Project News - Petronas Highlights Marginal Gas Potential with US$5bn Offshore Project28 Sep 2011 • by Natalie Aster
BMI View: The launch of the North Malay Basin project highlights Malaysia's efforts to boost gas supplies to its energy-hungry peninsular portion, while long-term needs look set to be partially met through LNG imports.
Malaysia's state-run oil and gas producer Petronas is kicking off a new offshore gas project to cater for fast-rising demand in peninsular Malaysia. The company said on August 23 2011 that the so-called North Malay Basin project will cost US$5.1bn and could see new gas volumes being produced by 2013.
The project entails the development of nine marginal offshore gas fields and a 200km subsea pipeline to transport the gas to Terengganu state. Annual production of 1bn cubic metres (bcm) in 2013 is expected to ramp up to about 2.5bcm by 2015. The fields in question are operated under production-sharing terms with unspecified partners.
The North Malay Basin project is critical for Malaysia's gas-fired power generation, which has not been able to keep up with demand in the country's peninsular portion, where the capital Kuala Lumpur is located. State-run utility Tenaga Nasional has been forced to switch to expensive, imported fuel oil as frequent maintenance shutdowns by Petronas Gas have reduced gas supplies. Current gas flows from Petronas to Malaysian utilities are about two-thirds of their 2011 allocated level, with Malaysia having to import electricity from Singapore for the first time in May 2011.
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Malaysia's response has been to encourage greater investment in domestic gas fields while also planning for gas imports. The government, which spends more than US$6bn annually in gas subsidies, has pledged to raise gas prices in order to make marginal fields more economically viable. Growing gas demand also incentivises further gas exploration. Petronas reported in July 2011 that it had made two shallow-water gas discoveries offshore Sabah (on the island of Borneo), with a combined gas-in-place estimate of 34bcm.
On the import front, Petronas is looking to develop a 3.8mn tpa (5.2bcm) regasification terminal near Sungai Udang port in the state of Malacca - the country's first LNG import terminal. Feasibility studies are expected to be completed by end-2011, with the terminal due onstream by end-July 2012. Petronas is considering a second LNG import terminal, to be located in the state of Johor, where the company is planning to build a US$20bn integrated downstream complex by 2016. Petronas agreed an LNG supply delay with state-run Qatargas in July 2011, for about 2bcm of gas starting in 2013. Should Petronas finalise a stake in Indonesia's Natuna D-Alpha gas project, we could see Malaysia import LNG cargoes from its neighbour.
Malaysia's upstream competitive landscape includes majors such as ExxonMobil and Royal Dutch Shell as well as independents such as Hess and Murphy Oil. Although Kuala Lumpur would no doubt be very keen for them to boost gas exploration and development in Malaysia, domestic gas sales prices would need to be high enough to make such an investment worthwhile. Consequently, Petronas is certain to take the lead in these endeavours.
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