Petronas developing new reserves

Source: http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_c7ccc34f-cb73c03a-1d1082f0-22cc78de

Petronas developing new reserves
By Alfean Hardy

Petroliam Nasional Bhd (Petronas) is developing new reserves for gas production off peninsular Malaysia and Sabah and Sarawak to cater to domestic consumption and to maintain liquefied natural gas (LNG) going forward.

Its president Tan Sri Hassan Marican said on June 12 Malaysias present production was about 720,000 barrels per day of oil and condensates and about 5.5 billion cubic ft per day of natural gas.

With the new development, we should be able to maintain national production for the future and maintain gas production to meet domestic and LNG demands, he added.

Speaking to reporters after the 11th Annual Asia Oil and Gas Conference in Kuala Lumpur, Hassan said Malaysia would maintain its production at current levels.

According to news reports, some oil producers were pumping at nearly maximum capacity due to high prices. Light crude oil for July delivery was trading at US$72 (RM264) per barrel on June 12.

Hassan said Petronas was continuing with its exploration and production despite rising operational costs to meet domestic and international needs.

We continue to conduct production and exploration operations, together with our production-sharing contractors in the South China Sea, both offshore the peninsula and offshore Sabah and Sarawak, particularly in the deep and ultra-deep water acreages.

We are developing new capacities for further production and some of the major ones include the development of the Kikeh field between Murphy and (Petronas) Carigali. Production is scheduled for early fourth quarter next year, he added.

Hassan said Kikeh was on schedule and production would be about 120,000 barrels per day.

Another major development would be the Gumusut deep water reserves (off Sabah), which should come on stream by 2011 and is planned for 150,000 barrels per day, he added.

Earlier, Prime Minister Datuk Seri Abdullah Ahmad Badawi said the period of cheap oil was effectively over.

We are unlikely to see prices of crude oil retreating from the current US$70 per barrel to US$20 to US$25 per barrel of four years ago, or even to US$45 to US$50 per barrel two years ago, anytime soon, he said.

Abdullah suggested energy cooperation for consuming countries to secure future energy supplies whereby the parties could have strategic alliances to explore new resources and develop future capacities.

He said the world needed to seek and develop new resources, as fields in the North Sea, Alaska and the Gulf of Mexico, were rapidly reaching the end of their productive cycles.

The Prime Minister said major oil and gas consuming countries would consider investing or becoming partners in upstream exploration and development in Southeast Asia, so as to reduce their dependence on Middle East oil.

Abdullah also said more than 100 million barrels per day of oil and 150 trillion cubic feet of gas would be required by 2025 to meet growing energy needs.

In the next 20 years, oil industry players, particularly producers, are estimated to be required to invest on excess of US$5 trillion (RM18.37 trillion) for oil and gas exploration, development and production, as well as for capacity building and supply infrastructure to sustain existing production and to meet new demand growth, he added.

Abdullah said an additional RM1.47 trillion would be needed between 2001 and 2030 to build new refineries to address the current constraint in capacity, which he said was one of the main contributors to high oil prices over the past two years.

It is probably realistic to accept the fact the period of cheap oil is effectively over and we are unlikely to see prices of crude oil retreating from the current US$70 per barrel to US$20 to US$25 per barrels. Some market analysts predict it is even possible to reach as high as US$100 per barrel or higher, he added.

Abdullah said he was pleased to see dialogues concerning energy had struck firm roots and that there was a firm realisation that energy was crucial for economic and social development and for commercial and political relations between countries.

What this entails for producers and consumers is to continue to pursue value-driven initiatives based on strategic alliances to explore new resources and develop future capacities with which to enhance the security of the worlds energy supply, he added.

Earlier, Hassan had said costs to find, develop and produce oil in the industry had increased by 50% on average over the last two years.

He said this increase in capital expenditure and shortage capacity in the contracting services could result in deferment and delays of projects around the world.

The increased cost is partly direct and partly indirect, the cost of steel has gone up tremendously over the past few years and supply continues to be tight. Drilling cost has gone up due to increases in activities and shortages of drilling rigs, both exploration and development rigs, he added.

Hassan said there was also a shortage of equipment manufacturers, especially for turbines and compressors, as the oil and gas industry was competing with the aircraft industry, which also uses the same or similar equipment.

He said the rising cost had had an impact on Petronas but it was still manageable. We have not deferred any major projects that we are undertaking. Our policy is to maintain our production at the same levels, he added.