Malaysia wants to reverse a long decline in its crude oil output. It recently completed a project that it sees as a major step in that direction. Mriganka Jaipuriyar discusses the project in this week’s Oilgram News column, At the Wellhead.
Malaysia recently achieved a significant milestone in its attempt to reverse a decline in crude oil production with the completion of the Tapis-R platform — a 23,500 mt mega structure for the enhanced oil recovery (EOR) project at the aging Tapis field located offshore Terengganu in Peninsular Malaysia.
With the EOR project, Petronas and ExxonMobil are aiming to recover an additional 180 million barrels of crude oil from the field, which was discovered in 1969, and extend its life by another 30 years.
The field is currently producing around 5,000 b/d and, by using EOR, production is expected to reach a peak of around 30,000 b/d by 2016-2017. The field began production in 1978 and so far 400 million barrels of oil have been produced.
The Tapis EOR project has many feats associated with it — it is one of the world’s largest water-alternating-gas EOR projects to be implemented offshore; it is one of the largest offshore EOR projects in Southeast Asia; and it is Malaysia’s first large-scale EOR project.
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But for Malaysia, which has seen its oil production decline from a peak of 860,000 b/d in 2004 to around 640,000 b/d currently, it underscores the government and Petronas’ commitment toward boosting indigenous oil and gas output to secure the country’s energy supply.
According to Credit Suisse, Malaysia has set itself a target to grow oil and gas production capacity by 5% per year up to 2020 to meet domestic demand, while sustaining exports. The country is looking to do this by using a combination of creative contracts to encourage development of marginal fields and EOR techniques to get more out of its giant but aging fields.
Petronas is currently working on three major EOR initiatives — Tapis, Guntong and Bokor, Nasir Darman, head of Petronas’ EOR technology division said this week. Several other studies are also being carried out and the target is to recover an additional 750 million to 1 billion barrels of crude oil, Darman said.
Besides tying up with ExxonMobil for the $2.6 billion Tapis EOR project, the state-owned oil and gas company and the US major are also planning to study the possibility of applying EOR techniques to fields around Tapis.
Separately, Petronas has joined with Shell for two EOR projects offshore Sarawak and Sabah in the country’s east. The two companies have committed to spending $12 billion over 30 years in the areas.
The plan is to further develop nine oil fields in the Baram Delta off Sarawak and four in the North Sabah offshore development area using EOR or other appropriate technologies.
The nine fields to be developed in the Baram Delta EOR PSC are Bokor, Bakau, Baram, Baronia, Betty, Fairley Baram, Siwam, Tukai and West Lutong. The North Sabah PSC fields are St Joseph, South Furious, SF30 and Barton.
The Malaysian government together with Petronas in 2011 launched Risk Service Contracts (RSC) — a new fiscal regime to encourage investments in the country’s marginal fields.
According to Petronas, Malaysia has around 106 marginal fields — fields which have under 30 million boe of reserves — and these are estimated to hold a total 580 million barrels of oil equivalent.
Under the RSC arrangement, Petronas remains the project owner while the contractors are service providers. Up-front capital investment is contributed by the contractors, who start receiving payment from first production and throughout the duration of the contract.
Petronas awarded the first RSC to London’s Petrofac and local companies SapuraCrest and Kencana Petroleum for the Berantai field located offshore Peninsular Malaysia in January 2011.
Since then it has awarded two more RSCs: Australia’s Roc Oil and Malaysia’s Dialog won a RSC for the Balai cluster of oil fields offshore Sarawak; and Coastal Energy was awarded an RSC for the Kapal, Banang and Meranti (KBM) cluster of small fields offshore Peninsular Malaysia.
The Berantai field began producing at 50,000 Mcf/d of gas in October last year.
“The third RSC round is widely reported to have attracted over two dozen players, which indicates a growing acceptance of this contracting model,” Credit Suisse said.
To strengthen its commitment to developing marginal and mature fields, Petronas in July formed Vestigo Petroleum—a subsidiary dedicated to this effort.
“Vestigo aims to optimize production from clusters of small, marginal and mature fields through operational, technical and cost effective methods,” Petronas said while announcing the set up of the new unit.
One of the strategic objectives of Vestigo is to build niche technical and execution capabilities in the development and production of small and marginal fields which can later be replicated for the company’s overseas ventures, Petronas Carigali President Anuar Taib said.
–Mriganka Jaipuriyar in Singapore