Despite new project start-ups in the coming years, the Covid-19 pandemic has marked the end of an era for Southeast Asia’s combined oil and gas production, pushing output below 5 million barrels of oil equivalent per day (boepd) for the first time since 1998, a threshold that is unlikely to be exceeded again, a Rystad energy analysis has shown.
According to data from Rystad Energy, an energy intelligence firm, daily average hydrocarbon production fell to 4.86 million boepd in 2021, down from 5.06 million boepd in 2020 and a massive 13 per cent drop from pre-pandemic levels of 5.5 million boepd in 2019.
Operators have struggled to recoup production losses caused by the pandemic, as activity levels have slowed amid an unprecedented disruption in oil markets.
However, the decline is expected to last until the middle of the decade. Although volumes will remain stable in 2022, production will fall by 10 per cent by 2025 to around 4.3 million boepd from current levels.
Prateek Pandey, upstream vice president with Rystad Energy, said: “Liquids production in Southeast Asia has been on the decline for almost 20 years due to a lack of discoveries and project sanctioning activities in the region. While new government incentives may help, the region looks set to experience declining production levels well into the future.”
On the other hand, natural gas production in the region remained stable between 2009 and 2019, at around 20.8 billion cubic feet per day (Bcfd). Despite expectations for an increase in gas sales volume to offset the 8 per cent drop in production in 2020, volumes are expected to be down around 2 per cent this year compared to 2020, at around 19 Bcfd. This is primarily due to declining output at mature legacy projects such as Mahakam, MLNG Dua, and MLNG Satu PSCs, as well as Yetagun.
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The volume share from projects in development and existing commercial discoveries is significant, reflecting the region’s timely project execution. Several projects were successfully brought online in 2021, including the highly anticipated Rotan field, which began production in March using PFLNG Dua, making Petronas the only operator in the world to produce LNG from two floating facilities. Eni completed a timely development in Indonesia, with Merakes achieving first gas production in April 2021.
However, despite these achievements, Southeast Asia continues to be plagued by delays and stopped projects. The two major initiatives – Tangguh LNG T3 and Jambaran Tiung-Biru Unitisation (JTB) – have been postponed until 2022, further delaying resurgence in gas output in Indonesia.
According to the report, over 60 per cent of Southeast Asia’s output comes from mature blocks — areas that provide more than half of the region’s resources. Volumes from such blocks are expected to fall steadily over the next few years, with projects now in the pre-final investment decision (FID) stage accounting for roughly 60 per cent of production by 2030. As a result, the approval of new initiatives will be the driving force behind the region’s upstream prospects.
Meanwhile, only roughly 300 million barrels of oil equivalent (boe) of resources from six assets reached FIDs in 2020, making it a terrible year for regional sanctioning activity. As operators sought to move forward in 2021, more than ten projects in the region received FIDs, totaling 750 million boe of reserves and $3 billion in greenfield investment, with Malaysia accounting for 85 per cent of the total.
Sanctioning activities are expected to continue stable in 2022, with FIDs anticipated for over 800 million boe of resources in the area, with 60 per cent of them in Indonesia and over 35 per cent in Malaysia.
Furthermore, Majors and National Oil Companies (NOCs) are projected to dominate projects in Malaysia, while regional players and E&P businesses will predominantly drive development in Indonesia.
However, in 2022, planned FID projects may have difficulties in obtaining final clearance. Most significant gas projects in the pipeline are concerned about Indonesia’s domestic gas price restrictions.
The report also indicated that in 2022, Southeast Asia is unlikely to witness a significant increase in spending, with investments expected to be in the region of $15 billion to $20 billion. Increased drilling activity in mature blocks in Indonesia and Thailand will likely stimulate investment as NOCs take control and focus on top-producing blocks.
