Can Malaysia's new fiscal terms spur more oil and gas investment?
Malaysia has introduced a new set of fiscal terms for oil and gas, aiming to attract investment that can stem an expected plunge in petroleum production over the coming decade. The new measures are targeted at small and marginal fields, mature and late-life assets, and shallow-water plays, which together can contribute significant volumes if international companies are willing to invest. Compared to the existing fiscal regime, the revised terms offer a simpler structure with fewer moving parts and more attractive terms for operators.
Malaysia’s oil and gas production has been relatively steady over the past 20 years and is currently at about 1.6 million barrels of oil equivalent per day. After 2022–2023, however, production is set to decline steeply , even with projects that are currently under development (Figure 1). The country is therefore facing an urgent need to reverse or slow down this trend and encourage investment both into exploration and exploitation.
With the introduction of these three new fiscal contracts and with recent discoveries, bid rounds in Malaysia should be able to attract a good number of bidders including mature field specialists, small to mid-sized independents, and regional players. In the upcoming licensing round, 9 of the 13 exploration blocks that will be on offer are shallow-water offshore blocks that will be awarded based on the new EPT regime. These incentivized regimes will increase the contractor’s take compared to the previous fiscal terms. Rystad Energy believes that these new incentives are much needed to reverse the declining production trend and to spur investments in Malaysia.
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