"New production sharing contracts spurring investments in upstream oil and gas sector"

KUALA LUMPUR: Malaysia's upstream oil and gas sector is gathering momentum, with new production sharing contracts (PSCs) providing the impetus for investments in upstream exploration and production, according to BMI, a Fitch Solutions company.

Petronas has signed PSCs for nine out of 14 blocks and three out of six discovered resource opportunities (DRO) offered under the Malaysia Bidding Round (MBR) 2022. This represents the highest number of awards since 2009.

The MBR 2023 is offering 10 exploration blocks and two DROs.

Petronas said more than 50 oil and gas companies are reported to have participated in MBR 2023.

The awards for the MBR 2023 blocks are expected to be announced in 2024.

In total, Malaysia has awarded 17 PSCs during MBR 2021 and MBR 2022, excluding other PSCs separately signed with TotalEnergies and Shell.

International and regional oil companies, including Shell, Inpex Corp, and PTT Exploration and Production (PTTEP), are reinforcing their commitment to investing in Malaysia's upstream sector, following the government's launch of successive petroleum bidding rounds in 2021, 2022, and 2023.

"Currently, more than 30 foreign companies, including oil and gas majors and independent players, are currently operating in Malaysia's upstream business," said BMI.

In 2023, Petronas on its own is reported to have spent RM10.5 billion in the upstream segment, not including RM2.6 billion in the natural gas business.

"Apart from Petronas, a significant portion of investments comes from Shell, which announced a final investment decision on the Rosmari and Marjoram sour gas project in September 2022."Shell also signed three new PSCs for exploration blocks offered in both the MBR 2021 and MBR 2022."Additionally, Shell has signed two new PSCs for the SB2K and SB2V blocks in Sabah," it said.

Thailand's PTTEP is emerging as one of the largest foreign investors, followed by Japan's Inpex Corp, which has signed two PSCs for exploration in MBR 2022. BMI said other foreign companies, including Skye UMDP Exploration, SapuraOMV Upstream, Topaz Number One, and Longboat Energy, are expanding their presence in Malaysia by investing in exploration blocks offered in MBR 2021 and MBR 2022.

"These developments all indicate a renewed interest and long-term commitment from foreign investors in Malaysia's upstream oil and gas exploration," it added.

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