Oil and gas production from the Southeast Asia region is estimated to decline by 30% in 2025 compared to the current year, as new projects are not able to compensate for the natural decline in production of mature fields. However, output from the fields supplying LNG plants is expected to decrease the least, supported by several ramping up projects. This article assesses the Southeast Asia status and outlook, illustrated by the three key drivers: production, exploration success and spending.
Figure 1 depicts the total production for the Southeast Asia region from 2010 to 2025, split by detailed oil and gas composition. Production in the region is decreasing since 2015, as more than half of the projects are mature and have been producing for decades. Ramping up projects in early development phase were able to offset mature decline in the last couple of years, but in the long-term, total supply from SE Asia is set to decline to around 4 million boe/d by 2025.
More than half of the production is coming from Indonesia and Malaysia, Indonesia being the biggest contributor to the oil and gas supply. Gas production is dominant in the region, accounting for 60% of total output. At the same time, LNG volumes make up 36% of total gas supply standing at 52 million tonnes in 2017. In fact, LNG production shows the least decline in the future and its share of total gas output surpasses 40% by 2025.
This is supported by a strong output from the Indonesian Tangguh LNG project and ramping up Malaysian Kebabangan Northern Hub, among others. On the other hand, declining production at Indonesian Bontang project largely drives the decrease in total LNG volumes in the medium-term. Among LNG projects currently under development, Tangguh LNG Train 3 in Indonesia and Rotan FLNG in Malaysia are seen to add more than 5 million tonnes in 2025.
Figure 2 shows the discovered volumes for Southeast Asia from 2000 to 2016. The best year for exploration in the region was 2000 when the giant Abadi field was discovered offshore Indonesia. In 2012, Petronas made a large discovery, the Kasawari gas-condensate field, in Block SK316 offshore Sarawak, and ExxonMobil discovered Ca Voi Xanh (Blue Whale) in Vietnam. Cumulatively, these two discoveries added around 1 billion boe in reserves. 2015 has been the worst year in terms of added reserves with barely 200 million boe discovered.
Last year, we have witnessed some recovery in exploration performance with several gas and gas-condensate fields discovered in Malaysia and Myanmar, together adding 700 million boe in reserves. Most of the recent discoveries are still unsanctioned, along with the Abadi field where the FID is not expected before the beginning of the next decade. This gives potential for production expansion in the long-term, provided that the discoveries are continuously sanctioned and timely brought on stream.
Figure 3 shows the total spending in Southeast Asia from 2010 to 2025. Spending levels increased from $50 billion in 2010, peaking at almost $68 billion in 2014, followed by a significant drop of over 20% in 2015. Capital expenditure (Capex) reached a high of around $34 billion in 2014, decreasing 27% in 2015, and an additional 36% last year. Investments are expected to stay relatively flat this year, increasing to around $20 billion by 2025.
Future growth in Capex is expected mainly from the development of the Tangguh LNG Expansion Project (FID approved in July 2016), the Chevron-operated Gendalo-Gehem project (feeding into Bontang LNG), slated for development around 2020, Malaysia’sK5 gas field, expected to be sanctioned next year, as well as the Block B gas project offshore Vietnam, which was approved for development in April of last year. The operating costs (Opex) are expected to remain around $21-23 billion per year, accounting for inflation, consistent with the production trend shown in Figure 1.
Production in Southeast Asia has been declining since 2015 and Rystad Energy expects this trend to continue for the rest of this decade. Without more discoveries in the next years and faster development plans, production in the region will decrease by almost 800 kbbl/d over the next three years. However, output from fields supplying LNG projects, such as Indonesia’s Tangguh LNG, is expected to decline less, supported by several expansion and new development projects. Additionally, large unsanctioned discovered volumes create potential for the region’s production growth in the long term.
RYSTAD ENERGY ANNUAL OIL & GAS SUMMITS 2017
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