South East Asian oil and gas explorers started 2020 with new licensing rounds and extensive exploration drilling and seismic programmes planned but the current economically challenging conditions created by Covid-19 is likely to extend, delay or temporarily suspend these activities.
The South East Asian upstream sector initially entered 2020 with ample optimism, with a long list of projects lined up ready to help the industry recover from the downturn. However, the situation took a fast turn with the Covid-19 pandemic, leading to a sharp decline in fuel demand and the resultant oil price crash.
Status of licensing rounds in South East Asia.
South East Asian explorers started 2020 with new licensing rounds and extensive exploration drilling and seismic programmes planned but the current economically challenging conditions and the uncertainty created by Covid-19 is likely to extend, delay or temporarily suspend these activities.
In Indonesia, SKK Migas has reported a reduction of 56% in exploration drilling, 84% in its 3D seismic studies and 49% in 2D seismic planned for 2020. A delay in the announcement of both the 2019 3rd Bidding Round awards and the 2020 Bidding Round is expected. In Malaysia certain exploration programmes by PTTEP and Petronas are likely to continue but at a slower pace and deadlines for submissions for the ongoing 2020 Bidding Round have been deferred. Thailand’s long-awaited 23rd licensing round has been delayed indefinitely; however, drilling activity is likely to continue in this lowprice environment. Myanmar started 2020 with the Mahar discovery and has a 10-well plan for 2020 by Eni, Posco and PTTEP which is likely to continue as most of the rigs are already contracted, but the 2020 licensing round will probably be delayed to 2021. The award stage and contract signing of the recently closed Philippines1 licensing round will be slowed down, while in Vietnam, Eni’s plans for Block 114 are likely to be delayed.
Reduced Sanctioning
South East Asia expects reduced sanctioning activity during 2020, with merely 100–150 MMboe of reserves reaching final investment decision during 2020, down from an average of over 800 MMboe since 2015. Across the region revised investment budgets, lockdowns and uncertainty around prices mean major projects will be delayed. The Limbayong gas development in Malaysia had FPSO awards due in 2019 but now longer delays are expected as operator Petronas is unlikely to go alone on this geologically complicated deepwater development. In Indonesia, the 2020–2021 production schedules for Merakes, Tangguh phase 3 and Jambaran-Tiung Biru will almost certainly be delayed. SKK Migas has revised down its annual production targets accounting for delay in the start-up of top projects and lower production enhancement activities. Although south-east production may not be impacted significantly in 2020, the region faces the risk of much higher production decline in the future due to the cascading effect from postponed projects. With over 70% of production coming from the mature assets and around 4.5% year-on-year decline, delayed sanctioning and start-up of new projects mean the region might witness an increased decline rate of over 7% by 2024. That said, planned activities on major NOC-operated projects in Indonesia, Thailand and Malaysia will have a crucial role in minimising the impact on production.
Overall, we expect the South East Asia upstream sector to face a challenging year as operators and oil companies try to balance prioritising projects, managing cashflows for survival and maintaining future growth.
1 The PCECP is still an ongoing process and it continues to accommodate submissions of interested parties for petroleum exploration:
Currently, nominations for open/free areas are being accepted at any time by the Philippine Government, through the DOE subject to a pre-approval (Area Clearance) process whether a particular Area of Interest (AOI) can be officially nominated under the PCECP before having the nomination published for a 60-day challenge-period;
Alternately, DOE reserves the right to, at any time, identify and offer a set of Pre-Determined Areas or PDAs (packaged with complete data sets), launching of which shall be announced/made by the DOE to initiate a 180-day application process, that interested parties may likewise apply for.
Further Reading on Oil & Gas Exploration in South East Asia
Rakhine Basin Gas Discovery, Offshore Myanmar
Brought to you in association with NVentures
Korean company Posco International has discovered a new gas field in Myanmar with exploration well Mahar-1, located in offshore Block A3 in the Rakhine Basin.
This article appeared in Vol. 17, No. 3 – 2020
The Geology and Hydrocarbon Potential of Myanmar
Amy Gough, South East Asia Research Group. Royal Holloway, University of London
Despite having a long history in petroleum production – and being the place where the anticlinal trap was first recognised – there is much left to learn about the geology of Myanmar and its remaining hydrocarbon potential.
This article appeared in Vol. 16, No. 1 – 2019
South East Asia Hydrocarbon Exploration
Jane Whaley
Andy Wight talks about the key hydrocarbon exploration & discoveries during his career in South East Asia.
This article appeared in Vol. 15, No. 3 – 2018
