International Outlook: Far East

Energy demands spur oil/ gas developments

Reviving economies and modernization are increasing demands for both domestic output and oil and gas imports from neighboring countries

 Tony Sitathan, Contributing Editor (Indonesia, Malaysia, Thailand, Vietnam, Myanmar and Brunei)

 China. The three largest Chinese firms – CNPC (PetroChina), Sinopec and CNOOC – control most oil/gas operations, operating principally in the north and west, the south and east and offshore, respectively. Estimated oil production in 2002 averaged 3.25 MMbopd, with net imports of 1.6 MMbopd. Gas production in 2002 averaged 2,320 MMcfd, with most undeveloped reserves in the isolated West. 

 Onshore oil development is highlighted by PetroChina’s Xinjiang Oil subsidiary’s increases in the northwest Junggar basin in three oil fields: Luliang, Cainan and Shixi. In the northeast, CNPC has cooperated with Russia’s Yukos for joint resource studies; an accord was signed for a 1,500-mi pipeline from eastern Siberia to Daqing city to supply 30 MMt crude to China by 2010. Significant onshore well completions in 2002 include: PetroChina’s Dina-22 and 202 gas appraisals, and Shidong 2 oil/gas appraisal in Junggar basin. 

 Major pipeline construction will increase onshore gas supply from the West to eastern markets. Recent developments include a new line from Changqing in Ordos to Beijing and south to Xian. And Shell, ExxonMobil and Russia’s Gazprom continue plans with PetroChina for the 4,000-km gas pipeline from western Xinjiang to Shanghai, which will spur gas development and trunk line connections from many intermediate basins. The overall plan is to triple the country’s gas output by 2010. 

 Offshore field developments involving foreign operators are proceeding at a rapid pace in four areas: Bohai Gulf, South China Sea and East China Sea. In Bohai, Kerr McGee will bring on Block 4/36 fields CFD 11-1, 11-2 and 2-1 with fixed platforms and an FPSO; ConocoPhillips planned Phase I of Peng Lai 19-3 for 35,000 bopd in early 2003; CNOOC/ChevronTexaco will jointly develop Bozhong 25-1/25-1 South oil field; Noble Energy commenced oil flow from Cheng Dao Xi (CDX) at 10,000 bopd from 11 producers with a platform and a 5-mi pipeline. And Apache’s Zhao Dong project is underway with 25 wells and a shallow-water platform. 

 In the South China Sea: Husky’s Wenchang 13/1, 13/2 fields were producing 60,000 bopd with an FPSO; Devon is using the Offshore Oil 111 FPSO for Panyu 4-2 and 5-1 platforms (Ursa and Boots) in the Pearl River Mouth basin; the CACT consortium has signed for platforms for first oil from Huizhou 19-2 and 19-3 in the PRM via existing field pipelines to shore; and CNOOC’s Phase 1 development of Dongfang 1-1 gas field off Hainan Island with two platforms, onshore gas terminals and a 116-km pipeline, is progressing. 

 In the East China Sea, Shanghai Oil & Gas is expanding Pinghu gas field with another platform and eight more wells; and Shell/Unocal have agreed with Sinopec/CNOOC on development of the major Chunxiao gas field in Xihu Trough, 400 km east of Shanghai, with first production in 2005. And in the Tainan basin of the Taiwan Strait, a cooperative relationship exists between Taiwan’s CPC and CNOOC. 

 Significant offshore exploratory drilling in China, as reported by Wood Mackenzie in 2002, includes: in Bohai – ChevronTexaco’s Luda 27-2-3, 4 and 5 oil appraisals in B 02/31; CNOOC’s three Luda appraisals, plus Suizhong 36-1W-2 and Jinzhou 25-1S-1; and Kerr McGee’s five wildcats in Caofedian B 4 and 5/36. 

 In the South China Sea, CNOOC drilled five gas wells in Dongfang in Changjiang WSCS permit, three in WSCS Yacheng 13-4 and 6, one gas well in Panyu 34-1-1, and one oil appraisal (Xijiang 23-1-4) in XJ24N ESCS.

 Indonesia. The country has oil and gas reserves of 5.9 Bbbl, and over 70 Tcf. It is considered the world’s largest LNG exporter. However, oil production has fallen, averaging 1.265 MMbopd. There is a continued evaporation of foreign funds. Total oil wells drilled were 5.2% less than 2001; however, offshore drilling increased to a new high of 240. 

 For exploration, ConocoPhillips will test the Suban-8 delineation. BP Bawean and Santos Group will abandon Titan BP 1 well, located 100 km NE of Kepodang gas field. Its Calypso BP 1 was also P/A’d. Santos (Madura Offshore), as operator of the Madura Offshore PSC located SE of Madura, flow tested the Maleo-1 wildcat, 140 km east of Surabaya. And CNOOC of China, successfully appraised the KE 40-2, on the KE 40 discovery in Madura block. 

 In development drilling, Pertamina and Bumi Siak Pusako, will maintain crude oil output at a field run by ChevronTexaco. Pertamina will drill five wells to keep production at 40,000 bopd, after taking over from PT Caltex Pacific. The Clough Group won an $80 million bid for the first deepwater oil production field, West Seno, in the Makassar Straits. Production was to commence in first quarter, 2003. And Unocal’s Indonesian subsidiary, Unocal Rapak, has drilled its fifth successive well on the deepwater Ranggas oil field, testing 8,158 bopd. 

 For most of 2001, net exports averaged 330,000 bpd crude/condensate. LNG exports decreased 11.5% in 2001 to 1.239 trillion BTU. Pertamina exported 32 Bcf gas to Singapore in 2001. Unocal intends to spend $3 billion developing fields in Indonesia within several years to increase its output.

Onboard the Sedco 601 semisubmersible, crews in late 2002 were drilling wells on behalf of Unocal, offshore Borneo. Indonesian drilling fell sharply last year, but a 20% rebound is predicted for 2003. (Photo courtesy of Transocean.)

 India. The principal upstream operator is state-owned Oil and Natural Gas Commission (ONGC). The smaller Oil India Ltd. (OIL) operates mainly onshore. Domestic oil production averaged 635,000 bopd in 2002, and the country consumes 2.0 MMbpd, requiring net imports of 1.36 MMbpd. LNG import projects are underway, plus proposals for import pipelines. 

 India’s largest new program is the New Exploration Licensing Policy (NELP) launched in 1999, with marketing of 48 onshore/offshore blocks; 24 were awarded in early 2001. NELP II closed for bidding March 2001; 23 onshore, shallow/deep offshore bids were awarded. In November 2002, 23 blocks were awarded under NELP III; ONGC and Reliance (a privately-held Indian company) are involved in 22 of the 23. No foreign company acquired operating interest. The awards included nine deepwater, six shallow water, and eight onshore blocks. Details of 25 blocks under NELP IV were released in mid-2003. 

 Exploration drilling as reported by Wood Mackenzie was dominated in 2002 by Reliance Industries’ six wildcats in Block KG-DWN-98/3 in the Krishna-Godvari basin off the southeast coast in 642 to 1,770-ft water. The wells named Bhirubai 1-6 discovered the major gas field of the same name 17 mi northeast of Cairn’s new discoveries around Annapurna and the prolific Ravva field oil/gas producer near the coast. 

 Cairn continued appraisal drilling in Krishna-Godvari to help plan developments in the deepwater area to possibly tie G-2, Q, N, M and Annapurna fields into the Ravva complex. Cairn also drilled an oil appraisal in Cambay basin on the West Coast; and Niko further appraised its west coast Hazira discovery in Cambay basin. Other apparently successful wildcatters included Petrom with EP-1, north of Bombay High field; BG with South Harinagar oil well in Cambay; and Niko’s Bheema-1 gas well in Cambay. 

 For developments, besides Cairn’s cluster-type plans for its five fields in Krishna Godvari, ONGC is pushing for a 220-mi-long pipeline over Bangladesh to unlock surplus gas to West Bengal from its fields in Tripura. Operator Niko is adding a platform and six new wells to the shallow-water Hazira field south of Surat, to increase gas output by 40%. And ONGC continues work to improve 14 major fields by stages, including its large Bombay High redevelopment. 

 Malaysia. This year, 2003, will be interesting, under a new Prime Minister. Crude oil production has been stable over recent years at 600,000 to 700,000 bopd; and there are over 4.0 Bbbl crude reserves. Malaysia is expected to be a net importer by 2007. Petronas continues to be active in both domestic and international E&P. Most of Malaysia’s domestic production comes from Tapis field. And Esso Production Malaysia is the largest crude oil producer. 

 In exploration activity, Malaysia’s oil/gas fields are mostly offshore, either off Sarawak or Peninsular Malaysia. Major producing fields include Baram, Baronia and Tukau (Petronas/Shell operated), Seligi and Guntong (Petronas/Esso operated) and Duland. Murphy Oil operates Block K with Petronas Carigali. Meanwhile, it was lucky with the Kikeh discovery in the southern part of Block K, considered the first deepwater oil discovery in Malaysia. Three wells are already commissioned to be drilled. Murphy also has an 80% interest in Block K as well as adjoining Block H, which covers close to six million acres. It has also made a similar find in Congkak 1 wildcat in Block SK 309 offshore Sarawak, the second Murphy oil discovery in Block SK 309. 

 Royal Dutch Shell made a significant oil discovery in deepwater Block J off Sabah in Eastern Malaysia, in the Kebabangan gas discovery. 

 For this year alone, an estimated 206 offshore wells will be found in Malaysia, compared to 192 offshore last year. Peninsular Malaysia accounts for 60% of the country’s total crude oil production, with wells in Sarawak providing 25%, and Sabah 15%. Gas reserves stand at 88.0 Tcf (the world’s twelfth largest). Gas demand is also rising rapidly, and is expected to increase this year. Like last year, Malaysia is expected to produce 5.11 Bcfd. Amerada Hess intends to drill in Block SB 302, while the Cendor discovery on Block PM 304 is being evaluated. Murphy Oil has launched a $127 million, two-phase development of its West Patricia oil discovery in West Malaysia. 

 Thailand. Economy under the stewardship of Prime Minister Thaksin Shinawatra has been rapidly recovering since the Asian monetary crisis of 1997/1998. 

 In exploration activity, Thailand has awarded concessions to six groups of oil/gas companies to explore seven onshore/offshore fields. Pogo Producing has successfully drilled the first three of a six-well exploration drilling schedule, Benchamas North 4 and 26, and Jarmjuree 9 – all part of Block B8/32 – the next three will test North Jarmjuree and northern and western limits of Tantaway field. The company owns 714,000 acres in the Gulf of Thailand. 

 For drilling and development, PTTEP, Thailand’s upstream oil company, intends to accelerate development of B17 in the Malaysia/Thailand Joint Development area (MTJDA) to meet the demand for gas, which is expected to flow from the block before 2008, when a new pipeline is completed, a year earlier than predicted. Amerada Hess, plans to start phase two of production in Pailin field. So far, only 26,500 MMcf gas has been produced, while an increase has been planned for the rest of 2003 to reach almost 50,000 MMcf. And Carnarvon Petroleum has recently announced Phase 2 development of Wichain Buri oil field. 

 Thailand produced close to 175,000 bpd oil in 2002, most of that being crude. And oil reserves have improved to 516 MMbbl due to significant new discoveries. Thailand has 12.9 Tcf proven gas reserves. There has been a decline in Thai drilling, principally offshore, from 241 wells in 2002 to only 205 wells expected this year. Unocal Thailand is the largest gas producer, and has intentions to increase its discovery in Pailin field. 

 Vietnam. After normalization of its relationship with the US in 2001, Vietnam has intentions to be part of the World Trade Organization. It has about 2.5 Bbbl proven oil reserves. Crude production averaged about 350,000 bopd in 2002. It also has proven gas reserves of over 7 Tcf. There are six operating oil fields, of which Back Ho (White Tiger), Rang Dong, Hang Ngoc and Dai Hung (Big Bear) are the largest, while most oil E&P is done offshore in Cuu Long and Nam Con Son basins. Cuu Long is the largest gas production area. 

 For exploration, the government has issued around 44 investment licenses. And about 30 companies now operate offshore. However, several have withdrawn from contracts due to regulatory framework and poor oil/gas findings. PetroVietnam and Petronas Carigali Overseas signed a contract to explore/ exploit oil/gas in 01-02/97, on the Continental Shelf. Drilling should start in 2004. PetroVietnam, Talisman and Petronas Carigali Overseas signed a $20 million contract to explore/exploit Block 46/02, covering 12,000 km² in Ma Lai-Tho basin, off the southern coast. SOCO Vietnam, a newcomer, has found oil/gas in Ca Ngu Vang (Golden Tuna) and Voi Trang (White Elephant) fields. It is the first to drill on Block 9-2. There are estimates that the block holds 250 MMbbl oil. Hoan Vu operating company made up of SOCO, PetroVietnam and PTTEP, made a significant offshore oil find with its Ca Ngu Vang wildcat in Block 9-2. The find contains 250 to 300 MMbbl oil. 

 In development and drilling, Vietsovpetro has discovered oil/gas in offshore Block 9-1, next to Rong field off Ba Ria Vung Tau province. It also found new hydrocarbon resources in Well 05 in Dai Hung oil field. The Cuu Long JV (ConocoPhillips, PetroVietnam, Korea National Oil Corp., SK Corp. and Geopetrol) plans second-phase development in Block 15-1 in Cuu Long basin. There are three existing oil blocks in Su Tu Den (Black Lion), Su Tu Vang (Golden Lion) and Su Tu Chua (King Lion). The first two contain 200 to as much as 400 MMbbl oil.

 BP is preparing a platform-based development of Hai Thach gas/condensate field in Nam Con Son basin. Korea National Oil Corp. (KNOC) intends to develop the Rong Doi wet-gas development off southeast Vietnam. So far, four companies are vying for the $280 million contract. The field is in Block 11-2 and is estimated to hold up to 1 Tcf recoverable wet gas. And BP and Korea National Oil Co. (KNOC) have plans to undertake a joint study of dynamic behavior of the Nam Con Son pipeline in Vietnam when KNOC’s gas in introduced into the line. The $300-million project is based on a central processing platform, wellhead platform, and a 60-km flowline to a tie-in point on the 399-km Nam Con Son line. 

 For production, Vietnam is still a net importer of oil-based petroleum products, although there are tentative plans to build a refinery, the Dung Quat plant, that is assisted by the Russian government. Vietsovpetro has ramped up production at is ageing Dai Hung (Big Bear) field off southeast Vietnam after a new discovery. The well DH-12X in Block 05-1A flowed 6,300 bopd and 122,000 m³pd gas. And Conoco has plans to increase production in Block 15-2 in Rang Dong. It has also drilled a wildcat in Sutu Vang field. 

Offshore Vietnam, in Vietsovpetro’s White Tiger oil field, the Trident 9 jackup has had steady work drilling development wells. State oil company Petrovietnam predicts a 19% pickup in offshore drilling for 2003. (Photo courtesy of Transocean.)

 Pakistan. The state oil company, Oil & Gas Development Corp., is a limited company known as OGDCL. Two other domestic companies are Pakistan Oilfields Ltd. (POL) and Pakistan Petroleum Ltd. (PPL). The country is divided into four areas, Sindh (Southeast), Punjab (Northeast), Balochistan (Southwest) and the North West Frontier Province. These encompass three geologic basins, Lower, Middle and Upper Indus (LI, MI and UI). Only a few offshore wells have been drilled. In 2002, oil output was 50,000 bopd, including condensate; estimated oil imports were 310,000 bopd; reserves are about 300 MMbbl. Natural gas reserves are in the 26 Tcf range, with production meeting consumption at 2,550 MMcfd, and new field developments supplying growing needs. 

 Increased activity in offshore Makran basin and isolated Balochistan is hoped for. Most foreign firms are small “independents,” except for BP and Eni. For new exploration license awards, a Petroleum Exploration Ltd. (PEL) JV got a license for gas-prone B 2769-9 (Mirpur Mathelo) in Sukkur/Khairpur. PPL acquired B 3372-12 (Kot Sarang) in Punjab. OGDCL got two licenses in B 3372-14 (Fateh Jang) and B 3170-1 (Al-Rehman) in Punjab, plus Nashpa and Khajuri blocks in UI and MI. OMV was awarded Nawabshah and Southwest Miano II, in the Southeast. Nativus was awarded Lugai B 3067-1 in Balochistan. And Agip was awarded Manchar (B 2667-5) in LI, east of Bhit gas field. 

 Exploration drilling highlights for 2002 include: BP’s Rajo-2 oil discovery in Ghunghro, LI. OGDCL found O/G in Chak 63-1 and 66-1, plus gas/condensate in Chak 2-1 and Resham-1 in Sinjhoro, LI; it also found gas/condensate in Norai Jagir 1 and Bhulan Shah-1 in Nim (B 2568-9), LI. PPL found gas in Khanpur X-1 in B 2768-3, MI; BP found oil/gas in Jhaberi South 1 in Badin III, B 2468-2, LI; and MOL reported gas/condensate in Manzalai 1, Tal (B 3370-3) UI. 

 Regarding field developments, Eni started commercial production from Bhit gas field, 115 mi north of Karachi. OMV plans to develop Sawan gas field in Sindh, MI, with Phase 1 and 2 to start-up in late 2003. BHP Billiton was awarded a license for Zamzama gas field in LI; phased development will supply 350 MMcfd by late 2003. Other development licenses were awarded to: OGDCL for Chanda and Jakhro in UI and MI; PEL for Badar in MI; and POL for Khaur in UI. PPL says construction for the gas pipeline from Turkmenistan through Afghanistan to Pakistan could begin as early as mid-2004. Other options for importing gas include an Iran-Pakistan-India line; and linking Pakistan to the Dolphin project which supplies gas from Qatar to UAE and Oman. Meanwhile, domestic production increases will likely delay most major pipeline projects. 

 Myanmar. The current regime, led by the military oligarchy, has stirred up strong anti-investment sentiments by human rights activists. However, according to Myanmar Oil and Gas Enterprise (MOGE), under the Ministry of Energy, foreign investments in the oil/gas sector have reached $2.5 billion since the country opened up to foreigners in 1988. 

 There are presently 34 contracts for exploring oil/gas at 47 inland blocks, and 15 JV contracts with MOGE in the same undertakings at 25 offshore blocks at Mottama, Tanintharyi and Rakhine coastal areas. So far, seven new oil/gas fields including Kyaukkhwet and Letpando have been found at inland blocks, while three others – Yadana, Sein-Hminh-Padamya and Yetagun – in Motamma, are in offshore Myanmar off the Tanintharyi coast. So far, a total of 2,791 km of new gas pipelines has been laid, both onshore and offshore. 

 According to official statistics, Myanmar produced 16,650 bpd crude/condensate, and 850 MMcfd gas in 2002. Gas exports account for at least 11% of the country’s total export value earnings, close to $200 million. Myanmar has a proven recoverable gas reserve of 15.7 Tcf. Unocal, an investor in the Yadana project, estimated at $1 billion, has continued to receive widespread criticism over its involvement in Myanmar. It nonetheless remains committed to exploring new areas for commercial oil/gas finds. Gas production from Yadana averaged almost 611 MMcfd, and the field is expected to be productive for 30 years. Management of the project is by Total. So far, most of the gas is exported to Thailand’s power plants. 

 Unocal has a 28.3% interest in the Mottama Gas Transportation Co. Other investors are Total (31.2%), PTT Exploration and Production Public Co. (25.5%) and state-owned MOGE, with a 15% interest. So far, Petronas Carigali, Premier Oil, Daewoo, Prime Resources, Goldwater and TG World Energy are active in Myanmar. Baker Hughes, BHP, Petro-Canada and Shell have all left. 

 Brunei. The monarchy is one of the longest-serving dynasties. The economy is, however, relatively open to foreign investments. A further 10,000 km² has been opened for deepwater exploration. Brunei Darussalam’s gas production will get a boost when Egret field goes into production by August 2003. The new field is hoped to satisfy gas needs for 2003 and beyond, both domestic and for export. However, due to its overdependence on oil reserves, it is increasingly interested in diversifying the economy. According to the 8th National Development Plan, the government says it needs $4 billion to be invested in its economy between 2001 and 2005, to achieve the desired growth rate. 

 The Brunei National Petroleum Co., Petroleum Brunei (PB), established only last year, will be acting as a commercial company, and also will take over many of the regulatory roles once done by Brunei Darussalam’s Petroleum Unit. It will now be sole partner in Shell’s Blocks A and CD and have a stake in Total-operated Block B. It is also authorized to acquire equity in new upstream and downstream JVs while targeting overseas oil and gas ventures. It is also planning to offer deepwater acreage in the exclusive economic zone (EEZ) to extend to some 400 km offshore, bordering Sabah and Sarawak. 

 Total has announced signing a PSC with PB for Block J, offshore. It has a 60% interest, and BHP Billiton, 25%, while Amerada Hess has 15%. Total’s Block-B JV has made another significant wildcat discovery at depths of 4,400 m, near the Maharaja Lela Jamalulalam field. As operator, it has a 37.5% stake.

 Philippines. Still the biggest news is the development of Shell Philippines Exploration’s Malampaya deepwater development in 2,800-ft water, 4 mi northwest of Palawan. In September 2001, first gas flowed through the 312-mi long pipeline to power plants at Batangas on the mainland. Five subsea wells have been drilled for initial development, flowing to a gas processing/ condensate storage platform in shallower water, then to the pipeline. A calm buoy transfers condensate to tankers. Gas rates will steadily increase with onshore market development. Four more development wells are planned by 2009. In April 2002, Shell drilled the MA-10 well with the Atwood Falcon semi on the oil rim of the field in 2,800-ft water, producing up to 8,000 bopd on an extended test, to the FSO Stena Natalita. Shell has been evaluating the development prospect. Domestic crude production of probably less than 5,000 bopd, excluding the condensate, does not begin to meet consumption in the 350,000 bopd range. 

 In other exploration news, JAPEX was awarded a Geophysical Survey and Exploration Contract for GSEC 102 in the Tanon Strait, near Forum’s SC40 offshore block; and Sterling Energy was awarded GSEC 101 covering Reed Bank off northwest Palawan. Unocal farmed-in with Alcorn and Nido to do a study of the undeveloped Galoc deepwater field off Palawan. Nido is reviewing its Matinloc and Nido, fields to boost output. Tracer Petroleum acquired 6623 % of Forum Exploration. In 2003, Forum was drilling the shallow Forum 1-X, near the MST-11 well, the first of three exploratory wells on Cebu island. 

 Others. The Far East contains several other countries with production and active oil/gas exploration efforts, but no large projects reported; these include: Bangladesh, Afghanistan, South Korea, Cambodia, Japan, Taiwan and Mongolia. Bangladesh contains a significant gas reserve, estimated at over 18.0 Tcf. It has about 20 gas fields, half active, and produces over 950 MMcfd. Probably 10 gas wells will be drilled there in 2003. Shell and Unocal are active in the country. And in Cambodia, tension remains with Thailand over the Overlapping Claims Area (OCA), covering 26,000 km², considered rich in reserves. Enterprise Oil has an interest in Contract Area III, in the OCA. And Chevron Overseas Petroleum’s existing assets in the area include Blocks 7, 8 and 9, presently in force majeure in the OCA.