Struggles of the Oil sector in Southeast Asia: long-term or a passing phase?

Acclaimed to play an indisputable role in the global energy market with fast growing economies, Indonesia ranks third largest natural gas resource in Asia after Turkmenistan and China. This has paved way for Southeast Asia to reign as a region rich in oil and gas resources.

However, the outlook for growth within this sector in the region remains bleak. With declining production, low oil prices globally, a heavily bureaucratic regulatory regime and uncompetitive upstream fiscal terms – these have all contributed to the strained environment now. As a result, the growing pessimism of independent E&P (Exploration & Production) companies such as Hess and Newfield Exploration Company are exiting the Southeast Asia market, causing greater uncertainty in the sustainability of the sector.

Nevertheless, Industrial Info has tracked more than $1 trillion worth of investments in active projects that are based in Southeast Asia's Power Generation, Oil & Gas, Petrochemical, Refining and Alternative Fuels’ industries.

Rystad Energy believes projects in Australia and Southeast Asia will potentially develop 512 million BoE (Barrels of Oil Equivalent) in recoverable liquids and natural gas resources in 2017, a 75% drop from 2016 volumes. Their study concludes that sanctioned projects in 2017 within the region contain more liquids (58%) compared to 2016, which were primarily gas (88%).

Amidst the struggles that the oil and gas sector is facing, below are a few projects in the region to keep a look out for that potentially helps the sector to remain afloat.

INDONESIA

PT Pertamina Persero's $900 million Balikpapan Refinery in Indonesia

The state-owned oil giant PT Pertamina is spending billions of dollars to boost their production and refining capacity whilst Indonesia’s crude output is expected to top 1 MMbpd by 2019, from about 800,000 bbl now. PT Pertamina Hulu Energi signed the first contract under this new scheme, covering an extension of the Offshore North West Java (ONWJ) block.

PT Pertamina (Persero) has given Honeywell UOP LLC, a subsidiary of Honeywell International Inc., the contract to provide technology licensing and engineering design for a grassroots unit and catalyst regeneration (CCR) unit equipped with its proprietary CCR Platforming technology for production of cleaner-burning and high-octane motor fuels, as mentioned by the service provider.

The project is slated to complete its first phase to upgrade and modernise the 260,000-b/d refinery in Balikpapan, East Kalimantan, Indonesia, in 2020.

“Indonesia is now a net importer of oil and will potentially be a net importer of gas by 2020", said Mr Sacha Winzenried, a partner at PwC in Indonesia specialising in energy, utilities and mining.

Jambaran Tiung-Biru field in East Java worth US$100 million

In August, 2015, the Special Task Force for Upstream Oil and Gas Business (SKK Migas) at the Energy and Mineral Resources Ministry, has approved the revised plan of development (PoD) of Tiung Biru-Jambaran field within Cepu Block.

PEPC is the operator of the Jambaran-Tiung Biru (J-BT) gas fields, located sub districts of Ngasem, Tambakrejo and Purwosari, Bojonegoro Regency, East Java.

Earlier, PEPC and EMCL have agreed to drill six wells, four by EMCL and two by PEPC. The two wells are expected to produce 80 million standard cubic feet per day (MMSCFD) of gas. EMCL is also the operator of Cepu Block.

This JTB gas project is located on 143 hectares of loan, off which 100 hectares belong to pipelines and well.

Targeted to produce 227 MMSCFD of gas in the first quarter of 2019, the US$100 million project will reach its peak production of 315 MMSCD of gas in 2020. To meet this target, oil drilling is projected to begin next year.

SINGAPORE

ExxonMobil expansion projected for 2019

ExxonMobil Corp. has approved a project to expand production of high-quality lubricant base stocks at its affiliate – ExxonMobil Asia Pacific Pte. Ltd.'s 592,000-b/d integrated, two-site refining complex on mainland Jurong and Pulau Ayer Chawan, Jurong Island, offshore southwestern Singapore.

“The expansion will support production of ExxonMobil’s EHC Group II base stocks, which will enable customers to blend lubricants that satisfy more-stringent specifications, help reduce emissions, as well as improve fuel economy and low-temperature performance,” said ExxonMobil.

In addition, the EHC Group II slate will allow customers to take advantage of industry base oil interchange and viscosity-grade, and more importantly read-across guidelines to reduce formulation costs for many engine oil formulations, as the company further explained.

ExxonMobil plans to begin construction on the expansion during the second quarter of 2017 for a targeted start-up sometime in 2019.

ExxonMobil added, “A cogeneration project to improve energy efficiency and reduce emissions at the Singapore refinery also remains under way and on-schedule for start-up by year end.”

MALAYSIA

Icon’s Petronas deal

Malaysia’s Icon Offshore has landed a charter for one of its Anchor Handling Tug Supply (AHTS) vessel with PCPP Operating Company, a unit of Malaysia’s state player Petronas. Icon has revealed that one of its AHTS vessels would support PCPP’s plugging and abandonment campaign on Block SK305 offshore Sarawak, East Malaysia. The contract lasts for a period of 166 days with an extension option of 30 days at a contractual value of approximately US$785,000.

Filling the talent gap

With the wide range of upcoming projects, talent from the upstream to downstream sectors will no doubt face a slight demand, regardless of the size of these projects. Selected candidates may also be equipped with transferrable skill sets which can prove handy for these projects.

If you would like to find out more about such suitable talent, or if you would like advice on sourcing for the best available talent in the market in a cost effective manner, please contact Stuart Clark, Sales Director for Southeast Asia at [email protected] who will be able to let you in on more information. You may also follow us on our LinkedIn page to find out more industry related insights.

Progressive Global Energy

Progressive GE is a leading global recruitment consultancy, specialising in the industry of Oil & Gas, Energy, Mining, Maritime and Offshore. Please do not hesitate to contact us should you require any assistance relating to recruitment, especially in the following areas:

• Assisting in the sourcing of new roles for any employees / contractors no longer required by your business

• Identifying highly skilled national staff for upcoming roles/ projects

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Source: Today Online, Rigzone, The Economist, IndustrialInfo.com, Oil & Gas Journal, Financial Times, The Straits Times, World of Oil, Bloomberg, The Edge Markets, Rambu Energy.