Asian governments must act to stem production decline, report warns
Majors and IOCs have disposed of nearly 800 MMboe of resources in Southeast Asia in recent years, according to Wood Mackenzie.
SINGAPORE – Majors and IOCs have disposed of nearly 800 MMboe of resources in Southeast Asia in recent years, according to Wood Mackenzie.
However, various major companies such as JXTG, Mitsubishi, POCO and Kufpec, along with local players Medco Energi, Saka Energu, KrisEnergy, Sapura Energy and others, have been steadily growing their presence in the region’s upstream sector.
Since 2013, the rising newcomers have acquired more than 600 MMboe throughout the region, led by Indonesia’s Medco Energi’s farm-ins into South Natuna Sea block B and North Sumatra block A (263 MMboe in total), and Sapura’s acquisition of Newfield’s Malaysian assets (220 MMboe).
And production from East Asian and Middle Eastern conglomerates and domestic independents has risen from 260,000 boe/d a decade ago to more than 675,000 boe/d.
According to Wood Mackenzie senior research manager Ashima Taneja, these companies now account for 12% of the region’s production with growths set to continue into the next decade.
“Southeast Asia falls in the backyard of East Asian and Middle Eastern conglomerates looking for diversity of supply,” she explained. “As for the domestic independents, strong networks with local NOCs, government and domestic supply chain have contributed to their success.”
The independents, led by management with regional experience, will seek to partner with NOCs on suitably sized projects but are unlikely to take on technically difficult developments.
Across Southeast Asia, production peaked at 5.9 MMboe/d and has since remained steady, the analyst said. Around 68% of today’s production comes from mid-life and mature fields, and with few significant developments planned, output looks set to decline by 15% by 2025.
This, combined with tight fiscal terms, a generally restrictive regulatory environment and lack-lustre exploration results will make the going hard for NOCs and regionally-focused players.
Taneja said: “Even as we see oil prices rebounding in recent times…in this environment, governments and regulators must question whether they are doing enough to attract investors that are looking to grow and diversify.
“If not, the region will be bereft of players that can help the NOCs fill the major gap.”