US oil industry major ExxonMobil has announced that its enhanced oil recovery project at the Tapis field in Malaysia will begin in 2013.
Investment in the project has been estimated to have totaled just over $1 billion. Interestingly, the news comes in the wake of the CEO of Malaysia's state-run oil and gas company Petroliam Nasional (Petronas) announcing that the company is re-shifting its focus backs towards domestic exploration and production and away from its wide-reaching international portfolio.
Malaysia's Tapis field, which is located offshore from the state of Terengganu, has been producing since the 1980s. The field is renowned for producing one of the most desirable API grades in the world, and, until recently, was a widely-accepted Asia-Pacific benchmark. This explains the lure of the field for majors such as ExxonMobil. The Tapis field is one of seven mature offshore oil fields that the US major, in collaboration with a Petronas unit, has agreed to develop.
This comes as part of a 25-year-long production-sharing agreement that was inked between the two firms in June of last year. The production pact includes provisions for the deployment of enhanced oil recovery and further drilling to boost output in the Malaysian territory.
Within the deal itself, the two partners agreed to invest as much as $2.1 billion in the seven fields. At present, the nascent Tapis enhanced oil recovery project is just in its front-end engineering and design (FEED) phase.
ExxonMobil's net Malaysian liquids production last year is reported to have averaged 52,000 barrels per day (bpd), while its net gas production averaged 5.6 billion cubic metres (bcm). In total, the firm operates seven production contracts in the Asian nation in combination with Petronas. Four of these said contracts are production-only, while three permit are both exploration and production.
Malaysia's oil and gas industry has long been held back by the nation's restrictive National Depletion Policy, which was brought into law in 1980. The Policy has kept hydrocarbon production at 3% of total reserves each year for the past three decades. Furthermore, hydrocarbon output has been in decline for the last ten years or so.
The result was to force domestic operators overseas in search of acquiring considerable international acreage to compensate for falling domestic production.
However, reversing this flow of investment overseas, the newly announced Petronas has called for increased domestic exploration. This involves boosting recovery rates from domestic acreage, which Petronas CEO Shamsul Abbas estimated to presently stand at 23%.