Exploding economies in China, India, and much of Southeast Asia are creating an increase in oil and gas demand gas. The region is expected to lead the world in offshore spending in 2008.
China
Last year, China National Offshore Oil Corp. Ltd.’s (CNOOC’s) exploration activities led to 10 oil and gas discoveries and six appraisal successes offshore China.
CNOOC is on the move to increase domestic production, reportedly planning to bring 16 new projects onstream this year. Plans also are in place to pursue as many as 60 onshore and offshore projects in the medium term.
Not surprisingly, the focus will be deepwater exploration for oil and gas in the South China Sea, which is already an active area.
Late last year, CNOOC Ltd. and partner Eni made discovery Huizhou (HZ) 25-4 in the eastern South China Sea. Discovery well HZ 25-4-1 in block 16/19 in the Pearl River Mouth basin is 180 km (112 mi) southeast of Hong Kong.
At about the same time as the Huizhou discovery, CNOOC signed two production-sharing contracts with Devon Energy Corp. for deepwater blocks 64/18 and 53/30. Water depth in the blocks is 300-2,000 m (984-6,562 ft).
Since 2006, CNOOC Ltd. has made four discoveries in the Yellow River Mouth sag of Bohai Bay. The company hopes to develop a large-scale cluster of oil and gas fields in this area.
India
In early March, the Indian government signed production-sharing contracts (PSCs) for 52 oil and gas blocks. NELP VI blocks initiated exploration in an additional area of about 300,000 sq km (115,831 sq mi), a major part of which falls in the deepwater blocks off the east and west coasts and the Andaman Sea.
Most of this year’s drilling will be in the Krishna-Godavari (KG) and Mahanadi basins, where exploration wells are planned and recent discoveries will begin moving into production.
ONGC exploration is ongoing in the Cauvery basin off the southeastern coast, and seismic surveys are under way off the Andaman Islands to the east.
ONGC reportedly intends to develop 153 onshore and offshore marginal fields in the next few years.
Privately owned Reliance Industries Ltd. also is planning significant activity in the coming year, announcing in Feb. 2007 that it would follow an aggressive exploratory program over the next four quarters. In mid-September 2006, Reliance completed a seismic survey on Cauvery block CY-PR-DWN-2001/3 off the Tamil Nadu coast in the southeast. Reliance reportedly plans to drill eight exploration wells in the block.
In March 2007, Reliance said its gas development in the D6 block, where reserves are estimated at 400 bcm, is on schedule for production and gas supply by 2008.
The company is reportedly in talks with state-owned GAIL (India) Ltd., to bid for oil and gas blocks in NELP VII, for which the India government has identified 50-60 blocks to be offered.
Canada’s Niko Resources had a very busy year last year, pursuing aggressive drilling programs on the D6 block off the east coast and Hazira blocks offshore West India. The D6 discovery in June 2006 was Niko’s first deepwater discovery, testing oil and gas in two intervals.
Niko also expects to begin developing the east coast NEC-25 block.
BG is planning to increase production at its Panna/Mukta and Tapti oil and gas fields by 60% to 2009 through a major drilling campaign.
According to BG, the company is looking to play an expanding role in India’s growing natural gas sector.
BG is also extending its deepwater initiatives and will be active in three deepwater exploration blocks in the KG basin.
Thailand, Vietnam, Myanmar
Thailand will focus on gas development in 2007. The Petroleum Authority of Thailand (PTT) approved nearly $6 billion in investment for 2007-2011, 84% of which would be used to develop the natural gas business.
PTT Exploration and Production Public Co. Ltd. (PTTEP) plans to invest $2.18 billion in 34 projects this year, 65% of which will be spent domestically, most of it on offshore projects.
In 1Q 2007, the Gulf of Thailand saw three new gas discoveries on PTTEP-operated blocks 15 and 16. A development plan for the three discoveries is under study. Production could begin in 2009.
PTTEP will invest $471 million in the Arthit project in the Gulf of Thailand to drill 37 development wells and to build and install the main production platform and four wellhead platforms.
PTTEP also is investing in the Bongkot field, spending $176 million to drill 16 development wells. A further $170 million will go to the nearby B8/32&9A field, and the Pailin project will receive $105 million for four wellhead platforms and 39 development wells.
PTTEP also plans to spend $139 million in Myanmar and $117 million in Vietnam.
Last August, ONGC Videsh Ltd. (OVL) and partners in blocks A-1 and A-3 offshore Myanmar, completed and appraised the original gas-in-place and recoverable reserves of the Shwe, Shwe Phyu, and Mya fields. OVL believes the fields hold a combined 5.7 tcf.
Two additional prospects have been identified in block A-3, where one or two exploratory wells are expected in 2007.
In February 2007, PTTEP said it will call for farm-out deals for its five blocks in the Gulf of Martaban offshore Myanmar. The farm-out for strategic partners follows the M9 gas discovery. The company is planning four or five more appraisal wells for the M9 and adjacent M11 blocks in July while preparations for M9 development get underway.
Deepwater exploration offshore Vietnam is expected to progress gradually. A step in that direction is a 2D seismic survey around the once disputed Spratly Islands, now under a tripartite agreement with the Philippines and China.
Vietnam saw four discoveries in 2006 and another in early 2007. Talisman (Vietnam 15-2/01) Ltd. found oil with the Hai Su Trang (HST) exploration well in January. The HST well is in block 15-2/01, 80 km (50 mi) off the east coast of Vietnam on trend with large oil and gas discoveries in the Cuu Long basin.
The Thang Long Joint Operating Co., established for the purposes of conducting operations on block 15-2/01, plans to drill three new wildcat exploration wells in 2007 to evaluate features on trend with the HST discovery.
Vietnam also is banking on a growing demand for construction, investing in several shipyards this year.
Russia
Exxon Mobil Corp. and its partners continue to make strides on the Sakhalin project offshore Russia’s east coast.
Last August saw production of crude oil from Sakhalin-1. Phase one, which includes the Chayvo, Odoptu, and Arkutun Dagi fields, reached targeted peak production of 250,000 b/d of oil in Feb. 2007. Sakhalin-1 is one of the largest single foreign direct investments in Russia.
Last December, Sakhalin II shareholders reached agreement with Ministry of Energy and Industry of the Russian Federation regarding the amended budget of Sakhalin II and cost recovery.
The upshot of the agreement is that the production-sharing agreement will continue, and the parties have agreed to jointly resolve all outstanding issues.
Australia
Australia opened 36 new areas for bid last year. Bidding for two of the areas closed in Nov. 2006. The other five close in May. All carry an initial term of six years.
There were 12 discoveries off Australia last year, and there is a fair amount of both exploration and production drilling planned for 2007.
The offshore program for BHP Billiton’s Stybarrow field, in permit WA-255-P(2) in the Southern Carnavon basin, 65 km (40 mi) off northwest Australia began in early 2007. Located in 825 m (2,707 ft) of water, Stybarrow will be the deepest subsea production system in Australia.
Meanwhile, Mitsui E&P Australia Pty. Ltd. and Woodside Energy Ltd. will begin improvements on the Enfield field off northwestern Australia, which began oil production last July. The 2007 program includes $390 million to drill additional wells and to workover existing wells to increase production from the field.
In March, Australian Worldwide Exploration Ltd. committed to a major new exploration program to increase gas supply to the growing southeast Australian energy market.
In the last three years, AWE and its co-venturers have made three gas discoveries in the Henry and Martha fields in the Otway basin and in the Trefoil field in the Bass basin. They have also carried out 2D and 3D seismic surveys. The company is planning to drill exploration wells on the Netherby and Pecten East prospects later in 2007.
The 3D seismic surveys over the Timor Sea Katandra prospect in the north and the Gippsland basin permit VIC/P42 in the southeast are precursors to increased exploration drilling in the two areas.
New Zealand
Last year, AWE began a drilling program offshore New Zealand comprising nine exploration and development wells.
One duster was drilled last year. The rest of the wells in the program will be drilled by 2Q 2007. They include the Tieke-1, Hector-1, Taranui-1, and West Cape-1 exploration wells and four development wells on the Tui field. Combined potential reserves are estimated at over 315 MMbbl of oil.
New Zealand’s offered 40 exploration blocks for bid in the Great South basin. Exploration work will pick up following block awards.
Last August, Shell began gas production from the onshore segment of Pohokura development in the Taranaki basin while offshore construction got under way. And New Zealand Oil & Gas Ltd. plans to start oil production from Tui in June
Meanwhile, seismic surveys are helping to delineate the largely unexplored offshore. In Feb. 2007, two CGGVeritas vessels were contracted for a multi-permit program that will take place this summer gathering 10,000 km (6,214 mi) of seismic data. Origin Energy contracted for a 40-km (25-mi) 2D seismic survey in Kupe in the Taranaki basin.
Discovery Geo Corp. is conducting a 200-km (124-mi) survey in PEP 38343 in Cook Strait-Marlborough, and Crown Minerals is planning a 2,300-km (1,429-mi) 2D survey for the Raukumara basin.
Singapore, Malaysia, The Philippines, Indonesia
The Singapore yards continue to take on orders, with delivery dates now as far out as 2012. The global shortage of rigs and construction/installation vessels will keep this region busy for quite some time.
Malaysia, meanwhile, is working to establish itself as a deepwater hub for the Asia-Pacific region, and increasing deepwater exploration is drawing attention to the area. Yard expansion is paving the way to greater construction capacity, and many international companies are setting up shop in Kuala Lumpur.
Murphy Oil Corp. is bringing Kikeh, Malaysia’s first deepwater field, onstream later this year, and exploration drilling is turning up additional deepwater discoveries. Earlier this year, Murphy Oil Corp. found a significant natural gas pay with the Rotan #1 exploration well in 1,150 m (3,773 ft) water depth near offshore Sabah. Rotan #1 is Murphy’s fourth exploration well in block H and its first discovery there.
Shell also has a deepwater discovery offshore Malaysia called Gumusut that is likely to be developed.
Deepwater has also become a draw offshore the Philippines. Exxon subsidiary Esso Exploration International Ltd. and Mitra Energy Ltd. recently entered an agreement to explore the deepwater Sandakan basin southwest of the Philippines.
The Philippine and Malaysian national oil companies are planning to drill offshore Mindoro island between 2007 and 2012. The plan is to drill one exploration and two appraisal wells in 2007, targeting a basin of a billion barrels of reserves.
International oil companies are expected to spend $411 million on drilling and seismic surveys over the next three years on the nine blocks awarded in Indonesia’s recent bidding round. Another 40 blocks will be offered this year. Indonesia is hoping to attract $1 billion in three-year exploration commitments from the 40 additional blocks. The country signed 18 PSCs last year.
Total E&P Indonesie plans to spend $2.2 billion on its Indonesian operation this year, up from $1.8 billion in 2006. The 2007 expenditure includes $1.6 billion for upstream development projects, including $400 million for the Sisi and Nubi fields, which are being developed in the Mahakam block off East Kalimantan, Borneo.
Total plans to drill 120 wells this year. The long-term strategy is to invest $8 billion over the next nine years.
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