Malaysia has ample room for higher crude output

Malaysia has ample room for higher crude output

SINGAPORE (Reuter): Malaysia has ample room to raise crude production by as much as 100,000 barrels per day (bpd), or 15 percent, in response to Prime Minister Mahathir Mohamad's call for more output.

Raising gas production was also possible, but would be problematic because of the long-term lead time needed in the gas market.

Late last week, Mahathir called on state oil company Petronas to raise oil output. On Thursday, he said natural gas production would also be increased.

Both measures were geared to helping foreign exchange earnings as part of the wider package of moves by Malaysia in recent weeks to stave off the sell off of the ringgit and the stock market.

The sell off has sparked fears the country's trade deficit will widen.

Earlier on Friday, Malaysia reported a 900 million ringgit ($300 million) deficit for July, taking the year-to-date deficit to 3.6 billion ringgit, indicating the economic woes were far from over.

Malaysia currently produces around 630,000 bpd of crude, of which around 275,000 bpd are exported. It has reserves of four billion barrels, indicating current production could last for another 15 years before the oil ran out.

Malaysia's gas production was estimated around 3,600 million cubic feet of gas per day, 60 percent of which is exported, amid the highest estimates reserves in Asia of 80.2 trillion cubic feet.

"Malaysia's crude output has been held steady, but can rise by 100,000 barrels per day, and it can be done within a few months," said an analyst in Singapore.

"There is also a potential to raise gas production. But you can't just increase gas output without having a buyer at the other end. LNG contracts are long term, around 20 years," said another analyst, in Europe.

Almost all of Malaysia's exported gas is in the form of liquefied natural gas (LNG) on long term contracts to Japanese companies.

"Malaysia has big plans to raise its gas output. But these will only be ready in the next five years. It intends to take over LNG contracts that Japanese companies have with Indonesia.

But these are only up for renewal in 2002/2003," he added. Petronas officials said crude production had already been moved up by 20,000 bpd to 650,000 bpd. Some said this was in response to Mahathir's call, while others attributed it to expected winter demand.

Malaysia's crude output has been kept steady around the 630,000 bpd market for the last two years to comply with a National Depletion Policy to extend the life of Malaysian crude fields.

However, if the rise in production related to increased demand for winter, it could signal Malaysia was abandoning its depletion policy, one analyst said.