1. LOGO The Challenges of Malaysian Oil and
Gas Industry: Imperative Pathways
for Sustainable Growth to Meet
Future Energy Expectations
Ekeh Modesty (CEng. MEI)
SPE
Petroleum Department,
UCSI University
Kuala Lumpur

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ContentsContents
Introduction & Overview1
stats. & Growth of Malaysia Oil & Gas Industry2
National Oil & Gas challenges: Myth or Reality?3
Overwhelming demand Vs Sustainability4

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Why Malaysian Oil & Gas Industry?Why Malaysian Oil & Gas Industry?
 The oil and gas sector is the mainstay of Malaysia’s
growth
 Oil and Gas sector is expected to generate RM131.4
billion in Gross National Income by 2020, (5% annual
growth) in the period from 2010 to 2020.
 Malaysia is aiming at becoming Industrialized nation
by 2020, oil & gas is a pivotal platform to breed
sustainable growth.
 Identified as a key sector to fuel growth development
under Malaysia’s Economic Transformation Programs.

4. OVERVIEWOVERVIEW
 Oil was first discovered in Malaysia in 1910 in Miri,
Sarawak in early 20th
century with production rate of 83
(bbl./day).
 Malaysia’s Parliament & the Petroleum Development
Act in 1975
 Petroliam National Berhad or PETRONAS became the
custodian of petroleum resources with rights to explore
& produce resources.
 PETRONAS the game changer?

5. National Oil Industry, Overlapping ObjectivesNational Oil Industry, Overlapping Objectives
Energy Access
Energy Efficiency
& Security
Environment
Profit
&
Growth
PETRONAS
Energy Sustainability
Deepening Interdependencies
Malaysians
Satisfaction
Trust /
Patriotism
&
Poverty
Reduction

6. Exploration AcreagesExploration Acreages
 Malaysia’s Continental shelf is favorable geographically
(conditions) for the creation of hydrocarbon.
 Malaysia has approximately 615,100 km2
of acreages available for oil and gas exploration.
 Of these, 218,678 Km2
or 36% of the total acreages are
currently covered by PSCs.
 Exploration drilling in Malaysia by the PSCs has resulted in
the discovery of 163 oil fields and 216 gas fields.

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Malaysia’s Hydrocarbon potentialsMalaysia’s Hydrocarbon potentials
Malay Basin
Malay Basin
1 2
 Overpressure reservoir
deep H2O– prospectivity
 New exploration plays
(carbonate plays)
 Better understanding of
HC response in carbonates
 Enhanced 3D acquisition &
better imaging may reveal
traps in vugs & fractures
Sarawak Basin
Sarawak Basin
3
 Deep H2O Turbidite plays
 Large stratigraphic -
features basinward of
the Neogene delta.
 Presence of the
intersection of growth
fault & folds.
 DeepH2O Sabah
prospect greater than
500m.
Sabah Basin
Sabah Basin
 Contains thick deposits
 Pre- Syn- & post- rift
megasequence
 Focus on tertiary -
deposits
 Paleozoic formation
indicated source rock,
reservoir & seals?
 Stratigraphic plays looks
promising
 Malaysia has approx. 615,100 Km2
of acreages for O&G exploration
 Malaysia’s continental shelf is made up of six sedimentary basins
 Favourable conditions for the creation of hydrocarbon

8. Crude oil Reserves Vs ProductionCrude oil Reserves Vs Production
Crude oil & condensate reserve by Region
 oil production is projected to
800,000 bbl / day by 2015
 Recent drilling effort in Penyu –
basin is anticipated to yield
20,000 bbl/day by 2nd
half of
2014.
 Gumusu/Kakap deep water
production is expected to ramp-
up to 120,000 bbl/d by end of
2013.

9. The dilemma: production Vs Growing DemandThe dilemma: production Vs Growing Demand
Natural Gas – Consumption by sectors (ktoe)

10. Crude oil products – Import & ExportCrude oil products – Import & Export

11. Actual & Predicted price of crude oilActual & Predicted price of crude oil
Further cuts in fuel
subsidies are
expected
The index adopted from information theory & measures the order (disorder) observed within a particular system.
The Index is denoted as:
Where H is the Index of variant for a portfolio of i options, pi is the proportional reliance on the
ith
option & ln is the natural logarithm.

12. Trends and Developments for Malaysia’s Oil & GasTrends and Developments for Malaysia’s Oil & Gas
 Oil consumption will probably not keep pace with underlying economic
expansion.
 Because the country has been replacing oil-fired power stations with coal-fuelled plants,
undermining the oil demand trend
 In addition, the government has been reducing fuel subsidies, which
could have a negative impact on consumption.
 It also faces some gas-related challenges; the primary problem comes
in the form of increasing domestic demand, which could result in some
imports being used for local consumption
 Fuel pricing remains under state control.

13. Forecasts for crude productionForecasts for crude production
 Analytical forecasts suggest a potential demand for 617,000 barrels
per day (b/d) by 2016, increasing to721, 000b/d by the end of our
forecast period in 2021.
 Production of crude and liquids, which averaged an estimated
651,700b/d in 2010 (EIA), looks set to rise over the medium-term,
aided by EOR schemes and some new fields.
 Mature fields are generally in decline, but ExxonMobil, Royal Dutch
Shell and Hess have new projects that should partly offset the falling
output.
 Predicted average output of 632,200b/d in 2012,rising to a new peak
of 881,000b/d in 2017, before a steady decline to 780,000b/d by
2021.

14. Forecasts for crude productionForecasts for crude production

15. Oil & Gas Malaysia and Its Blinking Future:Oil & Gas Malaysia and Its Blinking Future:
Myth or Reality?Myth or Reality?
 The national oil and gas industry sits directly at the centre of the
production and consumption of energy.
 Heavy reliance on oil & natural gas to sustain economic growth
 Energy demand is expected to continue to grow with the nation’s
ambitious goals of becoming industrialized nation with stimulating
increase in population.
 Proven oil reserves of 4 billion bbl as of Jan. 2013
 In addition to the 2% annual declining of Malaysian oil reserve due to
maturing offshore reservoirs

16. Rising Capex and Falling Returns
 Oil demand is expected to increase to 99 mil bbl/day by 2035 (IEA).
 Oil majors will continue investing upstream to maintain production.
 Capex increased fourfold between 2000-2008; fell 15% in 2009.
 However, returns from exploration activities have been declining
for PETRONAS

17. Formulation Synergy
Reserve Improvement Strategy

18. Strategy to Increase oil ReserveStrategy to Increase oil Reserve
Re-exploring old
field
Intensifying
search for new
reservoirs
Improved skills &
Tech. for offshore
exploration
Timely rejuvenating
of existing fields
 RSC partnership
 Attractive -
incentives (PSCs& Tax)
 Improved Tech.
 Tailored EOR
Strategy
Good Reservoir
mgt.
Increased
Reserve /
production
growth

19. Malaysia Maturing Reservoir & EORMalaysia Maturing Reservoir & EOR
 PETRONAS and Shell Malaysia Ltd in joint venture for two oil field
projects offshore East Malaysia.
 Revitalization investment of US$12 billion (RM38 billion) over 30
years, targeted nine oilfields in the Baram Delta off Sarawak and four
fields in the North Sabah development area.
 These investments are expected to extend the life of the fields beyond
2040 & raise recovery factor from 36% to about 50%.‟

20. Enhance Oil Recovery – ChallengesEnhance Oil Recovery – Challenges
 Offshore EOR (Chemical Injection) is new. No one has done it before.
 New approach and technical ability
 Requires more precise technology (cost) – fit for purpose
 Need for good reservoir management and understanding of
subsurface architecture
 How to extend the life of platforms from 30 years to another 15 or
20 years
 Maintenance of platforms and aging facilities

21. Marginal and Mature Field DevelopmentMarginal and Mature Field Development
 What parameters affect Marginal fields?
 This includes environmental concerns, political stability,
access, remoteness and, of course, the price and price
stability of the produced gas/liquids.
 Malaysia has 106 marginal fields, containing 580 million of
barrels of oil
 Required special tax incentives to develop such fields
 (tax, capital allowances, etc.)
 Special procurement arrangement

22. Matured FieldsMatured Fields
 EOR is the answers to matured fields
 Matured fields contain about 40 to 60% of OOIP
 Malaysia can extend the economic producing life of the
fields
using cost-effective, low-risk technologies.
 All Malaysian offshore producing reservoirs are in this
category.

23. Integrated Operations in EOR ModeIntegrated Operations in EOR Mode
 What is needed for effective EOR?
 Instrumentation / data capturingInstrumentation / data capturing
 Semi automated data analysisSemi automated data analysis
 Integration into modelsIntegration into models
 Cover 3 time horizons:Cover 3 time horizons:
 Field operation / efficiency
 Production Optimization
 EOR scheme monitoring & optimization

24. Role of Technology in reversing productionRole of Technology in reversing production
declinedecline
 The U.s have achieved decline reversal with unlocking
resources through new technologies; e.g. in shale oil
/gas development.
 Deep water Malaysia offshore:Deep water Malaysia offshore:
 Technologies for harsher environments
• Particularly in EOR & data acquisition & interpretations
 Reliability / Safety
 Cost effective technologies (invest in R&D to develop local
technologies)
 More incentives for

25. Issues?
Recommended 4N-Hypothesis

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Indentified challenges to the growth of oil and gasIndentified challenges to the growth of oil and gas
Need to recruit and retainNeed to recruit and retain
a skilled workforcea skilled workforce
 Larger skilled workforce
recruiting & retaining talent.
 Implementing growing
demand on them, to deliver
greater production
4N
HypothesisHypothesis
Need for technologyNeed for technology
advancement alongsideadvancement alongside
safety and regulatorysafety and regulatory
compliance toolscompliance tools
 Respect of safety &
regulatory tools for oil and
gas.
 Indicate regulatory and
reporting landscape
Need for high performanceNeed for high performance
data managementdata management
 Accurate data
procurement & accessibility.
 Engaging all stakeholders
& translating their interest
and values into the corporate
agenda
Need for sustainableNeed for sustainable
solutionssolutions
 Extension of platform life
 Risk & integrity measures
to allow for sustainable
management of existing
assets.
 lower carbon footprints

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FocalFocal
pointpoint
Maximize
Recovery
Sustain
production
Diversify
Energy
What Next for Overwhelming Demand VsWhat Next for Overwhelming Demand Vs
SustainabilitySustainability

28. Initiating trust for Investment in MalaysiaInitiating trust for Investment in Malaysia
O&G IndustryO&G Industry
 Openness of the custodian of Malaysian Oil & Gas, oriented in sound
business ideology
 Disclose all types of payments (royalties, taxes, etc.) according to
international disclosure standards for transparency in company reporting.
 Make fully transparent the revenue flows coming from foreign countries in
which PETRONAS operates.
 Amend the Petroleum Development Act 1974 to make PETRONAS
reportable to Parliament instead of to the Prime Minister.
 PETRONAS should be granted the autonomy to reinvest more of its profits,
through subsidy reductions .
 Active Industrial policy (including RSCs leniency)
 Shield from political interferences & other external appendage forces.
 Increasing oversea exploration portfolio; to balance international trust.

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Building platform for more GrowthBuilding platform for more Growth
To increase exploration for new reservoirs
& matured fields & develop local tech.
Full role in PSCs negotiation to
allow more rent capture, tech.
transfer & human capital building
Board members should be
on merit with experience &
qualifications
Capability of top mgt with
Appropriate professional
Background & ethics
Investment in R&D
PETRONAS Autonomy
Capable talents
Leadership integrity

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SustainableSustainable
PathwayPathway
BB
EE
CC
DD
AA
Realignment of
business ideology;
inclusive of more
oversea investment
Improving reserves from existing
sources, new exploration &
interpretation of data in deep H2O
Environmental challenges;
e.g., CO2 & H2S (Bunga
Raya in Peninsular
Malaysia & Chakerawala in
JDA)
Diversify the
Energy Sector
Transparency Issues &
adequate accountability to
parliament
Managing Future Expectations?Managing Future Expectations?

31. Conclusions
 Future looks very stimulating with so much opportunities,
but though with challenges.
 Billions of ringgit have been directed into RSCs: high
expectations of deepwater reserve discovery.
 Potential technological demanding areas: EOR & deepwater
exploration is expected to provide opportunities for the
local players to develop track record & indigenous
technology.
 Awarding more PSCs for the development of marginal
fields, with at least 22 identified is estimated to offset
production decline.
 More involvement in oversea exploration would assist in
balancing growing domestic demand crude oil resources.

32. LOGO
ekehmodesty@gmail.com