Malaysia’s state-owned oil and gas company Petroliam Nasional Bhd. said Friday that it has agreed with Royal Dutch Shell PLC to jointly develop oilfields in Malaysia using enhanced oil recovery techniques.
The companies say the $12 billion project will help the Malaysian national explorer extract a greater portion of oil from its existing reserves and extend the lives of its oilfields.
The Malaysian company, also called Petronas, has been grappling with shrinking output from aging fields and targets capital expenditure of 50 billion ringgit-55 billion ringgit ($15.89 billion-$17.47 billion) a year over the next five years to replace and refurbish them.
Many of its producing Malaysian oil and gas fields are between 19 years and 28 years old.
Last year, Malaysia unveiled a package of tax incentives to boost oil output from mature fields, including cutting tax rates for the development of new oil and gas resources and enhancing recovery from depleted fields.
Petronas said it signed a deal with Shell for two 30-year production-sharing contracts under which the companies will employ enhanced oil recovery methods at oilfields offshore Sarawak and Sabah states in East Malaysia.
They will also develop nine oil fields in the Baram Delta offshore Sarawak and four in the North Sabah development area.
The two projects together may yield an additional 90,000 barrels to 100,000 barrels a day and could be the largest offshore enhanced oil recovery development in the world.
Malaysia, which produced 658,000 barrels of oil and condensates a day as of Jan. 1 last year, is expected to become a net oil importer by 2013 because of declining domestic output.
The projects will increase the average recovery factor in the Baram Delta and North Sabah fields to about 50% from around 36%, halt the decline of Malaysia’s oil output by improving production in the fields and extend the field life beyond 2040, Petronas said.
