An analysis of Southeast Asia’s combined oil and gas production in 2021 by the Norwegian energy intelligence firm, Rystad Energy, has shown that the output is not likely to rise above 5 million barrels of oil equivalent per day (boepd) in the post-Covid-19 era.
Rystad Energy’s analysis from Thursday shows that the Covid-19 pandemic has marked the end of an era for Southeast Asia’s combined oil and gas production, pushing the region’s output in 2021 to below 5 million boepd for the first time since 1998, which is a threshold that is not likely to be exceeded again in the future despite new project start-ups in coming years.
Prateek Pandey, upstream vice president with Rystad Energy, remarked: “Liquids production in Southeast Asia has been on the decline for almost 20 years due to a lack of discoveries and project sanctioning activities in the region. While new government incentives may help, the region looks set to experience declining production levels well into the future.”
The company explained that the daily average hydrocarbon production tumbled to 4.86 million boepd in 2021, down from 5.06 million boepd in 2020, and a massive 12 per cent drop compared to the pre-pandemic volumes of 5.5 million boepd in 2019.
Rystad Energy data shows that operators have struggled to regain production losses triggered by the pandemic as operators slowed down activity levels amid an unprecedented disruption in oil markets. The decline is projected to continue into the middle of the decade, although, volumes will remain stable in 2022, production will drop an additional 10 per cent by 2025 to around 4.3 million boepd versus current levels.
Moreover, natural gas production in the region stayed steady between 2009 and 2019, at around 20.8 billion cubic feet per day (Bcfd). Despite expectations of a rise in gas sales volume that would counter the 8 per cent fall in production in 2020, volumes are expected to be down around 2 per cent this year compared to 2020, at about 19 Bcfd, primarily due to falling production at mature legacy projects including Mahakam, MLNG Dua and MLNG Satu PSCs, Yetagun.
In addition, the share of volume from projects under development and existing commercial discoveries are substantial and reflect the region’s timely execution of projects. Several projects were successfully brought onstream in 2021, including the highly anticipated Rotan field, utilizing PFLNG Dua, which started in March, making Petronas the only operator globally to produce LNG from two floating facilities.
In Indonesia, Eni completed a timely development, with Merakes achieving its first gas production in April 2021. The field has been connected to the 750 mmscfd-capacity Jangkrik floating production unit (FPU) operated by Eni.
The FPU is moored some 45 kilometres from the Merakes field and is already producing from the Jangkrik gas field. Merakes gas will contribute to the extension of the life of the Bontang LNG facility that supplies liquified natural gas to both the domestic and export markets.
However, despite these successes, Southeast Asia is still plagued by delays and stalled projects. In Indonesia, a recovery in gas production has been further delayed after the two significant developments -Tangguh LNG T3 and Jambaran Tiung-Biru Unitisation (JTB) – were postponed until 2022.
Mature blocks to experience consistent decline
For most of Southeast Asia, over 60 per cent of output comes from mature blocks – fields producing more than 50 per cent of its resource and volumes from such blocks are likely to see a consistent decline over the next few years, with an estimated 60 per cent of production by 2030 likely coming from projects currently at the pre-FID (final investment decision) stage.
In light of this, the driving force behind the region’s upstream outlook will be the sanctioning of new developments. It is worth noting that 2020 was a nightmare year for regional sanctioning activity, with only around 300 million barrels of oil equivalent (boe) of resources from six assets reaching FIDs. As operators tried to move forward in 2021, the region has seen more than ten projects secure FIDs, with around 750 million boe of reserves and some $3 billion in greenfield investment, with Malaysia accounting for 85 per cent of the total.
Rystad Energy analysis predicts that sanctioning activities in 2022 are likely to remain at similar levels, with FIDs planned on around 800 million boe of resources in the region, of which 60 aper cent are in Indonesia and over 35 per cent in Malaysia. Projects operated by majors and NOCs are likely to dominate in Malaysia, whereas regional players and E&P companies will primarily drive Indonesian developments.
However, planned FID projects in 2022 may still face challenges in securing the final approval and Indonesia’s domestic gas price regulation remains a concern for most large gas developments in the pipeline. Even though incentives are being discussed for blocks such as Kasuri, it is still one of the factors that could further delay progress. The planned developments from production sharing contracts (PSC) due for current contract expiry in the near term are also at risk unless host country governments initiate early discussions on potential extensions.
The Norwegian energy intelligence firm explained that Southeast Asia is unlikely to see a substantial increase in spending in 2022, with investments projected to be in the range of $15 billion to $20 billion across the year. Additionally, investments will likely be driven by increased drilling activity in mature blocks in Indonesia and Thailand, as NOCs take the reins and focus on top-producing blocks.
Around 360 million boe in resources have been discovered at eight fields as of November 2021, surpassing 2020 volumes by 40 per cent. While about 78 per cent of total discovered resources this year in Southeast Asia are gas or gas condensate, the remainder is oil.
Furthermore, about 84 per cent come from shallow waters, with around 86 per cent at NOC-operated blocks, thus, in line with the trend, over 90 per cent of volume in the region in 2021 has been discovered in the Miocene-Clastic formation.
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