PETALING JAYA: Oil and gas experts say the new discoveries off Miri are encouraging, but the future of the local industry would still be uncertain without greater investments in exploration efforts.
They said the exit of global oil giants from Malaysia amid growing pressure for them to lower their carbon footprint has also affected the country’s position as a major oil producer.
One expert also pointed to a lack of leadership and direction in the national oil company, Petronas, for offshore oil explorations.
Economist and senior fellow at the Institute for Democracy and Economic Affairs (IDEAS) Renato Lima de Oliveira said Malaysia may need to venture further into deep offshore operations instead of relying on shallow water resources.
“The current production profile of the country shows that unless significant new investments are made, there will be a steep decline in production after 2025,” he said.
“New investments in exploration are crucial to stabilise volumes of output. In fact, production in Malaysia has been more or less the same since 2003.”
De Oliveira said the Miri discoveries were the result of a bidding round from 2015.
“It took six years from the beginning of an investment process for the discovery to be made,” he said, adding that it would take an even longer time for the companies to start extracting oil that will then generate positive cash flow.
He said that without enough incentives and cost-reduction measures, including research and development, Malaysia may not be able to maintain the national production volumes for oil and gas.
The result of this can already be seen with the likes of major oil companies, like Exxon, leaving Malaysia, he said.
“On a longer-term perspective, more and more companies are announcing their intention to become net zero carbon emitters by 2050, including Petronas,” he said.
Another oil and gas expert, who wanted to remain anonymous, said major oil companies were battling increasing calls for them to reduce their carbon footprint.
This has led to them leaving Malaysia and several other countries, where domestic oil and gas reserves are not very large, to cut potential losses.
Going forward, he said, it will be a challenge for these corporations to sweat the assets, as fossil-based fuel ceases to become the fuel of choice.
“Exxon has found larger fields in the West African region. To them, it’s a matter of where to put their focus on. The same resources could be better utilised in areas which could give better returns.”
In the short term, he said, Malaysia lacks clear direction and leadership to compete with regional and even Middle Eastern players in offshore exploration, with each individual corporation left to develop its own business goals.
“We used to venture outside our shores for new oil blocks. This, however, stopped during the 2014 price crash,” he said, adding that former prime minister Dr Mahathir Mohamad used to steer Petronas and other large corporations to venture offshore.
“Now, countries like Thailand are getting more aggressive in seeking blocks to explore for oil and gas outside their shores, and Vietnam is not far away. Even heavyweights from the Middle East are also looking for opportunities in Southeast Asia.”
Aside from that, he said, some of Malaysia’s large production fields are also in decline, and a few have closed.
“Malaysia has been lucky that oil production has managed to remain stable at around 600,000 to 700,000 barrels per day,” he said, attributing the country’s capacity to maintain current production rates to sizeable new discoveries in northern Sabah and also new technologies.
Meanwhile, another expert formerly with Petronas Carigali Sdn Bhd was more optimistic when speaking on the future of the local O&G industry, saying he believed Malaysia will continue to heighten oil exploration efforts.
“Not only by Petronas and Petronas Carigali but also other new entrants like Repsol, PPTEP, Mubadala and small players like Hibiscus and Enquest.”
He said Malaysia’s activities may seem less aggressive compared to other neighbouring countries, but substantial discoveries have recently been made, including the Miri column.
The expert said the Covid-19 pandemic has, however, caused a temporary delay in the developments of newer oil fields because of lower global oil prices.
However, he was optimistic that this lower rate of production will increase soon with the help of advanced technologies.