Shell's Malaysia gas project moves ahead with engineering contract

Shell has awarded the engineering contract for the onshore gas plant section of the Rosmari Marjoram project in Malaysia, signaling that accelerated projects to feed existing LNG facilities are in favor in the current energy market, according to S&P Global Commodity Insights.

Shell subsidiary Sarawak Shell Berhad has awarded the Engineering, Procurement, Construction and Commissioning contract worth $680 million for the onshore gas plant at Rosmari Marjoram to Samsung Engineering, the South Korean contractor said July 13 in a statement.

Part of the onshore gas plant will be executed before the final investment decision of the Rosmari Marjoram project, and the remainder will be executed after the FID, the statement said.

The onshore gas plant will have the capacity to process up to 800 million cu ft/day of gas and is expected to be ready for start-up by the end of 2025, Samsung Engineering said.

"The development of the Rosmari Marjoram gas field is significant as we estimate reserves to be just under 3 trillion cubic feet that will support a revival of gas production in Sarawak. With an estimated 800 million cu ft/d of production, this will contribute to more than 5 million tons of LNG per year," Zhi Xin Chong, Director of South and Southeast Asia for Gas at S&P Global Commodity Insights, said separately.

Malaysia, which has lost ground to new LNG exporters like Australia and the US, has been grappling with declining domestic gas production for years, amid stagnant reserves and fewer new discoveries. It has three main oil and gas producing regions -- peninsular Malaysia and the more prolific Sabah and Sarawak states in the east.

Sarawak state, where the flagship Bintulu LNG complex is located, accounts for more than half of the country's gas production and reserves and the complex itself serves major consumers in North Asia like Japan. Malaysia's national oil company Petronas and other operators are relying on commercializing new gas discoveries to boost LNG exports, mainly in offshore waters, over the next three to five years.

"Upstream investments in Southeast Asia have been in a tailspin as companies have exited the region in search of better opportunities elsewhere. This project is a bright spark that signals that there are still gas reserves in Southeast Asia that can be developed given the right fiscal structure and environment," Chong said.

"With the global LNG market expected to stay tight for the next couple of years, accelerated projects that feed brownfield liquefaction plants will be favored as seen by this positive development," he added.

Rosmari Marjoram in Bintulu, Sarawak has two key components, the offshore development, which is in deepwater, and the onshore gas project, where the natural gas will be piped and processed.

Shell announced discoveries at Marjoram-1 and Rosmari-1 in Block SK318 off the Malaysia coast in 2014, and it had an 85% interest in the block at the time with the remaining 15% held by Petronas Carigali.