Wood Mackenzie Ltd. said international oil companies (IOC) have divested more than 600 million boe of Southeastern Asia oil and gas assets since oil prices fell in 2014. But a niche group of East Asian and Middle Eastern conglomerates is growing its upstream presence.
IOCs are seeking projects with higher returns, lower complexity, and shorter timeframes than Southeast Asia offers, WoodMac said.
Companies including JXTG Holdings Inc., Mitsubishi, and Kuwait Foreign Petroleum Exploration Co. (Kufpec) along with Medco Energi, Saka Energu, KrisEnergy, Sapura Energy and other independents are steadily growing their oil and gas holdings.
“National oil companies (NOC) will inevitably have greater roles to play to prevent domestic production decline,” Ashima Taneja, WoodMac senior research manager said.
Acquisitions since 2013 include Indonesia’s Medco Energi’s acquiring interest in South Natuna Sea Block B and North Sumatra Block A (263 million boe), as well as Sapura’s acquisition of Newfield’s Malaysian assets (220 million boe).
Production from East Asian and Middle Eastern conglomerates and domestic independents has more than doubled, growing to more than 675,000 boe/d in 2018 compared with 260,000 boe/d in 2008.
These companies comprise 12% of the region’s production and are expected to grow modestly going into the next decade.
“Southeast Asia falls in the backyard of East Asian and Middle Eastern conglomerates looking for diversity of supply,” Taneja said. Asian independents are networking with NOCs and government.
These companies will seek to partner with NOCs on suitably sized projects but are unlikely to fill the shoes of majors in operating technically difficult projects.
Southeast Asia is maturing as an oil and gas province. Production peaked at 5.9 million boe/d in 2010.
“Even as we see oil prices rebounding in recent times, fundamental challenges in the region remain,” Taneja said. “In this environment, governments and regulators must question whether they are doing enough to attract investors that are looking to grow and diversify. If not, the region will be bereft of players that can help the NOCs fill the major gap.”