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.