Regional oil production to dwindle in 5-10 years

Regional oil production to dwindle in 5-10 years

SINGAPORE (Reuters): Oil production in Asia Pacific will
decline over the next 5-10 years as key oilfields reach maturity
with few new major finds to replace them, oil analysts said on
Thursday.

Developing gas markets and high oil prices may hold some
incentive for exploration but new oil prospects in Asia are dim,
they said.

Lower output can be expected from major exporters like
Indonesia and Malaysia -- whose crudes are currently used as
price benchmarks for the region.

"New regional production is limited. As every year goes by and
reserves are not being replaced, the decline in production is
inevitable," said Gavin Law, head of Asia-Pacific Energy at oil
research firm Wood MacKenzie.

"Not taking into account additional reserves yet undiscovered,
Asian production will be on the decline over the next few years,"
Law said.

Other analysts like oil consultant FACTS Inc director
Widhyawan Prawiraatmadja were less negative, projecting that
production may rise to eight million barrels-per-day (bpd) from
the current 7.6 million bpd over the next 10 years.

But that is the best case scenario, he said.

"The more likely scenario is that it will stabilize in the
next five years, and start to decline after that," Prawiraatmadja
said.

Lower production means Asia will have to rely more on oil
imports from other regions like the Middle East, Africa and Latin
America to supplement its own oil.

Despite its recent economic crisis, Asian oil demand is still
growing strongly with consumption for 2001 expected to rise 2.2
percent to 20.45 million bpd, according to the last Reuters poll.

Asia's major oil exporter Indonesia produced about 1.639
million bpd oil in 1996 but its output,including condensates, is
expected to fall to 1.375 million bpd for 2001, analysts said.

Indonesia's output has been falling since 1997 on political
unrest in the Riau province, which accounts for half of its total
production.

The country -- Asia's only member of oil cartel Organization
of the Petroleum Exporting Countries (OPEC) -- has seen reserves
run down at its mature Sumatran Minas crude oilfield.

Malaysia's oil output has been stable due to a strict national
depletion policy and also helped by recent start-ups like Masa,
but is also set to drop in about five years time, analysts said.

By 2006/2007, Malaysian output will start to fall from current
levels of about 700,000 bpd, Wood MacKenzie's Law said.

Prospects, however, are buoyant as Malaysia recently
introduced policies more encouraging towards commercializing
marginal fields with small reserves.

New discoveries, although comparatively small, have stalled
output decline in some countries like Australia and Vietnam.

"There is small chance for a big find," FACT's Prawiraatmadja
said. "Some reserves continue to be found but it's not going to
change the overall picture."

Australia's Laminaria and Legendre, Vietnam's Rang Dong, Ruby,
Malaysia's Masa and Thailand's Benchamas and Brunei's Bebatik are
new oilfields that became commercial in the last few years but
together barely add 300,000 bpd more to Asian output.

However, they have helped boost Vietnam's and Australia's
individual output, again offsetting more mature fields like Bach
Ho and the Bass Strait.

Analysts estimate that Vietnam production rose 55 percent from
1997 to current levels of about 320,000 bpd but add that it
started from a low base.

Australian production will rose by 23 percent from 1999 to
660,000 bpd now, after accounting for the new fields, they said.
Other producers in Asia -- Brunei, India, Thailand, Pakistan and
Papua New Guinea -- are likely to see more gradual growth or flat
oil output.

These producers contribute about 1.1 million bpd to Asian
output.

For Asia's future, three production basins with new
discoveries hold promise, analysts said.

These are Indonesia's Banyu-Urip in Cepu, Java, China's
offshore Bohai Bay and Vietnam's Sutu Den in Cuu Long Basin.

More production, if any in Asia, are expected to emerge from
these areas.

"There is big potential in offshore China's Bohai Bay," Gordon
Kwan, Hong Kong based HSBC analyst said.

But he added that this may serve to offset China's current
dwindling onshore prospects like Daqing and Shengli. China's oil
production stands at about 3.15 million bpd.

Recent estimates put Bohai reserves at 800 million barrels,
Banyu-Urip at about 250 million barrels, and Sutu Den at about
250-400 million barrels.