NOC’s, Independents, braze up in S/East Asia

908
OilandPower South-Sudan  2020

“One man’s food is another man’s poison” is a proverbial injunction of the primordial era that has stood the test of time.

-ADVERTISEMENT-

The fall in oil prices of 2014 and the surprises it sent across to both producers and consumers, leaving the oil majors and international oil companies (IOCs) no other option than accelerate a shift towards resource themes and regions offering higher returns, lower complexity and shorter timeframes has eventually became an opportunity for the NOC’s and the Independents.

To date, says one of Wood Mackenzie’s senior research analyst Ashima Taneja, close to 800 million barrels of oil equivalent (boe) of the Asia’s region resources have left the hands of majors and IOCs.

A niche group comprising East Asian and Middle Eastern conglomerates, including JXTG, Mitsubishi, POCO and Kufpec, among others, together with Medco Energi, Saka Energu, KrisEnergy, Sapura Energy and other domestic independents Ashima says, has been working hard to grow their presence in the region’s upstream sector.

Ashima Taneja further said: “As the majors and IOCs relinquish assets in Southeast Asia, national oil companies (NOCs) will inevitably have greater roles to play to prevent domestic production decline,”  “Partnering with those who still consider the region as core will be critical in delivering the message that the region is still open for business in the upstream sector”, the senior research analyst further stated.

The senior man also said that since 2013, these rising new players have acquired over 600 million boe of resources in Southeast Asia with notable acquisitions to include Indonesia’s Medco Energi’s farm-ins into South Natuna Sea Block B and North Sumatra Block A (total of 263 million boe), as well as Sapura’s acquisition of Newfield’s Malaysian assets (220 million boe).

Production from East Asian and Middle Eastern conglomerates and domestic independents is said to be more than doubled, growing from 260,000 barrels of oil equivalent per day (boe/d) a decade ago to more than 675,000 boe/d in 2018, and these companies according to Wood’s team make up 12% of the region’s production and will grow modestly into the next decade.

“Southeast Asia falls in the backyard of East Asian and Middle Eastern conglomerates looking for diversity of supply,” Ms Taneja said.

“As for the domestic independents, strong networks with local NOCs, government and domestic supply chain have contributed to their success.”

With good management teams says the analyst, domestic independents will be able to bring diversity and an entrepreneurial approach to the sector with these companies eventually seeking the partnership with NOCs on suitably sized projects rather than technically difficult projects meant for the IOC’s.

Production at the Southeast region is reported to have peaked at 5.9 million boe/d in 2010 and has since remained steady. The chief analyst also says around 68% of today’s production comes from mid-life and mature fields, and with a lack of significant developments in the pipeline, output will decline by 15% by 2025. Coupled with tough fiscal terms, a restrictive regulatory environment and lack lustre exploration results, it will be an uphill climb for NOCs and regional-focused players vested in this region.

Ms Taneja said: “Even as we see oil prices rebounding in recent times, fundamental challenges in the region remain. In this environment, governments and regulators must question whether they are doing enough to attract investors that are looking to grow and diversify. If not, the region will be bereft of players that can help the NOCs fill the major gap.”

 

--ADVERTISEMENT--

LEAVE A REPLY

Please enter your comment!
Please enter your name here