800 b/d.

In March 2003, Unocal Thailand and its co-venturers said they expect to invest nearly $300 million on oil and gas projects in 2003.

Myanmar

Myanmar could see more offshore drilling by the end of this year. In 3Q 2002, Daewoo International of South Korea announced plans to start drilling gas from the 13-14 tcf Rakhine gas field by late 2003.

Last August, the Myanmar government awarded Malaysia's Petronas four oil PSCs for blocks M-15, M-16, M-17, and M-18 offshore southern Myanmar. Petronas Carigali Myanmar II will operate the blocks with 100% equity.

Korea

Korea National Oil Co. set a goal of reinventing itself as a world-class, internationally competitive company and is actively working toward that objective.

Though oil production has not taken off domestically, KNOC has had better results with gas, most notably, in the Donghae-1 gas field. The field includes three satellite subsea wells tied back to a fixed offshore gas processing platform. The platform is connected via a subsea pipeline to a new onshore receiving terminal on the Korean coast at Ulsan.

In March 2003, KNOC selected a Fluor/AMEC JV for operations, maintenance, and production management services for Donghae-1, set for first production late this year.

China

Cnooc identified the need to address the hydrocarbon supply/demand gap several years ago. Since then, the company has laid plans for domestic oil and gas development to increase supply. China is picking up more foreign partners and increasing investment in E&P.

With the startup of the Penglai 19-3 field, the Bohai Bay area has begun contributing to China's domestic oil production. Penglai 19-3, being developed with partner Phillips China, is China's largest offshore field with estimated reserves of 500 MMboe. First production took place on Dec. 31, 2002.

In the same month that Penglai 19-3 came onstream, Cnooc signed a petroleum contract with Husky Oil China for deepwater block 40/30 in the Pearl River Mouth basin of the South China Sea. This is the first deepwater exploration contract signed between Cnooc and a foreign company.

Early this year, Sinopec reported it was in the final stages of an agreement with Shell and Unocal to develop the 80-bcm Xihu Trough in the East China Sea.

Reportedly, Cnooc plans to drill more than 600 wells in Bohai Bay this year.

Cnooc is also buying up foreign assets. In April 2002, Cnooc purchased the Indonesian assets of Spain's Repsol-YPF for $585 million. Four months later, Cnooc announced it would buy a 5% stake in Australia's North West Shelf gas project for $320 million. Cnooc will follow the same aggressive strategy in 2003.

Eastern Russia

The Sakhalin-1 consortium declared the Sakhalin-1 project commercial in 3Q 2001.

In February 2002, the consortium received approval for its $726-million 2002 budget. The project consists of three fields on the northeast shelf of Sakhalin Island. Recoverable reserves are set at 2.3 Bbbl of oil and 17.1 tcf of gas.

Future phases of development include construction of a natural gas pipeline to Japan and development of the Arkutun-Dagi field. Gas sales to Japan are expected to begin in 2008.

In early July 2003, Rosneft won a five-year exploration license for part of the offshore Sakhalin-5 block. The exploration license encompasses the Kaigansky-Vasuykansky blocks of the East Schmidtovsky offshore area in the southern part of the Sakhalin-5 tract, covering 10,000 sq km.

An alliance comprising BP, OJSC NK Rosneft, and Rosneft-Sakhalinmorneftegas formed in 1998 to develop Sakhalin-5 hydrocarbons. The alliance will jointly carry out development operations, including geological studies. The work program for Sakhalin-5 includes seismic acquisition and exploration drilling. Drilling could begin as early as 2004.



AUSTRALASIA

New Zealand

The government of New Zealand awarded 21 of 26 new exploration permits, three of them offshore, in the 2002 Taranaki permit round. The latest round of new permits implies there will be a more intensive exploration effort in Taranaki over the next few years.

With depletion of the 3.8-tcf Maui field now expected in 2007, part of the increased interest in New Zealand's offshore results from the need for gas. Pohokura holds 1 tcf in gas reserves and 53 MMbbl of condensate.

Three significant seismic surveys began in early 2003. In January and February, WesternGeco carried out a 3D survey for Indo-Pacific and a survey for Bridge Petroleum. The Polar Duke seismic survey vessel arrived in Taranaki waters in mid-January to shoot surveys for two consortia. And Transworld began planning a 3D survey after the Tui-1 well hit oil in PEP 3860 offshore Taranaki. The partners hoped to begin the survey in March 2003 to delineate the prospect so appraisal drilling can take place later this year.

Australia

Successes have led to increased exploration off Australia.

Last September, BHP and ExxonMobil announced plans for a long-term drilling and exploration program in the Gippsland basin. The program, a mix of exploration, appraisal, and development wells, is expected to begin in 4Q 2003.

Woodside Petroleum announced in February 2003 that it would explore in offshore South Australian waters this year. Woodside and partners planned to spud the Gnarlyknots-1 well in March 2003.

Woodside also said it would move the Geographe and Thylacine gas fields offshore Victoria into development. The estimated combined scope for recovery is 8 bcf of gas and 8 MMbbl of condensate. The joint venture (JV) hopes to deliver gas to the market by 2006.

In March 2003, ExxonMobil and ChevronTexaco confirmed that the Jansz field discovery off the northwest coast indicated the presence of a world-class gas resource, perhaps the largest ever discovered off Australia.

About the same time, Tap Oil announced plans for an exploration program for Western Australia's Carnarvon basin. Tap is part of the Harriet JV, which had a very productive 2002, first, discovering the Victoria area fields offshore northwest Australia, then installing and commissioning the fields and beginning production late last year. The development produces 13,000 b/d. This production is in addition to the 16,500 b/d from the four other Harriet JV oil fields. Seven fields are now tied to this hub.

LNG was also a focus last year. In September, Harriet began making plans to capture LNG demand in Asia with its $2.4-billion Gorgon field off west Australia. In 3Q 2002, Australia's North West Shelf gas project was awarded a contract to supply LNG to China's Guangdong receiving terminal. The contract is valued at between $10 billion and $13 billion and involves supplying an initial 3 million metric tons/year of LNG.

Last October, the Australian government published the details of six offshore exploration permits awarded from the October 2002 bidding round. The work program commitments for the six permits awarded are valued at around $50.8 million over the next six years. Three of the permits are in the relatively under-explored Perth basin, which attracted new exploration interest last year following commercial oil discoveries.

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