With all the talk about rising oil prices or the lack of it, the BN/Umno regime saw it fit to raise the price of petrol and diesel. There has long been a suspicion that Kelantan had a vast oil and gas reserve. However, the BN/Umno regime doesn’t seem to want to exploit it as long as Kelantan is under Pakatan Rakyat. It makes sense here if the State is under Pakatan Rakyat, it will be difficult for the Umnoputras to exploit the oil and gas revenues for their own pockets. According to a report in The Star on May 4th, 2006 by Ian MacIntyre, oil deposits have been found at the inshore areas of Tumpat and Bachok districts in Kelantan.

Kelantan State Financial Planning Committee Chairman, Datuk Husam Musa said oil deposits have been found at the inshore areas of Tumpat and Bachok districts in Kelantan. He said the state government planned to appoint a consultant to confirm if there were oil reserves around both inshore areas, which could be extracted commercially. He added that the oil discovery was made recently by certain parties who alerted the state. More details can be found at http://kickdefella.wordpress.com.

The following article extracted from the United States Energy Information Administration is both informative and an eye opener.

Source: http://www.eia.doe.gov

United States Energy Information Administration
Malaysia Energy Report (part of May 2000 report)

Malaysia is important to world energy markets because of its 81.7 trillion cubic feet of natural gas reserves and its net oil exports of over 300,000 barrels per day. Note: All information contained in this report is the best available as of May 2000 and is subject to change.
OIL

Malaysia contains proven oil reserves of 3.9 billion barrels, down from 4.3 billion barrels in 1996. Despite this trend toward declining oil reserves (due to lack of significant new discoveries in recent years), Malaysia’s crude oil production has been stable in recent years, fluctuating in the range between 690,000 barrels per day (bbl/d) and 730,000 bbl/d between 1996 and early 2000. In 1999, crude oil production averaged 720,000 bbl/d. After a pause during the Asian financial crisis, Malaysia’s domestic petroleum product consumption is again growing.

As a result of declining oil reserves, Petronas, the state oil and gas company, has embarked on an international exploration and production strategy. Currently, Petronas is invested in oil exploration and production projects in Syria, Turkmenistan, Iran, Pakistan, China, Vietnam, Burma, Algeria, Libya, Tunisia, Sudan, and Angola. In 1999, Malaysia exported the majority of its oil to markets in Japan, Thailand, South Korea, and Singapore.
Malaysia’s domestic oil production occurs offshore and primarily near Peninsular Malaysia. Most of the country’s oil fields contain low sulfur, high quality crude, with gravities in the 35o-50o API range. Over half of the country’s oil production comes from the Tapis field, which contains 44o API oil with 0.2% sulfur content. Esso Production Malaysia Inc. (EPMI), an affiliate of ExxonMobil Corporation, is the largest crude oil producer in Peninsular Malaysia, accounting for nearly half of Malaysia’s crude oil production. EPMI operates seven fields near the peninsula, and one-third of its production comes from the Seligi field. The Seligi-F platform, with its 28 wells, is the newest satellite in the Seligi field, located 165 miles off the coast of Terengganu, Peninsular Malaysia. Built at a cost of $155 million, Seligi-F is the seventh production platform on the Seligi field. The platform came on stream in March 1998 and is expected to produce an annual average of 21,000 bbl/d. EPMI holds a 78% interest in the project with Petronas Carigali holding the remaining 22%. In addition, EPMI began drilling the nearby Raya-A platform in the second quarter 1998. EPMI has invested $96 million in six wells, and holds an 80% interest with Petronas Carigali holding the remaining 20%.

In other developments, Sabah Shell Petroleum Company, a unit of Royal Dutch/Shell Group, raised production at the Kinabalu field to 36,000 bbl/d, as well as 28 million cubic feet per day (Mmcf/d) of gas. Production at Kinabalu, located in the SB-1 block 34 miles off the coast of Labuan, Sabah in east Malaysia, began in December 1997. Peak production is expected to reach 40,000 bbl/d of oil and 30 Mmcf/d of gas. As operator of the SB-1 block, Shell holds an 80% stake in the block, with Petronas holding a 20% stake. In February 1998, Amerada Hess signed two, five-year production sharing contracts (PSCs) with Petronas for blocks PM304 and SK306. The PSCs commit Amerada to $24.9 million of exploration activities on the two blocks. Amerada drilled five exploratory wells in 1999 following a series of 2-D and 3-D seismic studies. Under the PSCs, Amerada holds a 70% stake in PM304, offshore Terengganu, and an 80% stake in SK 306, offshore Sarawak, with Petronas holding the remaining interests in both blocks.

In February 2000, Sweden’s Lundin Oil announced that it had signed a sales agreement with Petronas and PetroVietnam which will allow it to proceed with development of its long-delayed Bunga Kekwa project. Production is scheduled to begin in 2003, with an expected volume of 40,000 bbl/d of liquids and 250 Mmcf/d of gas. Lundin Oil is the operator of the field, and Petronas and Petrovietnam hold equity stakes in the project.

Refining & Downstream
Malaysia has six refineries with a total processing capacity of 524,400 bbl/d. The three largest are the 155,000 bbl/d Shell Port Dickson refinery and thePetronas Melaka-I and 100,000 bbl/d Melaka-II refineries, which each have a capacity of 100,000 bbl/d.

The second phase of the $1.4-billion, 200,000-bbl/d Melaka refinery complex, located about 90 miles south of Kuala Lumpur, commenced operation in August 1998. The 100,000-bbl/d Melaka-II second phase is a joint venture between Petronas (45%), Conoco (40%), and Statoil (15%). This second refinery contains a 62,000-bbl/d vacuum distillation unit, 26,000-bbl/d catalytic cracker, 28,500-bbl/d hydrocracker, 35,000-bbl/d desulfurization unit, and 21,000-bbl/d coker. One of the main purposes of this refinery is to supply gasoline to Conoco’s service stations in Thailand and a new line of stations planned for Malaysia. The first phase of the Melaka refinery was finished in mid-1994 and consisted of a 100,000 bbl/d sweet crude distillation unit, which is wholly-owned by Petronas and processes Tapis crude oil.
Petronas, in a joint venture with Conoco and Statoil began construction of a 7,500 bbl/d lubricants plant at Melaka in 1998. Petronas and its partners began construction on the $250 million plant in March 1998, and it is scheduled to come on line in 2002.

In other downstream activities, Petronas signed a joint venture agreement with Union Carbide Company, in April 1998, to build a petrochemical complex in Kertih on the east coast of Peninsular Malaysia. Construction of the complex is estimated to cost $3-$4 billion and to involve three separate projects. The centerpiece of the joint venture is an olefins cracker unit with an annual production capacity of 600,000 metric tons of ethylene and 85,000 metric tons of propylene. Petronas will hold a 76% stake and Union Carbide will hold a 24% stake in this unit, which is expected to be complete by the first quarter 2001. Both companies will hold equal shares in the ethylene oxide/ethylene glycol plant with an annual capacity of 320,000 metric tons and the multi-unit derivatives plant. The derivatives plant will produce amines and ethyloxates, glycol ethers, butyl acetate, and butanol.

NATURAL GAS
Malaysia contains 81.7 trillion cubic feet (Tcf) of proven natural gas reserves. Natural gas production has been rising steadily in recent years, reaching 1.44 Tcf in 1998, up from 1.36 Tcf in 1997. Natural gas consumption in 1998 was estimated at 0.70 Tcf, with LNG exports of 0.72 Tcf (mostly to Japan, South Korea, and Taiwan). Exports dipped slightly in 1998 as a result of the Asian financial crisis, but began to climb again in 1999.

One of the most active areas in Malaysia for gas exploration and development is the Malaysia-Thailand Joint Development Area (JDA), located in the lower part of the Gulf of Thailand and governed by the Malaysia-Thailand Joint Authority (MTJA). The MTJA was established by the two governments for joint exploration of the once-disputed JDA. The JDA covers blocks A-18 and B-17 to C-19. A 50:50 partnership between Petronas and Triton Energy Ltd. is developing block A-18, while the Petroleum Authority of Thailand (PTT) and Petronas also share equal interests in the remaining blocks. PTT and Petronas announced an agreement in November 1999 to proceed with development of a gas pipeline from the JDA to a processing plant in Songkla, Thailand, and a pipeline linking the Thai and Malaysian gas grids. Malaysia and Thailand will each take half of the gas produced. The agreement had been delayed two years by uncertainty over demand growth related to the Asian financial crisis. Production from the JDA is to begin in 2002.

Block A-18 is operated by the Carigali-Triton Operating Company (CTOC), a joint venture project between Triton and Petronas. In December 1997, the MTJA approved a development plan for CTOC’s Cakerawala gas field, which will be the first JDA field to come on line. In November 1999, CTOC signed a gas sale agreement with Petronas and PTT, which will allow it to proceed with development. Gas production of 390 Mmcf/d will begin in mid-2002.
Malaysia accounted for approximately 18% of total world LNG exports in 1998. After a brief downturn related to the Asian financial crisis, demand for LNG is rising again. After much delay, Malaysia is proceeding with a long-planned expansion of its Bintulu LNG complex in Sarawak. In February 2000, Petronas signed a contract with a consortium headed by Kellogg Brown and Root for construction of the MLNG Tiga facility, with two LNG liquefaction trains and a total capacity of 7.6 million metric tons (370 Bcf) per year. The Bintulu facility as a whole will then be the largest LNG liquefaction center in the world, with a total capacity of 23 million metric tons per year (1.1 Tcf).

Apart from its existing customers, Petronas will be selling some of the gas from MLNG Tiga to Enron’s Metgas project in India. Malaysia also has sold some spot LNG cargoes to Coral Energy of the United States.