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OIL & GASMARKET OVERVIEW

August 2018

Laetitia Boura

Senior Trade Advisor Industries, Energy & CleanTech

Business France Malaysia

MALAYSIAN

O&G MARKET

CONTENT

1. GENERAL OVERVIEW

2. UPSTREAM

3. GLOBAL EXPLORATION TREND

4. MID & DOWNSTREAM

5. ECOSYSTEM

6. CONCLUSION

OIL & GAS GENERAL OVERVIEW – AUGUST 2018© 2018 – BUSINESS FRANCE

MALAYSIAN O&G MARKETGENERAL OVERVIEW

3

KEY FIGURES (2017)

▪ 2nd producer in ASEAN and 26th rank of world proved reserves of crude oil (681 000 bbl/d –).

▪ 16th rank of world natural gas reserves.

▪ 28 billions of BOE (Baril Oil Eq): 70% Gas / 30% Oil

▪ 3rd global LNG exporter (after Qatar)

DRIVERS OF GROWTH

▪ 14.5% of the GDP (2016)

▪ 14.7% to the Government’s revenue (2016)

Source: https://www.researchgate.net/publication/321360712


MALAYSIAN O&G MARKETUPSTREAM

4

OPERATIONS:

▪ More than 400 O&G fields in operation

▪ Exploration Opportunity in 2016: 9 focus blocks

▪ 101 Productions Sharing Contracts (PSCs) and 6 Risk Sharing Contracts


MALAYSIAN O&G MARKETGLOBAL EXPLORATION TRENDS

5

▪ Challenges

▪ Fall in oil price – budget cost – inflated cost environment

▪ Monetization difficulties for gas

▪ Higher volumes in giant fields, longer lead time

▪ Return to positive value creation and reduce discovery cost to 1.3$/boe

▪ Declining volumes

▪ Total discovered volumes decrease 38Bboe (2010-2012) to 12 Bboe (2017) but size of average discovery constant (77Mboe)

▪ Industry response

▪ Slashing budgets, headcount, exiting conventional exploration

▪ Dramatic fall of investment from 90B$ in 2014 to 35B$ in 2017 (record level)

▪ More resilient, smarter portfolio, do more with less capital

▪ Shift from exploration to DRO


MALAYSIAN O&G MARKETGLOBAL EXPLORATION TRENDS

6

▪ Discovery size

• 2010-2012 – Mainly high risk exploration

• 2015-2017 – More low risk exploration

➢ FOCUS ON NEAR-FIELD AND ONSHORE

▪ Return to volumes

➢ RESULT OF HIGH GRADING AND PRIORITIZATION IN A RESTRICTED

BUDGET ENVIRONMENT

➢ DEEPWATER DISCOVERIES MAKE 50% OF DISCOVERIES


MALAYSIAN O&G MARKETMID & DOWNSTREAM

7

CURRENT SITUATION: MALAYSIA A INTERNATIONAL TRADING HUB

▪ 6 refineries with the total refining capacity of around 900,000 bbl/d.

▪ Costs reduce resulted in the relocation of sizable players as McDermott and Subsea 7.

PENGERANG INTEGRATED PETROLEUM COMPLEX (PIPC)

▪ Pengerang Independent Deepwater Petroleum Terminal (PIDPT)

▪ Pengerang Integrated Complex (PIC)

▪ Refinery and Petrochemical Integrated Development (RAPID)


MALAYSIAN O&G MARKETECOSYSTEM

8

▪ After the Trans Pacific Partnership Agreement, PETRONAS will retain its regulatory and licensing role.

▪ PETRONAS growth and stature has been matched by a maturing local industry with over 4,000 oil & gas

businesses including International Oil Companies.


MALAYSIAN O&G MARKETECOSYSTEM – PETRONAS & PETROS ?

9

▪ PDA 1974 – Creation of PETRONAS: Sole ownership and control of all upstream oil and gas resources

▪ June 2018

- Federal Court refuses PETRONAS case (requesting affirmation of PDA1974 having a federal implication, including

Sarawak)

- Based on MA 1963 - Sarawak reclaiming their “constitutional authority to regulate the mining and production of

O&G as well as the distribution of Gas”.

- Referral to High court

▪ 1 July 2018

- Creation of PETROS – Sarawak’s own oil & gas company comes into force

Regulatory challenge at Sarawak ?

Open

Sarawak

Domestic demand expected to grow; State is giving

focus to grow the petrochemical industry robustly as early as 2019/2020

Undersupplied in meeting current demand; PETRONAS

working hard to mitigate the shortfall in order to meet MLNG plant demand

Remains a challenge to develop future field; amid the

low oil prices and competition among LNG suppliers, developing the discovered gas fields at competitive cost and maintaining supply reliability is critical

Technology is the key; to unlock value from the high

contaminant discovered resources

Maintaining a consistent investment flow in exploration; to ensure sustainable resources to support the

future demand

Opportunities Right Ahead

SK 2P+2C Resource as at 1.1.2018

Long Term Sarawak Gas Supply-Demand

0

1 000

2 000

3 000

4 000

5 000

6 000

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

Producing SSGP supply

Sanctioned Future Project

Non LNG Demand LNG Plant Requirement

2

1

LNG

Power, Petrochemical, Industries, Reticulation

Unit: MMscf/d

11%

15%

19%

19%

7%

10%

13%

Producing

Producing CO2 10%

Sanctioned

Producing High H2S

Producing High CO2

SanctionedCO2 >10%

Unsanctioned High H2S

UnsanctionedCO2 >40%

Unsanctioned High H2S High CO2

UnsanctionedCO2 20-40%

UnsanctionedSanctioned

High H2S High CO2

Source: TOTAL Malaysia

Sabah

Development of new pipeline infrastructure opens up a new demand opportunities; The Trans Sabah Gas

Pipeline (TSGP) is expected to open up new demand center at the Sabah east coast region by 2020/2021

Challenge to develop future field; especially to unlock

the discovered resources at deepwater, stranded and marginal

Liberalizing the domestic gas remains a challenge; as the cost of developing the future field increases, much efforts need to be undertaken to relook at the domestic gas price

Maintaining a consistent investment flow in exploration; to ensure sustainable resources to support the

future demand

Open

Growing the Gas Demand and Unlocking Deepwater Potentials

SB 2P+2C Resource as at 1.1.2018 60%

40%

ShallowWater

DeepWater

water depth <200 m

water depth >200 m

0

500

1000

1500

2000

2500

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

Producing GCBDOpportunity Power SectorNon-Power Sector LNGs (export)Additional Sipitang TSGP (Non Power)

Long Term Sabah Gas Supply-Demand

Unit: MMscf/d

3

2

1

MLNG & FLNGs

Power Sector (inclSandakan Power)

Non-Power Sector

TSGP (Non Power)

Additional Sipitang

*Opportunity refers to discovered resources

Source: TOTAL Malaysia


MALAYSIAN O&G MARKETCONCLUSION

MARKET PERSPECTIVES:

▪ Development of oil infrastructures, recycling, and dismantling services

▪ Know-how and technology with strong added value for exploration

(geology, geophysics, imaging, etc.)

▪ Drilling in deep sea, collect and treatment of gas

▪ EOR and marginal fields, capture of the CO2, etc.

▪ Challenge remains to develop Future Projects; Developing high contaminant gas resources at competitive cost

through technology solutions remains critical decision in order to provide competitive gas supply

GENERAL RECOMMENDATIONS

▪ Capacity of innovation (high technology in drilling, engineering of reservoirs, submarine engineering, design and

maintenance, equipment and high-technology applications)

▪ Find local partners referenced with Petronas

▪ Remain attentive to the evolutions of the conditions of eligibility for Sarawak

▪ attractive tax system and global incentive allowance (GIFT, Global Incentive For Trading) managed by the

MIDA. Agency which support investment in O&G,

▪ Maintaining consistent investment flow in exploration; to ensure sustainable resources to support the future

demand

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BUSINESS FRANCE MALAYSIAFrench Trade Commission / Kuala Lumpur Office EMBASSY OF FRANCE IN MALAYSIA

Laetitia Boura

Senior Trade Advisor

[email protected]

Shahreza SHAHRIR

Trade Advisor

[email protected]

Charles MVOGO

Trade Advisor

[email protected]

INDUSTRIES, ENERGY & CLEANTECH

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