M'sia, RI vie for oil in troubled waters

M'sia, RI vie for oil in troubled waters

Reuters, Kuala Lumpur

Malaysia could challenge neighbor Indonesia to become Southeast
Asia's top oil producer, in a high-stakes rivalry underscored by
a tense dispute over little-explored waters off Borneo.

Malaysia's output is estimated to be less than 200,000 barrels
per day (bpd) behind Indonesia and its quest for oil and gas is
taking it into deeper waters and grey areas of sovereignty where
drilling can be deemed a hostile act.

Indonesia has sent warships and fighter jets to waters where
the two countries had awarded overlapping concessions to major
oil companies.

Crude oil production in Indonesia fell to a 34-year low in
February at 940,000 bpd, compared with almost 1.6 million bpd in
the early 1990s. Malaysia is pumping 750,000 bpd, state oil firm
Petronas said.

"It's possible to see a renaissance in Indonesian production,
but the recent trend has been declining," said Noel Tomnay, vice
president for Asia Pacific at energy research consultancy Wood
Mackenzie.

"Though there has been so much exploration success in the
waters off Sabah, none of it has been monetized," Tomnay said,
referring to the waters off Borneo island.

"One can be fairly confident of seeing a billion-plus barrels
of oil in undeveloped reserves there."

Oil major BP reckons that at the end of 2003, Malaysia has 4.0
billion barrels of proved oil reserves and Indonesia 4.4 billion
barrels. But Malaysia has had a string of high-profile
discoveries in deepwater off Sabah since the early 2000s with
estimated reserves of 300 million up to at least 700 million
barrels each.

"Malaysia, I would say, could, if it wanted to, produce
900,000 to a million barrels (daily) within two to two and a half
years," said Al Troner, managing director of Asia Pacific Energy
Consulting, which is based in Seattle.

Investment in Indonesia exploration, however, has fallen
sharply in recent years due to a lack of clarity in legal, fiscal
and regulatory frameworks, suffocating bureaucracy and rising
costs.

Deepwater drilling technology has enabled oil companies to
explore for reserves that can lie well over 2 km below the waves
and were previously ignored as uneconomic.

Indonesia and Malaysia are Southeast Asia's biggest producers
of oil, but are grappling with declining output from maturing
fields.

But a dash for deepwater prospects has led separate disputes
between Kuala Lumpur and neighbor Brunei as well as Indonesia.

Indonesia protested in February when Petronas awarded two
blocks in the Sulawesi Sea to local unit Petronas Carigali and
Shell Malaysia Last year, Jakarta awarded Unocal Corp. acreage in
the area.

Interest among global oil firms in Malaysia's deepwater has
grown since 2002, when U.S. firm Murphy Oil announced the major
Kikeh discovery off Sabah in a 1.62 million hectare area with
reserves estimated at 400 million to 700 million barrels.

This month, Malaysia gave exploration rights to U.S. energy
firm ConocoPhilipps for a deepwater block off Sabah, putting it
in the running with Murphy and Shell for a bigger slice of the
country's deepwater riches.