Petronas, which will award the Sepat and Berantai marginal oil field contracts soon, plans to award two more marginal field cluster contracts by April.
“We are closing the deal now for Sepat and Berantai and will announce the contracts soon. The bidding process for another two marginal oil field clusters is currently ongoing,” Petronas president and chief executive officer Datuk Shamsul Azhar Abbas said at a media briefing yesterday.
Malaysia has 106 marginal oil fields containing 580 million barrels of oil with Petronas having firmed plans to develop 25% of the total marginal oil fields to replenish its oil reserves and generate new revenue streams. A marginal oil field is defined as a field that can produce 30 million barrels of oil equivalent or less.
With oil price currently trading above US$87 per barrel, 580 million barrels of oil can be valued at US$50.46bil.
Petronas will cluster four to five marginal oil fields to make it more attractive for development.
“For the remaining 75% of marginal oil fields, we don't have plans yet as they require further assessment. We have been working with the Government to come up with another method as the product sharing contract (PSC) (arrangement) does not encourage the development of marginal oil fields,” said Shamsul.
Petronas will adopt a risk service contract arrangement for the development of marginal oil fields. The plan is to build up the local oil and gas services industry by getting foreign players to tie up with local service providers.
Shamsul said the new method for marginal oil field development must be an improvement from existing methods, otherwise it would be akin to “Petronas just giving away the assets”.
Petronas is looking for niche development and production (D&P) foreign players with the capability and technology to tie up with local players and become service contractors to Petronas, by forming a local consortia on a full equity partnership.
Typically, the big boys such as Shell and ExxonMobil are not keen to develop these marginal fields. Even though some of them have marginal fields under their local PSCs, some have chosen to relinquish these marginal oil fields deemed sub-economic back to Petronas.
Among the niche D&P foreign players are London-based Petrofac, Newfield Exploration Co, Salamander Energy Plc and Abu Dhabi's Mubadala Oil & Gas.
While Shamsul acknowledged that local oil and gas service providers cannot become exploration and production (E&P) players, he said that local service providers could become D&P players.
“The local guys can't do it themselves so we need to bring in the teachers and upgrade the capability of local players,” said Shamsul.
Petronas hopes that the sharing of know-how with local players will help the latter venture into development of marginal oil fields overseas.
Shamsul added that Petronas was also undertaking a “design competition” among the service contractors, whereby the aim is to try and reduce the development costs and time taken to see the first production from marginal oil fields.
It was earlier reported that the five new incentives announced under the Economic Transformation Programme would help unlock some 1.7 billion barrels of oil equivalent, with investments up to RM75bil over the next 15 to 20 years.
Shamsul said Petronas aimed to boost domestic oil recovery to 40% from the current 26% over the next five years under its enhanced oil recovery programme.
StarBiz reported last week that Petronas was expected to award multi-billion ringgit contracts for the development of marginal oil fields by the end of this month to several consortia comprising local and foreign companies.
It is believed that Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd might form an alliance together with a foreign oil and gas major, as both these local parties had been busy raising capital to fund their expansion plans and were widely speculated to be one of the front runners for these oilfield deals.