Frost & Sullivan: Steady Oil Prices to Drive Exploration & Production Capital Expenditure

Dec. 8, 2011 - PRLog -- Kuala Lumpur, Malaysia – Oil prices (Brent crude) are expected to remain at an average of above US$90 a barrel even in a weak economy as demand for petroleum products from China and India is expected to remain strong. Frost & Sullivan forecasts Global exploration & production (E&P) capital spending to increase in 2012 to US$545 billion.

In Malaysia, expenditure for exploration for production is expected to be around RM45 billion with a growth rate of 16.6% in 2012. Growth segments include Deepwater projects, Enhanced Oil Recovery (EOR), and Marginal Fields.

According to Subramanya Bettadapura, Director of Energy & Power Systems, Frost & Sullivan, key O&G market suppliers to benefit in 2012 include Engineering, Procurement, Commissioning, Installation and Commissioning (EPCIC) firms, Drilling service providers, Offshore Support Vessels and services providers, Brownfield services providers, Offshore fabrication companies, and Pipes manufacturing and pipe-coating companies.

“Petronas has had decent success with its intensified exploration program in 2011. Significant oil & gas discoveries in 2011 were made offshore Sabah and Sarawak. Petronas remains committed in its strategy to focus exploration efforts in domestic waters and has budgeted RM300 billion for the next 5 years for capital expenditure to sustain production levels and some growth along the integrated value chain.”

Exploration efforts will continue in shallow water and deepwater blocks in 2012. Petronas and its partners are expected to drill around 20 exploration wells during 2012.

Malaysia’s second deepwater project Gumusut/Kakap will be onstream early 2012. The Malikai deepwater project is projected to come on-stream during 2014. Two more deepwater developments Jangas and Kebabangan are also scheduled to be on-stream in 2014. All these deepwater projects will entail significant expenditure in 2012.

An Aggressive Approach for Rejuvenating Mature Fields

Enhanced Oil Recovery (EOR) projects are designed to extend the lifetime of mature oil & gas fields and sustain production levels. Petronas, working with ExxonMobil and Shell, has taken an aggressive approach to rejuvenate mature fields.

“Petronas and Shell Malaysia will be spending upwards of RM36 billion on EOR projects and development of new fields to sustain production. The 2012 expenditure under this program is expected to be around RM3 billion,” said Bettadapura.

EOR projects offshore Sarawak and Sabah will provide opportunities for domestic service providers to build technical capabilities in this important segment. The 2012 - 2013 expenditure on the ExxonMobil Tapis brownfield rejuvenation program is expected to be RM2 billion with total project cost estimated at RM3 billion.

Development of Marginal Fields

The development of marginal fields will see continued investment in 2012. The focus on marginal fields is essential to sustain oil production.

The North Malay basin project is part of the marginal fields development initiative. This project taps into 2 marginal fields and 9 fields with high CO2 content. A 200 km pipeline is also part of this project. This combined project development is expected to cost RM15 billion. Since initial production from this project is expected to be by H2, 2013, most of the development work would be in 2012.

The Balai cluster marginal fields are being developed by a consortium of Dialog Group, ROC Oil and Petronas Carigali. The total investment for this development is estimated to be RM2.7 billion. First oil is expected by H2, 2013 and first gas by H2, 2014.

Development work on the Berantai marginal field will continue in 2012. The total development cost to develop this field, excluding the FPSO delivery cost, is estimated to be RM2.4 billion.  

Final Investment Decision for Rapid Project during mid-2012

The feasibility study for the refining and storage hub (Rapid Project) at Pengerang, Johor is underway. Peninsular Malaysia’s second LNG receiving and re-gasification terminal is planned to be part of the Rapid project

The final investment decision is expected by mid-2012. The capital outlay for this project is approximately RM60 billion. This project has already attracted the attention of many Engineering, Procurement, Commissioning, Installation and Commissioning (EPCIC) firms.

The proposed Rapid project includes:
•   Refinery with capacity of 300,000 barrels per day
•   Naptha Cracker of 3 million tons per year
•   Petrochemicals and polymer complex
•   LNG receiving and re-gasification terminal
•   Power Plant

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MEDIA CONTACT:

Donna Jeremiah
Corporate Communications – Asia Pacific
P: +603 6204 5832
E: djeremiah@frost.com

Carrie Low
Corporate Communications – Asia Pacific
P: +603 6204 5910
E: carrie.low@frost.com

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Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's research and consulting services empower clients to generate, evaluate, and implement effective growth strategies.