Malaysia Oil and Gas Report Q1 2011

Report Summary

The latest Malaysia Oil & Gas Report from BMI forecasts that the country will account for 1.78% of Asia Pacific regional oil demand by 2015, providing 8.80% of supply. Regional oil use of 21.42mn barrels per day (b/d) in 2001 will reach an estimated 27.11mn b/d in 2010, then rise to around 30.64mn b/d by 2015. Regional oil production was around 8.35mn b/d in 2001, and will average an estimated 8.91mn b/d in 2010. It is set to decrease slightly to 8.89mn b/d by 2015. Oil imports are growing rapidly, because demand growth is outstripping the pace of supply expansion. In 2001, the region was importing an average of 13.07mn b/d. This total will rise to an estimated 18.20mn b/d in 2010, and is forecast to reach 21.75mn b/d by 2015. The principal importers will be China, Japan, India and South Korea. By 2015 the only net exporter will be Malaysia.

In terms of natural gas, in 2010 the region is expected to consume 489bn cubic metres (bcm) and demand of 633bcm is targeted for 2015. Production of an estimated 412bcm in 2010 should reach 548bcm in 2015, implying net imports rising from around 77bcm to 84bcm. This is thanks to many Asian gas producers being major exporters. Malaysia’s share of gas consumption in 2010 is an estimated 6.55%, while its share of production is put at 16.99%. By 2015, its share of gas consumption is forecast to be 5.56%, with the country accounting for 15.51% of supply.
For 2011, there is considerable oil demand and oil price uncertainty, but still a very strong possibility that oil will trend higher. Economic growth may have been subdued late in 2010 and into early 2011, but should still support meaningful oil demand increases. Non-OPEC supply is likely to emerge only slightly higher so, with continued OPEC discipline, the foundations have been laid for an oil price rise – albeit falling well short of the improvement seen this year. It seems likely that the 2010 average OPEC basket price will have emerged around the US$77.00 per barrel (bbl) level, representing a year-on-year (y-o-y) gain of approximately 27%. Progress towards at least US$80 is seen as achievable in 2011.

BMI believes that Malaysian real GDP will increase by 4.9% in 2010, with average annual growth of 5.1% forecast for 2010-2015. State-owned Petronas operates in partnership with various international oil companies (IOCs) under a production sharing system that we believe will result in oil production of 782,000b/d by 2015. Consumption is forecast to rise by up to 2% per annum to 2015, implying demand of 547,000b/d. Malaysia’s gas exports are set to rise from an estimated 38bcm in 2010 to almost 50bcm in 2015, with production climbing from an estimated 70bcm to 85bcm over the period.

Between 2010 and 2020, we are forecasting a 4.02% decrease in Malaysian oil production, with crude volumes peaking at 790,000b/d in 2014. Oil consumption between 2010 and 2020 is set to increase by 21.42%, with growth slowing to an assumed 1.5% per annum towards the end of the period and the country using 589,000b/d by 2020. Gas production is expected to rise from an estimated 70bcm in 2010 to a possible 100bcm by 2019/20. With demand growth of 22.53%, this provides an export capability peaking at 61.6bcm in 2019, largely in the form of liquefied natural gas (LNG). Details of BMI’s 10-year forecasts can be found later in this report, which provides regional and country-specific projections. Malaysia is now ranked fifth, behind Vietnam, in BMI’s composite Business Environment (BE) league table. Its strong showing reflects the country’s fourth place in BMI’s updated upstream Business Environment ratings, reflecting a strong resource position and a moderate gas output growth outlook, offset by extensive state involvement. The country is just one point behind Vietnam, but two points ahead of Papua New Guinea (PNG). Malaysia ranks 13th, behind Hong Kong, in BMI’s downstream Business Environment ratings, reflecting its limited refinery capacity expansion plans, sluggish oil and gas demand growth outlook and relatively high level of retail site intensity.

Table Of Contents

SWOT Analysis  9
Malaysia Political SWOT  9
Malaysia Economic SWOT  10
Malaysia Business Environment SWOT  11
Malaysia Energy Market Overview  12
Global Oil Market Review  15
Regaining Momentum  15
Quarterly Trends  16
Global Oil Market Outlook  18
Sitting Comfortably  18
Oil Price Forecasts  19
Oil Supply, Demand And Price Outlook  20
Short-Term Demand Outlook  20

Table: Global Oil Consumption (000b/d)  21

Short-Term Supply Outlook  21

Table: Global Oil Production (000b/d) 22

Longer-Term Supply And Demand  23
Oil Price Assumptions 25

Table: Crude Price Assumptions 2010  25

Table: Oil Price Forecasts  25

Regional Energy Market Overview  26
Oil Supply And Demand  26

Table: Asia Pacific Oil Consumption (000b/d)  27

Table: Asia Pacific Oil Production (000b/d)  28

Oil: Downstream  29

Table: Asia Pacific Oil Refining Capacity (000b/d)  29

Gas Supply And Demand  30

Table: Asia Pacific Gas Consumption (bcm)  30

Table: Asia Pacific Gas Production (bcm)  31

Liquefied Natural Gas 32

Table: Asia Pacific LNG Exports/(Imports) (bcm)  32

Business Environment Ratings  33
Asia Pacific Region  33
Composite Scores 34

Table: Regional Composite Business Environment Rating  34

Upstream Scores  35

Table: Regional Upstream Business Environment Rating 35

Malaysia Upstream Rating – Overview  36
Malaysia Upstream Rating – Rewards  36
Malaysia Upstream Rating – Risks  36
Downstream Scores  37

Table: Regional Downstream Business Environment Rating  37

Malaysia Downstream Rating – Overview  38
Malaysia Downstream Rating – Rewards  38
Malaysia Downstream Rating – Risks 38
Business Environment  39
Legal Framework  39
Infrastructure  40
Labour Force  42
Foreign Investment Policy  43
Tax Regime  44
Security Risk  45
Industry Forecast Scenario  46
Oil And Gas Reserves  46
Oil Supply And Demand  46
Gas Supply And Demand  47
LNG  48
Refining And Oil Products Trade  48
Revenues/Import Costs 49

Table: Malaysia Oil And Gas – Historical Data And Forecasts  50

Other Energy  51

Table: Malaysia Other Energy – Historical Data And Forecasts  55

Key Risks To Forecast Scenario 55
Long-Term Energy Outlook  55
Oil And Gas Infrastructure  56
Oil Refineries  56

Table: Refineries in Malaysia  56

Service Stations  58
Oil Storage Facilities  58
Oil Terminals/Ports  58
Oil Pipelines  59
LNG Terminals  60
Gas To Liquids Plants  60
Gas Pipelines  61
Macroeconomic Outlook  62

Table: Malaysia - Economic Activity  63

Competitive Landscape  64
Executive Summary  64

Table: Key Players – Malaysian Energy Sector  65

Overview/State Role  65
Licensing And Regulation  65
Government Policy  66
International Energy Relations  66

Table: Key Upstream Players  69

Table: Key Downstream Players  69

Company Monitor  70
Petroliam Nasional-Bhd (Petronas)  70
ExxonMobil Sdn Bhd  75
Shell Malaysia  78
ConocoPhillips  81
Murphy Oil  83
BP – Summary  85
LTAT – Summary  85
Chevron – Summary 85
Hess – Summary  85
Talisman Energy – Summary  85
Gulf Petroleum – Summary  86
Total – Summary  86
Newfield Exploration – Summary  87
Oil And Gas Outlook: Long-Term Forecasts  88
Regional Oil Demand  88

Table: Asia Pacific Oil Consumption (000b/d)  88

Regional Oil Supply  89

Table: Asia Pacific Oil Production (000b/d)  89

Regional Refining Capacity  90

Table: Asia Pacific Oil Refining Capacity (000b/d)  90

Regional Gas Demand  91

Table: Asia Pacific Gas Consumption (bcm)  91

Regional Gas Supply  92

Table: Asia Pacific Gas Production (bcm)  92

Malaysia Country Overview  92
Methodology And Risks To Forecasts  93
Glossary Of Terms  94
Oil And Gas Business Environment Ratings  95
Risk/Reward Ratings Methodology  95
Ratings Overview  95

Table: BMI Oil And Gas Business Environment Ratings: Structure  96

Indicators  96

Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology  96

Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology  98

BMI Forecast Modelling  100
How we generate our industry forecasts 100
Energy Industry 101
Cross checks 101
Sources 101

List of Table

Table: Global Oil Consumption (000b/d) . 21
Table: Global Oil Production (000b/d). 22
Table: Crude Price Assumptions 2010 . 25
Table: Oil Price Forecasts . 25
Table: Asia Pacific Oil Consumption (000b/d) . 27
Table: Asia Pacific Oil Production (000b/d) . 28
Table: Asia Pacific Oil Refining Capacity (000b/d) . 29
Table: Asia Pacific Gas Consumption (bcm) . 30
Table: Asia Pacific Gas Production (bcm) . 31
Table: Asia Pacific LNG Exports/(Imports) (bcm) . 32
Table: Regional Composite Business Environment Rating . 34
Table: Regional Upstream Business Environment Rating. 35
Table: Regional Downstream Business Environment Rating . 37
Table: Malaysia Oil And Gas – Historical Data And Forecasts . 50
Table: Malaysia Other Energy – Historical Data And Forecasts . 55
Table: Refineries in Malaysia . 56
Table: Malaysia - Economic Activity . 63
Table: Key Players – Malaysian Energy Sector . 65
Table: Key Upstream Players . 69
Table: Key Downstream Players . 69
Table: Asia Pacific Oil Consumption (000b/d) . 88
Table: Asia Pacific Oil Production (000b/d) . 89
Table: Asia Pacific Oil Refining Capacity (000b/d) . 90
Table: Asia Pacific Gas Consumption (bcm) . 91
Table: Asia Pacific Gas Production (bcm) . 92
Table: BMI Oil And Gas Business Environment Ratings: Structure . 96
Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology . 96
Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology . 98