trends in moving towards deepwater e & p in malaysia

Trends in Moving towards Deepwater E & P in Malaysia

Subbu BettadapuraDirector, Energy & Power Systems

Asia Pacific

27th July 2011

Offshore Drilling Rigs ConferenceSingapore

Malaysia as the Regional Deepwater and Oilfield Services Hub

E & P Expenditure

Table of Contents

Trends in Moving towards Deepwater E&P in Malaysia

Current drilling rig utilization situation and potential increasing investment in the rig sector

Overview of major offshore E & P projects in Malaysia

Moving towards deepwater – forecasting demand for deepwater drilling facilities

11

22

33

44

55

2

Malaysia - E&P Expenditure

Growing Complexity of Malaysia’s Reserves

Source: PETRONAS

• Malaysia’s total reserves,(2010) ~ 20.56 bboe

• Deepwater potential for oil & gas reserves is estimated to be 10bboe

• Growing Complexity in extracting Malaysia’s reserves

• Malaysia’s deepwater presents unique challenges such as complicated sea-bed relief with slope and stability issues

• Shallow hazards • Hydrate management• High CO2 content in gas

• Reserves estimate increase due to• Additions from new discoveries• Revised estimates due to EOR

11

• In Malaysia, deepwater definition ranges from depth of 200m to 1200m. Beyond 1200 meters is considered as Ultra deepwater

• Generally accepted deepwater definition - greater than 300 metres depth up to 1500 meters; Ultra deepwater - greater than 1500 meters depth

3

0.00

5.00

10.00

15.00

20.00

25.00

2005 2006 2007 2008 2009 2010

17.27 17.42 17.66 17.13 17.21 17.58

2.09 2.49 2.52 3.00 2.97 2.98

Rese

rves

, bbo

e

DW Reserves

SW Reserves

Deepwater Reserves, at ~ 3 bboe (2010), are 14.5% of total reserves

11

Increasing number of PSCs and International Companies Participation

Number of active PSCs: 82

•Currently there are 33 exploration, 15 development and 34 producing PSCs

20 international oil & gas exploration companies are present in Malaysia

16 of these operate oil & gas assets in Malaysia

Source: Petronas; Compiled by Frost & Sullivan

Malaysia - E&P Expenditure

4

Malaysia’s Upstream Expenditure – Increasing Trend

• Malaysia’s upstream expenditure has steadily increased over the years• The country’s upstream expenditure was 28.72 billion RM in FY 2010• Malaysia Upstream Expenditure, FY 2011 ~ RM 34 Billion

6.3

8.46 10 11 12

.5 16.3 19

.8

21.5

22.3 28

.72

0

5

10

15

20

25

30

35

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RM

Bill

ion

Year

Malaysia Upstream Expenditure, FY 2001 to FY 2010Total number of producing fields: 106

Oil : 68 Gas : 38

Oil and Gas Fields Discovered : 409Oil: 167; Gas: 242

Malaysia - E&P Expenditure11

Source: Petronas; Compiled by Frost & Sullivan 5

Deep Water is the Final Frontier – Its true for Malaysia too


Increasing Depth

Malaysia is faced with the prospect of declining shallow water reserves – a phenomenon true for most countries (except a few OPEC and Russia)

Global Drivers for DW projects

•Decline in shallow water reserves•Strong growth in energy demand•Rising oil & gas prices•Long term sustainability•Technology now exists to tap oil at depths exceeding 3 km

Drivers specific to Malaysia

•Capability development & local participation•Goal to grow competency to be DW regional hub and global player

2010200620021983

Deep water projects more expensive and carry more risks

Oil price estimates for project to break even -•Shallow water: $40•Shallow water, marginal: $65•Deepwater: $ 80•Ultra deepwater: $80 to $100

22

6

Num

ber

of

PS

Cs


Sabah, 3

Sarawak, 5

1

2

3

4

5

6 Gumusut-Kakap,Malikai

Kikeh

Kebabangan

Production

Exploration

Development

Break-Down of Deep Water Blocks PSC(By Operator and Phase)

Number of Open Deep Water Blocks: 8

• 19 Deep Water PSCs are currently active

• 8 open Deep Water blocks

• 7 international companies awarded operatorship in Deep Water blocks

Deep Water PSCs in Malaysia

22 Overview of major offshore E & P projects in Malaysia

7

22

Source: Compiled by Frost & Sullivan

Deepwater Fields Being Developed

Gumusut/Kakap (Block J & K)Development Stage

Recoverable: 620mboeDepth: 1,100m

Onstream: 2011/2012Operator: Shell

Malikai (Block G)Development Stage

Recoverable: 108mboeDepth: 480m

Onstream: 2012/2013Operator: Shell

KebabanganDevelopment StageRecoverable: 2.2tscf

Depth: >200mOnstream: 2012/2013

Operator: KPOC

Jangas (Block J)Pre-Development StageRecoverable: 81mmboe


Operator: MurphyUbah Crest (Block G)

Pre-Development StageRecoverable: 215mmboe


Operator: Shell

Pisangan (Block J)Pre-Development StageRecoverable: 56mmboe


Operator: Shell

KamunsuPre-Development Stage

Recoverable: 2.2tscfDepth: >1000m

Onstream: 2014/2015Operator: KPOC

North Siakap – PetaiPre-Development Stage

Limbayong, Block GPre-Development Stage


8

Deepwater Production Forecasts

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Deep Water Addition

Deep Water Existing

Shallow Water Addition

Shallow Water Existing

Ma

lays

ia O

il P

rod

uct

ion

(%

)

• Deep Water to contribute 30% of oil production in 2020• Shallow water existing includes production from SW marginal fields and EOR additions

22 Overview of major offshore E & P projects in Malaysia


9

Kikeh Snapshot: First Deepwater Project in Southeast Asia


Field Depth(metres)

Estimated Reserves (mmboe)

On-stream Operator PSC Others holding interest in PSC

Kikeh 1,340 400 to 700 Q3, 2007 Murphy 80% Petronas Carigali 20%

The first deepwater oil discovery in Malaysia, Kikeh is located in 4,400 feet (1,341 meters) of water offshore Sabah, northwest of the island of Labuan, in the southern part of Block K.

Considered a fast-paced project, field development was completed in five years following the initial discovery in July 2002, and production started in August 2007.

Initial daily production started at a rate of 40,000 bopd. More wells were brought on-stream through the next two years, bringing daily production levels to 120,000 bopd.

A total of 20 producing wells have been drilled, all completed on schedule and on budget.

In the news recently:

Apr 2011: Murphy awarded Seadrill an 18-month contract for the West Menang semi tender rig to operate on the Kikeh Spar deepwater field in Malaysia. The estimated contract value is about US $100 million, commencing Q2, 2011

Jun 2011: Kikeh is currently producing less than expected due to sand in the oil. This issue is expected to be resolved this year

Overview of major offshore E & P projects in Malaysia22

10

Development Solutions for Malaysia Deepwater Projects

22

Malikai

North Siakap Petai

Gumusut Kakap

Kikeh Kebabangan

Sub-sea

TLP

Fixed PlatformSPAR

FPSO

FPSSabah Oil

& Gas Terminal


11

Rigs Currently Deployed in Malaysia (July 2011)

33 Current Drilling Rig Utilization Situation

Cold StackedReady

Stacked Drilling ModificationUnder

Construction Total

Drill Ships 1 0 2 0 0 3

SemiSub 5 2 1 1 0 10

Tender 0 0 9 0 0 9

Jack-up 8 1 12 0 1 22

Total 14 3 24 1 1 43

• As of July 2011, 24 Rigs are drilling in Malaysian waters. One more Semisub, Atwood Falcon (managed by Atwood Oceanics), to be deployed in August 2011

• Atwood Falcon is currently drilling in the Philippines. Shell Malaysia has re-engaged Atwood Oceanics for drilling two wells with an option to drill 3 more starting August 2011

• Shell Malaysia also has an open drilling tender for a long term contract starting April 2012

• Drilling contractors expect demand for another 4 to 6 rigs in Malaysia, taking the total number of rigs deployed to around 30 by 2013.

• Domestic drilling contractor, Kencana Petroleum, to invest in 3 more rigs


12

Aban Offshore, Jack Up, 1

Ensco, Jack Up, 3 Hercules Offshore, Jack Up, 1

Japan Drilling,

Semisub, 1KCA Deutag, Tender,

2

Kencana Petroleum, Tender, 1

Sea Drill, Jack Up, 3

Sea Drill, Tender, 6

Singapore Drilling, Jack

Up, 1

Stena Drilling, Drill Ship, 1

Transocean, Drill Ship, 1

Transocean, Jack Up, 3

Total Rigs Drilling (as of July 2011): 24

Rigs Currently Deployed in Malaysia (July 2011)

33 Current Drilling Rig Utilization Situation

13


Wells Drilling Forecast, Malaysia

44 Forecasting Demand

Forecast includes both shallow water and deepwater (Exploration, Appraisal and Development) Wells

•6 deep water fields (of the total wells forecast, 20% are in deepwater)•22 new Shallow Water Blocks•10 Marginal fields•6 fields identified for Enhanced Oil Recovery (EOR)

14

Source: Frost & Sullivan Estimates

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014 2015

161 178 193 204 207 211 211Wells Drilled

Rigs Under Construction in South East Asia Region

44 Forecasting Demand

South East Asia Region Under Construction (as of July 2011)

Managers (# of Rigs under construction)

Drill Ship 2 Noble Drilling (2)

Semi-Sub 7 Ensco (3), Seadrill (2), Songa Offshore (1), Atwood Oceanics (1)

Jack-up 38 Noble Drilling (4), Standard Drilling (7), Transocean (3), Others (24)

Tender Rigs 2 PV Drilling (1), Seadrill (1)

Globally, international drilling companies are in investment mode

• Pride International, Transocean, Diamond Offshore , Noble, Ensco have ordered new ultra-deepwater rigs in the last one last year

• 30 drillships rated for drilling in water depths greater than 9,800 feet were scheduled for delivery from 2010 through 2013

• 24 semis capable of drilling in greater than 2,461 feet of water will be delivered from 2010 through to 2012

• Around 40% of drillships and semisubs ordered without contract in hand

15

55


Offshore Potential in the Asia Pacific Region; Offshore Prospects

KG Basin6.76 TCF

Offshore Sabah (10 TCF) & Sarawak

(45 TCF) 4.2Bboe proven; 8Bboe

potential

Gulf of Thailand

Arthit 1.9TCF

Bohai Bay 7.35 Bboe

Carnarvon 95.5 TCF

East Kalimantan 47 TCF

Makassar Strait6 TCF

Kikeh 700 mmboe

Masela 10 TCF

Phu Khanh Basin

2.48Bboe

Shwe Gas Field

8 TCF

Browse 30.3 TCF

M9 Field, Gulf of

Martaban 1.76 TCF

Bonaparte29.5 TCF

Gippsland10.65 TCF

• Asia Pacific – a significant deepwater region


16

55 Malaysia as the Regional Deepwater and Oilfield Services Hub

Key Success Factors for a Deep Water Services Hub

Infrastructure

Government Policies

Location1

2

3

Cost Competitiveness4

17

Development of Labuan and Sabah Region as the Deep Water Services Hub

55

Labuan and Sabah region has the potential to be developed into a deep water services hub

Drivers for Development of Labuan and Sabah

Gumusut / Kakap, Malikai, Jangas, Ubah Crest, Pisangan and Kamunsu deep water fields are being developed

Sabah Oil and Gas Terminal (SOGT)

Development of logistics - MOU between Labuan Shipyard & Engineering (LSE) and Asian Supply Base (ASB)

Important to leverage the deepwater oil & gas reserves, operators, specialised equipment manufacturers, service providers and offshore engineering companies


18


Oil & Gas Majors in Labuan

Baker Hughes (M) Sdn BhdCameron (Malaysia) Sdn BhdDelcom Services Sdn BhdFMC TechnologiesHalliburton Energy Services (M) Sdn BhdHalliburton Services (M) Sdn BhdMISC Integrated Logistics Sdn BhdPetra Resources Sdn BhdSchlumberger WTA (M) Sdn BhdSobena Offshore Inc. Sdn BhdScomi Oiltools Sdn BhdScomi OMS Oilfield Services Sdn BhdScomi Sosma Sdn BhdUMW Oiltools Services Sdn Bhd

BHP Billiton Petroleum (Sabah) CorporationExxonMobil Exploration and Production Philipines B.VHess Oil & Gas Sdn BhdPetronas Carigali Sdn BhdSabah Shell Petroleum Company LtdMurphy Sarawak Oil Co., LtdNewfield Sarawak Malaysia IncNippon Oil Exploration (M) Ltd.PCPP Sdn Bhd

Support & Services Companies in Labuan

Oil & Gas Companies in Labuan


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Key Activities Kikeh Gumusut Kakap Malikai Kebabangan, North Siakap–Petai, UbahCrest, Pisangan, KemunsuEast

All future deep water projects

Subsurface Studies/Field Development Plan

Malaysia North America Malaysia Malaysia Malaysia

Engineering•pre-FEED•FEED•Detail Design

MalaysiaNorth AmericaEurope

MalaysiaNorth America

Malaysia Malaysia Malaysia

Procurement MalaysiaNorth AmericaEurope

MalaysiaNorth America

Malaysia Malaysia Malaysia

Fabrication•Topside•Hull•Subsea

MalaysiaEurope

Malaysia Malaysia Malaysia Malaysia

Petronas Aspires to Transfer Development and Operation Activities to Malaysia


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Source: Petronas

What works for Malaysia…….


Exploration & Development

• Exploration blocks are well defined

• Malaysia continues to attract a significant level of interest among foreign companies to bid for and operate blocks in Malaysia

• First deepwater project in the APAC region. Malaysia is one of the currently only five proven deepwater areas in the world – this gives more leverage for higher exploration investments.

• Early entry of deep water service players into the Malaysia. Technology import gaining ground

Production

• Malaysia’s offshore producing fields are more mature than those of its Southeast Asian neighbours (i.e., Indonesia, Thailand and Vietnam)

• A vast pool of field operators who are of international standards

• Good understanding of type of reservoir and its production strengths and constraints

• Good understanding of production facilities constraints

Malaysia is a veteran in offshore production activities

Growth in the domestic capabilities to service the oil & gas value chain

• Malaysian fabricators are able to meet international standards at competitive prices. Increased reputation

internationally

• Domestic companies are growing to become integrated service solution providers

• Malaysian companies collaborating with international companies are able to provide full EPCIC service21


Aspects to be worked on…..

• Malaysia relies heavily on foreign partners to invest in exploration. Petronas does not bear the bulk cost for exploration activities until reserves are proven by awarding the exploration rights to international companies

• Malaysian companies do not have enough experience leading projects for the entire value chain of major exploration, development & production of an oilfield. Service providers entered the market and mostly remained as sub-contractors

• Limited high-end technology owned by Malaysian companies for exploration and limited experience can slow development of exploration skills especially for deep water

• Over focus on support services and fabrication could slow down growth of domestic players in other areas

• Fabrication yards are scattered all over the country. More advantages to have them in a few strategic locations

• Local companies lack better control over rig schedule and therefore development activities

Local Players Not Taking a Leading Role in Exploration

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Subbu BettadapuraDirectorEnergy & Power Systems+603 6204 [email protected]

Jessie LohCorporate CommunicationsAsia Pacific+65 6890 [email protected]

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