OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia

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OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
MALAYSIAN
                                                                    O&G MARKET
                  OIL & GAS
          MARKET OVERVIEW

                                                      August 2018
Laetitia Boura
Senior Trade Advisor Industries, Energy & CleanTech
Business France Malaysia

   WWW.BUSINESSFRANCE.FR
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
CONTENT

1.   GENERAL OVERVIEW

2.   UPSTREAM

3.   GLOBAL EXPLORATION TREND

4.   MID & DOWNSTREAM

5.   ECOSYSTEM

6.   CONCLUSION
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
GENERAL OVERVIEW                                                                                              MALAYSIAN O&G MARKET

KEY FIGURES (2017)
      ▪   2nd producer in ASEAN and 26th rank of world proved reserves of crude oil (681 000 bbl/d –).
      ▪   16th rank of world natural gas reserves.
      ▪   28 billions of BOE (Baril Oil Eq): 70% Gas / 30% Oil
      ▪   3rd global LNG exporter (after Qatar)

DRIVERS OF GROWTH
      ▪ 14.5% of the GDP (2016)
      ▪ 14.7% to the Government’s revenue (2016)

                                                                                   Source: https://www.researchgate.net/publication/321360712

© 2018 – BUSINESS FRANCE                                                                     OIL & GAS GENERAL OVERVIEW – AUGUST 2018 3
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
UPSTREAM                                                                                   MALAYSIAN O&G MARKET

  OPERATIONS:

        ▪ More than 400 O&G fields in operation
        ▪ Exploration Opportunity in 2016: 9 focus blocks
        ▪ 101 Productions Sharing Contracts (PSCs) and 6 Risk Sharing Contracts

© 2018 – BUSINESS FRANCE                                                          OIL & GAS GENERAL OVERVIEW – AUGUST 2018 4
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
GLOBAL EXPLORATION TRENDS                                                                   MALAYSIAN O&G MARKET

▪ Challenges
  ▪   Fall in oil price – budget cost – inflated cost environment
  ▪   Monetization difficulties for gas
  ▪   Higher volumes in giant fields, longer lead time
  ▪   Return to positive value creation and reduce discovery cost to 1.3$/boe

▪ Declining volumes
  ▪ Total discovered volumes decrease 38Bboe (2010-2012) to 12 Bboe (2017) but size of average discovery
    constant (77Mboe)

▪ Industry response
  ▪   Slashing budgets, headcount, exiting conventional exploration
  ▪   Dramatic fall of investment from 90B$ in 2014 to 35B$ in 2017 (record level)
  ▪   More resilient, smarter portfolio, do more with less capital
  ▪   Shift from exploration to DRO

  © 2018 – BUSINESS FRANCE                                                           OIL & GAS GENERAL OVERVIEW – AUGUST 2018 5
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
GLOBAL EXPLORATION TRENDS                                                  MALAYSIAN O&G MARKET

        ▪ Discovery size
    •     2010-2012 – Mainly high risk exploration

    •     2015-2017 – More low risk exploration

    ➢ FOCUS ON NEAR-FIELD AND ONSHORE

        ▪ Return to volumes
    ➢ RESULT OF HIGH GRADING AND PRIORITIZATION IN A RESTRICTED
      BUDGET ENVIRONMENT

    ➢ DEEPWATER DISCOVERIES MAKE 50% OF DISCOVERIES

© 2018 – BUSINESS FRANCE                                          OIL & GAS GENERAL OVERVIEW – AUGUST 2018 6
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
MID & DOWNSTREAM                                                                             MALAYSIAN O&G MARKET

CURRENT SITUATION: MALAYSIA A INTERNATIONAL TRADING HUB

   ▪ 6 refineries with the total refining capacity of around 900,000 bbl/d.
   ▪ Costs reduce resulted in the relocation of sizable players as McDermott and Subsea 7.

PENGERANG INTEGRATED PETROLEUM COMPLEX (PIPC)

   ▪ Pengerang Independent Deepwater Petroleum Terminal (PIDPT)
   ▪ Pengerang Integrated Complex (PIC)
   ▪ Refinery and Petrochemical Integrated Development (RAPID)

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OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
ECOSYSTEM                                                                                         MALAYSIAN O&G MARKET

▪     After the Trans Pacific Partnership Agreement, PETRONAS will retain its regulatory and licensing role.
▪     PETRONAS growth and stature has been matched by a maturing local industry with over 4,000 oil & gas
      businesses including International Oil Companies.

© 2018 – BUSINESS FRANCE                                                                OIL & GAS GENERAL OVERVIEW – AUGUST 2018 8
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
ECOSYSTEM – PETRONAS & PETROS ?                                                                MALAYSIAN O&G MARKET

     ▪     PDA 1974 – Creation of PETRONAS: Sole ownership and control of all upstream oil and gas resources

     ▪    June 2018
     -    Federal Court refuses PETRONAS case (requesting affirmation of PDA1974 having a federal implication, including
          Sarawak)
     -    Based on MA 1963 - Sarawak reclaiming their “constitutional authority to regulate the mining and production of
          O&G as well as the distribution of Gas”.
     -    Referral to High court

     ▪     1 July 2018
     -     Creation of PETROS – Sarawak’s own oil & gas company comes into force

 Regulatory challenge at Sarawak ?

© 2018 – BUSINESS FRANCE                                                             OIL & GAS GENERAL OVERVIEW – AUGUST 2018 9
OIL & GAS MARKET OVERVIEW - MALAYSIAN O&G MARKET - Business Malaysia
Sarawak                                                                                                                           Unsanctioned
                                                                                                                                High H2S High CO2
Opportunities Right Ahead                                                                                        Unsanctioned
                                                                                                                   High H2S
Unit: MMscf/d                                                                                                                                       Producing
                                                                                                                                 11%
                                                                                                                                            19%
                Long Term Sarawak Gas Supply-Demand                                                     Unsanctioned
                                                                                                         CO2 >40%
                                                                                                                          15%                                   Producing
                                                                                                                                                  10%           CO2 10%
 6 000
                                                                                SK 2P+2C                                                                        Producing
                                                                                Resource as at                                                                  High H2S
                                           LNG                                                                                 19%
                                       2                                        1.1.2018                                                      13%         Producing
                                                                                                          Unsanctioned                 7%                 High CO2
 5 000
                                                                                                          CO2 20-40%
                                                                                                                                                    Sanctioned

                                                                                                                Unsanctioned                 Sanctioned
                                                                                                                              Sanctioned     CO2 >10%
 4 000
                                                                                                                           High H2S High CO2

                                                                               Domestic demand expected to grow; State is giving
 3 000                                                                         focus to grow the petrochemical industry robustly as early as
                                                                               2019/2020
                                                                               Undersupplied in meeting current demand; PETRONAS
 2 000                                                                         working hard to mitigate the shortfall in order to meet MLNG
                                                                               plant demand

                                            Power, Petrochemical,              Remains a challenge to develop future field; amid the
 1 000
                                            Industries, Reticulation           low oil prices and competition among LNG suppliers, developing
                                       1                                       the discovered gas fields at competitive cost and maintaining
                                                                               supply reliability is critical
       0
                                                                               Technology is the key; to unlock value from the high
           2033
           2034
           2019
           2020
           2021
           2022
           2023
           2024
           2025
           2026
           2027
           2028
           2029
           2030
           2031
           2032

           2035
           2036
           2037
           2038
           2039
           2040

                                                                               contaminant discovered resources
                                                                               Maintaining a consistent investment flow in
                      Producing                        SSGP supply
                      Sanctioned                       Future Project          exploration; to ensure sustainable resources to support the
                      Non LNG Demand                   LNG Plant Requirement   future demand
                                                                               Source: TOTAL Malaysia
Open
Sabah
 Growing the Gas Demand and Unlocking Deepwater Potentials
Unit: MMscf/d

                                                                                                                                           Shallow
                Long Term Sabah Gas Supply-Demand                                                                                           Water
                                                                                                                                        water depth 200 m

                                                             MLNG & FLNGs
                                                 3
  1500
                                                                                Development of new pipeline infrastructure opens
                                                                                up a new demand opportunities; The Trans Sabah Gas
                                                                                Pipeline (TSGP) is expected to open up new demand center at
  1000
                                                                                the Sabah east coast region by 2020/2021
                                                                                Challenge to develop future field; especially to unlock
                                                           Non-Power Sector     the discovered resources at deepwater, stranded and marginal
                                                  2
   500                                                                          Liberalizing the domestic gas remains a challenge;
                                                           Power Sector (incl   as the cost of developing the future field increases, much efforts
                                                           Sandakan Power)      need to be undertaken to relook at the domestic gas price
                                           1
                                                                                Maintaining a consistent investment flow in
       0
                                                                                exploration; to ensure sustainable resources to support the
           2019
           2020
           2021
           2022
           2023
           2024
           2025
           2026
           2027
           2028
           2029
           2030
           2031
           2032
           2033
           2034
           2035
           2036
           2037
           2038
           2039
           2040

                                                                                future demand
                   Producing                             GCBD
                   Opportunity                           Power Sector
                   Non-Power Sector                      LNGs (export)
                   Additional Sipitang                   TSGP (Non Power)
                                                                                Source: TOTAL Malaysia

Open       *Opportunity refers to discovered resources
MALAYSIAN O&G MARKET
CONCLUSION

  MARKET PERSPECTIVES:

       ▪     Development of oil infrastructures, recycling, and dismantling services
       ▪     Know-how and technology with strong added value for exploration
              (geology, geophysics, imaging, etc.)
       ▪     Drilling in deep sea, collect and treatment of gas
       ▪     EOR and marginal fields, capture of the CO2, etc.
       ▪     Challenge remains to develop Future Projects; Developing high contaminant gas resources at competitive cost
             through technology solutions remains critical decision in order to provide competitive gas supply

  GENERAL RECOMMENDATIONS
       ▪     Capacity of innovation (high technology in drilling, engineering of reservoirs, submarine engineering, design and
             maintenance, equipment and high-technology applications)
       ▪     Find local partners referenced with Petronas
       ▪     Remain attentive to the evolutions of the conditions of eligibility for Sarawak
       ▪     attractive tax system and global incentive allowance (GIFT, Global Incentive For Trading) managed by the
             MIDA. Agency which support investment in O&G,
       ▪     Maintaining consistent investment flow in exploration; to ensure sustainable resources to support the future
             demand

© 2018 – BUSINESS FRANCE                                                                       OIL & GAS GENERAL OVERVIEW – AUGUST 2018
BUSINESS FRANCE MALAYSIA
        French Trade Commission / Kuala Lumpur Office
        EMBASSY OF FRANCE IN MALAYSIA

       INDUSTRIES, ENERGY & CLEANTECH
       Laetitia Boura
       Senior Trade Advisor
       laetitia.boura@businessfrance.fr

       Charles MVOGO
       Trade Advisor
       charles.mvogo@businessfrance.fr

       Shahreza SHAHRIR
       Trade Advisor
       shahreza.shahrir@businessfrance.fr

                                                                                                                © 2018 - BUSINESS FRANCE
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