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.