Tide is turning for Myanmar, Malaysia and Indonesia
As their economies grow, the three countries need upstream investment to meet rapidly rising demand
Oil-price volatility, energy-supply deficits and political upheaval are creating headwinds for Malaysia, Indonesia and Myanmar as they seek to develop and attract investment in their energy sectors.
Indonesia and Malaysia—which, with Brunei, share the island of Borneo—occupy a strategic geographical position, ideally placed for budding trade routes between the Pacific and Indian oceans. Myanmar recently held free elections for the first time in a quarter of a century.
Southeast Asian oil and gas imports are expected to surge over the next decade as the region's GDP growth continues to rise, yielding a thirst for more energy. Indonesia, the region's largest economy, is also its biggest producer of oil, pumping about 0.85m barrels a day. Malaysia is the second-largest oil producer, with output of 0.693m b/d. It is also the world's third-largest exporter of liquefied natural gas.
But GDP growth will put pressure on the countries' upstream sectors to supply all the energy needed. In Malaysia alone, demand will double by 2040, according to the International Energy Agency. Indonesia could be the world's largest gasoline importer by 2018.
Slowly does it
Myanmar's oil and gas industry has been slow to attract new investment following the end of military rule 18 months ago. A dearth of new oil and gas blocks available for bidding—not one new concession has been on offer since the beginning of 2016—hasn't helped.
Myanmar boasts proven reserves of 50m barrels of oil and 10 trillion cubic feet of gas, according to the Extractive Industry Transparency Initiative, a lobby group. Troy Hayden, chief executive of Australia's Tap Oil, described the nation, formerly known as Burma, as "potentially a world-class hydrocarbons province". But how the new government will approach upstream investment is unclear. Investors want signals that future bidding rounds will be more transparent than past ones.
The fall in oil prices over the past two years has not spared Malaysia, although there are signs that its sales are picking up. Last year, Malaysia's oil exports surged to an eight-year high of 333,000 b/d. Malaysia is the world's third-largest LNG exporter, after Qatar and Australia—and it has staked a claim as a technology leader too. Last year Malaysia's state-run firm, Petronas, brought online the world's first floating LNG platform, PFLNG Satu.
Indonesia, the world's fourth most populous nation, has battled declining crude oil production in recent years, which stood at 0.792m b/d in 2015, just over half its output level in the mid-1990s. In April, it announced an overhaul of its energy policy, hoping to attract investment of $200bn over the next decade.
Facing a gas-supply deficit, the country is increasingly turning to floating, storage and regasification units to handle imports. In November 2016, it left Opec just a year after it rejoined. A net importer of oil, Indonesia was unwilling to take part in group-wide supply cuts designed to support oil prices. Indonesia was Opec's only Asian member.
All three nations need more inward investment to boost oil and gas output, but territorial disputes are not helping. Indonesia and Malaysia both claim ownership of an area of the Celebes Basin, in the western Pacific Ocean, which is underexplored as a result. Potentially prolific deep-water areas of the South China Sea remain contentious.
Malaysia, Indonesia and Myanmar will also have to balance the demands of rising energy consumption alongside targets to slash emissions and increase the uptake of renewables. Indonesia has set a target of reducing carbon emissions by 29% by 2030. This is no mean feat as much of its emissions are the result of both deforestation and its agricultural industry.
Soaring import needs: key Indonesian energy infrastructure Source: Petroleum Economist
This article appeared in the AOGC daily newsletter, produced by Petroleum Economist for attendees of the 19th Asia Oil and Gas Conference held in Kuala Lumpar.