Petronas and Shell Malaysia on FRiday signed a Heads of Agreement (HOA) for two 30-year production-sharing contracts (PSCs) for enhanced oil recovery (EOR) projects in offshore Sabah and Sarawak.
The HOA will see staged work activities and new investments from Shell and its joint-venture partner, Petronas Carigali Sdn Bhd, to extend the life and increase the recovery factor of the Baram Delta and North Sabah fields.
"This new agreement confirms Shell's commitment to continue investing in Malaysia and its position as a heartland for Shell.
"The agreement also provides an opportunity to work together with Petronas on building local knowledge and capabilities in enhanced oil recovery," Shell's chief executive officer Peter Voser said in a statement.
Improvements in the recovery efficiency of oil fields may result in an additional 90 to 100 kilo barrel of oil equivalent per day of oil production and extend the field life to beyond 2040.
The new agreement will build upon the existing Baram Delta and North Sabah production-sharing contracts located offshore Sabah and Sarawak.
Meanwhile, Shell Malaysia chairman Anuar Taib said the new agreement would positively impact Malaysia's oil reserves and benefit the country as well as, adding further value to the nation's upstream oil and gas industry.
"Shell, as a long-term partner in Malaysia's progress, is pleased to be able to continue contributing towards the national aspiration to become a high-income economy," he said.
Petronas Carigali holds 60 per cent equity interest in the Baram Delta production-sharing contract (expiry 2018) and is the operator while Shell holds the remaining 40 per cent stake.
The North Sabah PSC (expiry 2019) is Shell-operated, with each company holding an equal 50 per cent equity interest.
The projected increase in the average recovery factor in the Baram Delta and North Sabah fields will see a rise to 50 per cent from 36 per cent, adding significant value to the upstream industry in Malaysia and sustainable over the coming decades.
The technology employed in the North Sabah fields can potentially lead to the first field-scale offshore Chemical EOR in the world.
To date, Shell has participating interests in 14 PSCs in various offshore blocks in Sabah and Sarawak.
