SHELL COMPANIES TO HIKE MALAYSIAN SPENDING

Royal Dutch/Shell Group companies in Sarawak and Sabah, Malaysia, are poised for major increases in offshore spending. Outlays will focus on supplying more gas for expansion of Malaysia LNG Sdn. Bhd.'s Bintulu, Sarawak, gas liquefaction plant and start-up in 1993 of the Shell middle distillate synthesis (SMDS) plant on an adjoining site. Expansion of an onshore fertilizer plant in Sarawak and new power generation units also will require more offshore gas during the next few years.

Aug. 19, 1991

4 min read

Royal Dutch/Shell Group companies in Sarawak and Sabah, Malaysia, are poised for major increases in offshore spending.

Outlays will focus on supplying more gas for expansion of Malaysia LNG Sdn. Bhd.'s Bintulu, Sarawak, gas liquefaction plant and start-up in 1993 of the Shell middle distillate synthesis (SMDS) plant on an adjoining site.

Expansion of an onshore fertilizer plant in Sarawak and new power generation units also will require more offshore gas during the next few years.

Current spending by Sarawak Shell Bhd. and Sabah Shell Petroleum Co. Ltd. is about $555 million (U.S.)/year. That will rise to $629 million next year.

The peak spending years will be 1993-96, when outlays for offshore field development and construction of an extensive gas gathering network will amount to $740-925 million/year.

The sharp upturn in spending will boost the Shell group's total investment in eastern Malaysia to $10.14 billion during 1976-95.

PLANS FOR PRODUCTION

Offshore oil production by the two Shell companies is on a 2 year plateau of an average 284,000 b/d. Their combined productive capacity will rise to 302,000 b/d next year and to a peak of 338,000 b/d by 1995.

Gas production is scheduled to make even more spectacular increases as the LNG plant expansion and the SMDS project go on stream. Production, currently about 1.3 bcfd, will more than double by 1996.

Shell said there are ample reserves off eastern Malaysia to fuel the new onshore projects. Total proved reserves are 30.6 tcf, of which 25.5 tcf are in the Central Luconia area off Sarawak. Oil reserves in eastern Malaysia are 1.825 billion bbl. Sarawak and Sabah account for more than half of Malaysia's oil and gas reserves.

Gas for the LNG plant expansion will come from the undeveloped M field clusters. The exact development concept is not yet decided, but the field will be tied back to the production and pipeline infrastructure in Central Luconia.

Shell and state owned Petronas Carigali Sdn. Bhd. recently agreed to develop three fields in the Central Luconia area to provide 100 MMcfd required by the SMDS plant. Bringing gas ashore for all the new projects also will require a major expansion of gas gathering systems.

LNG OPERATIONS

The biggest volume of additional gas will be required by the second phase of Malaysia LNG. When the $1.7 billion expansion is complete in 1996, gas consumption will rise to 2.4 bcfd from 1 bcfd.

Addition of three LNG trains will boost plant capacity to 15 million metric tons/year from 8 million metric tons/year. The expansion includes a new shipping jetty and new storage tank.

Production from the first phase of the LNG operation, which started up in 1983, is sold under long term contracts to Japan. Shipments of second phase production will include 2.3 million metric tons/year to Taiwan and an additional 2.5 million metric tons/year to Japan.

The number of LNG vessels required for the project will rise to 12 from the current fleet of six.

State owned Petroliam National Bhd. (Petronas) owns a 60% interest in the first phase of the project. Its partners are Shell Gas BY and Mitsubishi Corp. 17.5% each and the Sarawak state government 5%. In phase two, Shell and Mitsubishi's interests will be cut to 15% each, with a corresponding increase in the shares held by the two government bodies.

SMDS PLANT

The SMDS plant, which will produce middle distillates and a range of waxes from gas, is about 50% complete.

The $740 million unit, first of its kind in the world, is on schedule to start-up in 1993.

When fully operational, the plant will convert about 100 MMcfd of offshore gas into 12,000 b/d of products.

Shell owns a 60% interest in the venture. Its partners are Mitsubishi subsidiary Diamond Gas Holdings 20% and Petronas and the Sarawak state government 10% each.