Lloyds List: Deepwater oil finds make South China Sea the next hotspot: 'Shell and its partners are pursuing a business growth strategy that contributes to Malaysia's economy and these deepwater discoveries are a cornerstone of this strategy,' said Datuk Jon Chadwick, chairman of Shell Malaysia.: Tuesday Oct 18, 2005
Energy is edited by Martyn Wingrove +44 (0)20 7017 4629 martyn.wingrove@informa.com
NEW deepwater oil discoveries off the northern coast of Borneo mean that this area could be the next exploration and development hotspot and a key market for floating production systems, writes Martyn Wingrove.
Royal Dutch Shell and Murphy Oil have so far led exploration efforts in the deepwaters off Malaysia and Brunei, resulting in more than 1.5bn barrels of oil and 7trn cu ft of gas discovered in the area so far this decade.
Asian subsea equipment and installation markets are set to see a boost from these oil discoveries with contractors getting ready to service these construction projects.
US firm Murphy Oil is the first to get a development underway after starting engineering work on the Kikeh field earlier this year.
Shell could be in the market soon to develop its three deepwater discoveries Gumusut, Malikai and its latest oil find on the Ubah prospect.
ConocoPhillips and state firm Petronas Carigali are also coming to the market for deepwater offshore services after gaining Malaysian government approval for the Kebabangan project.
More drilling in the deepwaters of the South China Sea are likely to result in more deepwater discoveries and new projects.
Complemented by deepwater fields found in the Makassar Strait off East Kalimantan, this area has the potential to become a major market for international contractors.
Malaysians officials estimated that around 1.4bn barrels of oil and 7.7tcf of gas reserves have been discovered off northeast Sabah alone, before Shell announced its latest oil find, the fifth in the area.
The Shell-led joint venture that includes Petronas Carigali and ConocoPhillips hit oil pay with the Ubah 2 well in deepwater Block G, off Sabah in 1,430 m of water.
Shell immediately drilled an appraisal sidetrack to the discovery and found more reserves.
The Anglo-Dutch oil major is due to drill another set of wells in the block to explore for more fields and appraise these discoveries.
'Shell and its partners are pursuing a business growth strategy that contributes to Malaysia's economy and these deepwater discoveries are a cornerstone of this strategy,' said Datuk Jon Chadwick, chairman of Shell Malaysia.
'We continue to focus on the delivery of new material discoveries, whilst pursuing rapid appraisal and development of these new fields,' said Wouter Hoogeveen, Shell's vice-president for exploration in Asia Pacific.
Contractors will be keeping a close eye on events in Malaysia as deepwater developments may require spar, tension-leg platforms and floating production storage and offloading vessels, plus associated subsea facilities.
Subsea installation contractors are lining up new facilities for laying subsea equipment and pipelines in deeper waters in the region.
Last week Stolt Offshore chief executive Tom Ehret highlighted his company's investment in the area that includes a joint venture with SapuraCrest Petroleum to build the region's largest heavy lift vessel Sapura 3000. He said the joint venture was tendering the unit for deepwater installation work in 2007 and beyond.
Drilling contractors will also be on alert as these developments will require a host of production and water injection wells completed with subsea wellheads.
For Murphy's Kikeh development, the US independent has ordered a production spar and an FPSO to recover reserves of between 400m and 700m barrels of oil.
Murphy is looking to begin production in the second half of 2007, while Technip and Subsea 7 have joined forces to install the subsea infrastructure next year.
Technip will provide its construction vessel Venturer and Subsea 7's Rockwater 2 will be used to install the subsea systems in water depths up to 1,330 m in the second quarter of 2006.
Malaysia International Shipping Corp is converting a very large crude carrier for European contractor SBM Offshore, which is supplying the FPSO for Murphy's development under an eight-year lease contract.
It is thought that ConocoPhillips' Kebabangan project will be the next in the lengthening line of developments to require subsea contractor services. This is likely to be followed by Shell's projects and possibly more developments when new fields are discovered.
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