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Petronas' growing oil discoveries reflect strategy to expand upstream focus


Robust oil prices help upstream investments in Southeast Asia: S&P Global

Petronas records 10 hydrocarbon discoveries in Malaysia in 2022

A few projects were affected by the pandemic

  • Author
  • Neo Rong Wei    Sambit Mohanty
  • Editor
  • Norazlina Jumaat
  • Commodity
  • Energy Transition Natural Gas Oil

Robust oil prices had encouraged Petronas to pump funds into the upstream sector, helping the state-run firm to increase its hydrocarbon discoveries sharply in 2022, a sign that the Malaysian oil giant remains focused on traditional businesses while embracing a changing energy landscape.

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Analysts and industry participants saw the big push on the upstream segment as part of the company's efforts to continue increasing the country's hydrocarbon resource base to meet growing energy demand at home and overseas.

"Higher oil and gas prices have been a much needed welcome change for national oil companies in Southeast Asia to focus on a number of initiatives," said Nick Sharma, executive director for upstream solutions at S&P Global Commodity Insights.

"Primary focus will continue to be towards allocation of greater capital towards maintaining oil and gas production, but equally will allow the regional NOCs to grow their low-carbon footprint, given a commitment has been made towards reducing their emissions footprint," he added.

According to Petronas, the company and its petroleum arrangement contractors recorded a total of 10 hydrocarbon discoveries in Malaysia in 2022.

Eight oil and gas discoveries were made off the coast of Sarawak, and one each off the coast of Sabah and Peninsular Malaysia. The largest oil discovery was made by Petronas Carigali at the Nahara-1 well in Block SK306 within Sarawak's Balingian province.

Discoveries were also made at Sarawak's Central Luconia, Western Luconia and Baram provinces. In Central Luconia, Sarawak Shell Berhad had discoveries at the Inai-1 and Temu-1 wells in MLNG Block, while Mubadala Energy found more gas in Block SK320 at the Cengkih-1 well.

At Western Luconia, ConocoPhillips Sarawak Limited drilled three exploration wells in Block WL4-00 and discovered gas at the Gagau-1 well, while the Salam-3 and Benum-2 wells confirmed the extension of oil and gas accumulations in adjacent fault blocks.

Meanwhile, PTTEP HK Offshore Limited, made another gas discovery in the Baram province at Block SK410B, through the Paprika-1 well, where the giant Lang Lebah was also discovered in 2019.

TotalEnergies EP Malaysia made oil and gas discovery at the Tepat-2 well in Block N in ultra-deepwater Sabah, further proving the extent of the earlier oil and gas discovery of Tepat-1 in 2018. Hess EP Malaysia B.V. found a new gas reservoir off the coast of Peninsular Malaysia, at the Bergading Deep-4 well in Block PM302 within the North Malay Basin.

Projects to be quickly monetized

"The year 2022 has been a good year for exploration in Malaysia. I am very pleased with the increased exploration activities where 16 wells were completed, with two more in progress, doubling the 2021's figure," Petronas senior vice president of Malaysia Petroleum Management, Mohamed Firouz Asnan, said recently.

"Our 60% success ratio validates the prolific nature of the Malaysian basins. Most of the discoveries can be quickly monetized at a lower cost given their proximity to the extensive network of existing infrastructure," he added.

Petronas, through Malaysia Petroleum Management, grants petroleum licenses, manages petroleum arrangements, and provides stewardship on upstream petroleum activities in Malaysia.

"Enabled by MPM's long-term rig sequencing plan, our PACs are gearing up to drill as many as 30 exploration wells next year," said Petronas' senior general manager of resource exploration MPM, Azmir Zamri.

The state-owned firm said in its activity outlook 2023-25 report released recently that Malaysia's Petronas remains optimistic in growing its rig activities and drilling services despite impending labor shortage and rising costs.

It added that the firm would continue to have a positive outlook for rig activities and third party drilling services even beyond 2025, but added that there would be a need to focus on cost-effective solutions.

Maintaining focus on core portfolio

Petronas said it has been investing in business activities and growth projects, but many project executions have been affected by lingering effects from the pandemic as some supply chain disruptions continue amid a slow pace of recovery among industry players.

"The industry players must push on with innovation while remaining cost competitive at par with global players in the course of doing business to ensure projects and production remain feasible despite the cyclical swings in oil price," the three-year report quoted its vice president for group procurement Freida Amat as saying.

In the past year, Petronas has even set its sights abroad to expand its upstream portfolio in regions such as South America.

Its subsidiary, Petronas Petróleo Brasil Ltda, recently won the Agua Marinha exploration block in Brazil in December, just weeks after its first oil discovery at the 4-BRSA-1386D-RJS well in the pre-salt Sépia oil field in the Santos Basin, southeast of Santos, Brazil.

"We expect its core oil and gas business to continue to account for the majority of the investments, which are critical to maintain production at its domestic oil and gas fields and drive growth overseas. Petronas' efforts to reduce carbon intensity in its core business is likely to account for some of the rise in capex," Fitch Ratings said in a recent report on Petronas .