Southeast Asian crude well into the black: Consultants

Southeast Asian crude well into the black: Consultants

SINGAPORE (Reuters): Oil prices would have to plunge back to around 12-year lows before even a fraction of Southeast Asia's oil production became uneconomical, energy consultants Wood Mackenzie said in a report.

At benchmark Brent prices of US$10 per barrel, only two percent of the region's oil production would be uneconomical, it said.

At $9 per barrel, around 300,000 bpd or six percent of output becomes uneconomical, doubling to 12 percent at $6 per barrel.

Mackenzie carried out a study of oil field viability after oil prices plummeted in 1998 to their lowest annual average in more than 20 years. Brent averaged $13.34.

In December last year Brent fell as low as $9.64 per barrel, a 12-year low, but has recovered to close on Thursday at $16.45.

The study covered 4.7 million bpd of oil equivalent production in Southeast Asia, of which around 45 percent is gas. This included all production in Malaysia and Thailand, 94 percent of Indonesian production and 32 percent of Vietnam's production. However, only 7.5 percent of China's production was covered in the study. National oil companies were excluded.

In more detail, Thailand would break even on a weighted average basis at a price as low as $2.10 per barrel because a large element of its production is supported by gas, the pricing of which is largely insulated from oil prices.

Malaysia was estimated to break even at $4.40 per barrel, while Indonesia's break-even price was around $2.53.

Mackenzie said 62 percent of Indonesia's production was onshore and that only five percent of it failed to break even at $5 Brent. But at the same price a third of offshore production failed to break even.

Vietnam, where costs are much higher, including a high government take, the break-even price is around $10, basis Brent. On a global perspective, Mackenzie said production would not be affected at a Brent crude price of $14 to $15 per barrel.

At $12, about 225,000 bpd would be uneconomical. At $10, the figure would go up to 600,000 bpd and would accelerate to one million bpd at $9 and two million bpd at $8.