Southeast Asian oil output seen declining

Southeast Asian oil output seen declining

CANBERRA (Reuter): Crude oil production in the Southeast Asian
region will decline to around 4.6 millions barrels per day (bpd)
in 2005 from a 1996 peak of around 5.7 million bpd unless major
new exploration investment is undertaken, BHP Petroleum's Michael
Baugh said.

At the same time, demand will rise to 8.35 million bpd in 2005
from 5.19 million in 1995, Baugh, BHP Petroleum's president
Asia/Australia region, told the Australian Bureau of Agricultural
and Resource Economics (ABARE) Outlook conference.

He said the key factors driving this anticipated decline in
production are:

The maturity decline in the major oil provinces in Indonesia,
China and Malaysia and

Insufficient incentives for exploration in relatively
unexplored basins in remote areas and deep water given --
geological risk, development and production risk, lack of
infrastructure, commercial complexity and uncertainty, low oil
price outlook.

Baugh defined the Southeast Asian region as Brunei, Cambodia,
China, Indonesia, Malaysia, Burma, the Philippines, Thailand and
Vietnam.

The anticipated growth in oil import dependency will constrain
regional economic growth as national earnings are diverted to
secure transport fuels and will accentuate security tensions, he
said.

While all the countries in the region except Brunei will be
net importers by 2005, the forecast shortfalls of 0.5 million bpd
for Indonesia and 2.0 million bpd for China comprises 66 percent
of the total regional shortfall of 3.8 million bpd.

Baugh said Indonesia has cautiously moved to promote
exploration activity for remote and deepwater contract areas in
four incentive packages between August 1988 and January 1994.

But the poor response appears to indicate that much more
substantive incentives will be required to reverse the decline of
exploration activity and to shift the focus of exploration to the
large relatively unexplored basins of eastern Indonesia.

Baugh said the Chinese claims to the Paracel and Spratley
Island groups in the South China Sea are understandable in the
context of Chinese priority on energy self sufficiency.

Baugh said a review of world fiscal terms by Van Meurs &
Associates in 1994 indicated U.K. offshore terms provided a
benchmark for investors wishing to invest in a world class oil
province. Government take in the North Sea is 33 percent.

"The remarkable 'resilience' of North Sea oil production in
recent years ... is a result of investor confidence."

At the other end of the scale, conventional terms for
Malaysia, Indonesia and Burma are uneconomic at today's oil
prices even if exploration risk is eliminated, he said.

Government take for these countries ranges from 79 to 89
percent.