Into its second century, Malaysia might be perceived as a mature hydrocarbon province, but the nation still has little trouble attracting fresh upstream investment, which Petronas senior vice president of Malaysia Petroleum Management (MPM), Mohamed Firouz Asnan, attributes to the continuous commercial innovation to develop production sharing contract (PSC) models for the various asset types or opportunities.
“This incentivises investors to come to invest in Malaysia to participate in the continued development of hydrocarbon resources in the country ever since the first production in the town of Miri in 1910," Firouz says.
“And we are guided by our business philosophy of creating value with our partners and employing the strategy of ‘right asset, right player’.
“This is accompanied by the efforts to build a strong ecosystem supported by the right policy by the government,” he tells Upstream.
Firouz is currently overseeing the nation’s latest licensing exercise - Malaysia Bid Round 2022 - which is offering exploration acreage, discovered resource opportunities and late-life assets.
Petronas this year also launched myPROdata, a web-based platform that houses all Malaysia E&P data, which is not only open to prospective bidders in MBR 2022 but also to academia.
“Basically, we are putting on the cloud the E&P data we have on Malaysia. We wanted to let people see what we see and invite them to see the potential we see in Malaysia,” Firouz says.
“This is a big shift for Petronas, we’re sharing our data… because we want people to come in and help us unlock the full potential that exist in Malaysia.”
The information comes with a small subscription fee to cover the operating costs of the digital platform.
Earlier, following feedback from investors, MPM dropped the requirement for national upstream Petronas Carigali to have an automatic carried interest in awarded acreage.
Malaysia essentially employs a PSC model, which replaced the previous concession system.
Since 1974, MPM has continued to tweak the PSC to match the opportunity. Following the earlier introduction and changes to the deep-water term, there are specific terms for shallow-water, marginal fields, and late-life assets.
This has enabled the country to attract a range of players from junior independents to the supermajors and national oil companies, from the explores to companies specialising in developing discovered resources opportunities.
When Firouz joined Petronas in 1988 there were just three companies — Exxon, Shell, and Petronas Carigali — involved in E&P in Malaysia and currently there are “about 23”, he says.
“Now we have a more diverse set of players. The big ones, of course, work on the bigger stuff. Then we have specialist companies working on the niche capabilities.
“Many companies who ventured in Malaysia made a name for themselves. There were also M&A activities which saw changes in the players. In spite of that, production levels have been kept as new entrants brings new capability and rigour to address production decline rates," says Firouz.
“We take a lot of pride in keeping our production quite steady.”
When Petronas was established in 1974, Malaysia’s hydrocarbon production was 200,000 barrels of oil equivalent per day, and it was primarily oil. Today, the country produces around 1.7 million to 1.8 million boepd — two-thirds of it gas, which positions it well in the energy transition. In meeting the growing energy needs of its customers domestically and abroad, the aspiration is to grow that production further to 2 million boepd by 2025.
The main focus to achieving that goal will be improving the recovery factor from existing assets and accelerating projects in the pipeline. In parallel, there is a drive towards exploring near-field prospects that could be tied back to existing hubs.
“As the NOC, Petronas has invested a lot in building key infrastructure and pipelines which provide [a] high level of connectivity to enable easy monetisation when discoveries are made," he says.
Malaysia has a touted 20.7 billion barrels of oil equivalent yet to be discovered.
When it comes to evaluating bids for exploration blocks and other assets, MPM has a clear focus on companies’ technical capabilities.
“I feel like the father of the bride looking for a suitable suitor for my daughters,” quips Firouz, adding that all that technical “muscle” should be backed by the financial capability to execute the proposed work programme.
Malaysia has seven hydrocarbon basins. It is producing from three, another two host discoveries but are not yet producing, and the remaining two basins to date have not yielded any finds. Many of these discovered resources and those fields yet to be discovered will require carbon capture and storage (CCS) solutions to cope with their high carbon dioxide content of up to 70%.
It has the technical solution to handle its high-contaminant well streams with around 47 trillion cubic feet of storage already identified at depleted gas fields, but Firouz admits that CCS is capital intensive.
“The key [to commercialising such projects] will be finding scale and building the infrastructure so if someone has a CO2 challenge, they do not need to invest in the total infrastructure.”
With so much sequestration capacity identified, it could be that operators will not need to pay for all the related CCS infrastructure but simply pay a tariff.
“These are the solutions that we are thinking about. We have not launched them yet, but this is something that we wish to offer.”
The carbon storage capacity identified to date is located in depleted gas fields offshore Peninsular Malaysia and Sarawak.
“As we develop fields with high contaminants, we can use this as a [carbon] sink,” says Firouz.
“We would like to enable the monetisation of high-CO2 fields — those high-CO2 fields need to be monetised fast.
“However, as we move forward there are also other producing fields in need of a CCS solution. We have the technical solution – that is being developed for Kasawari Phase 2. We now need the commercial solution, a commercial arrangement. We are exploring how we can structure those,” he says.
“From where I’m sitting, I think the best is yet to come. We’ve got the technologies that will enable us [to undertake CCS], we couldn’t do [that] a couple of years ago,” says Firouz.
“But we need to watch our costs [just as we] watch our carbon footprint.”