Oil and gas production from the Southeast and East Asia regions is estimated to decline by 17% from 2018 until 2025, as new projects coming online are not able to compensate for the natural decline in production of mature fields. However, China’s gas production is anticipated to increase to nearly 2.6 million boe/d during the next couple of years and remain at that level to 2025. This article assesses the Southeast and East Asia status and outlook, illustrated by the three key drivers: production, economics of unsanctioned discoveries and capital investments.
Figure 1 depicts the oil and gas production for the Southeast and East Asia region from 2010 to 2025, split by country. Total supply in these regions has been decreasing since 2015, as many of the projects are mature and have been producing for decades. Despite a number of new fields coming on stream in the medium to long-term, total output from Southeast and East Asia is set to decline to around 10 million boe/d by 2025, compared to 12 million boe/d in 2018. More than half of the production is coming from China, with Indonesia and Malaysia making up another 30% of the oil and gas supply. Furthermore, about half of the total output corresponds to gas, and despite the overall negative production dynamics, gas supply in China has been steadily increasing since 2010 and is estimated to reach over 2.6 million boe/d by the early 2020s, and remain at a stable level until 2025. Post-2025, gas volumes have potential to expand further, reaching over 3 million boe/d. In the medium-term, the largest contribution will come from already producing fields that are part of Changqing, Tarim, and Puguang projects. In addition, China’s production will benefit from Longmaxi shale gas developments in the Sichuan Basin. Hydrocarbon supply from the Southeast Asia is expected to decline more steeply in the medium to long term, showing over 20% decline rate in 2025 compared to 2018.
Figure 2 depicts the breakeven gas prices as of the sanctioning date for the top new gas projects in the region expected to be sanctioned in the next five years. Breakeven prices are shown on the y-axis, and the distribution on the x-axis corresponds to the total economically recoverable gas resources. The Abadi gas-condensate field is the largest development in the selection of projects, with estimated recoverable resources of over 10 Tcf. The field is located in the Masela PSC offshore Indonesia, is expected to be sanctioned in Q1 2021, and has an estimated breakeven gas price of 6.6 $/kcf as of the sanctioning date. The projects with the lowest breakeven gas prices include China’s Qing Hua Coalto-gas (phase 2), Indonesia’s Kali Berau Dalam, and Malaysia’s Jerun. Malaysia and Vietnam notably dominate the top 10 upcoming gas projects list, with estimated breakeven prices ranging from 6 to 8.3 $/kcf for Vietnam and 4.8 – 6.5 $/kcf in Malaysia. Malaysia’s Kasawari field discovered in 2012 in Block SK316 has an estimated breakeven price of 6.4 $/kcf and holds recoverable resources of around 3.2 Tcf. Together these top-10 gas fields are expected to contribute over 1.2 bcf/d to the region’s 2025 production, and an average of $2.5 billion per year in capital expenditure from 2021 to 2025.
Figure 3 shows the total investments in Southeast and East Asia from 2010 to 2025 by project life cycle. Capital expenditures reached $75 billion in 2013 and fell sharply during 2015-2016 to a level of just $40 billion. To a large extent the drop was driven by decreased spending in China, where investments were cut by 35%. The fall in the oil price led to decreased infill drilling levels in the country and projects such as Changqing, Shengli, and Daqing were especially affected. Fields in Indonesia and Malaysia also experienced cuts in expenditures. Since 2017, capital investments have been on an increasing trend and stood at nearly $48 billion in 2018. Driven by projects currently under development, as well as yet unsanctioned discoveries, capex will mostly remain on a positive trend in the medium term and reach over $50 billion by 2025. In Southeast Asia, the Kasawari discovery in Malayasia, Ca Voi Xanh in Vietnam and Abadi field in Indonesia will see the largest inflow of capital until 2025. In China, a significant part of investments will be directed to the Longmaxi shale gas development, as well as to already sanctioned fields in Lingshui 17-2 gas complex and Liuhua 16-2 project. Nevertheless, despite growing spending across both East and Southeast Asia regions, total investments are not expected to reach 2014 levels even by 2025.
Oil and gas production in Southeast and East Asia has been declining since 2015 and this trend is projected to continue for the rest of the decade. The decline in oil production, however, is expected to be somewhat counter-balanced by the increasing gas volumes from new projects awaiting sanctioning or already under development. China’s gas projects will be especially key for the region’s supply going forward