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Shell wins Malaysia offshore exploration block

A drilling rig being towed offshore Sarawak, Malaysia
A drilling rig being towed offshore Sarawak, Malaysia

Shell has snapped up new exploration acreage in Malaysia offshore the state of Sarawak in a move that underscores the supermajor’s commitment to country’s upstream sector.

Significantly, Sarawak state-energy company Petroleum Sarawak (PETROS) will hold a minor stake in Block SK437, marking its first involvement in an offshore exploration production-sharing contract (PSC).

Shell will operate the 2,015 sq km block, which lies southwest of the Central Luconia province in waters 50 metres deep, with an 85% interest. Malaysian national oil company (NOC) Petronas Carigali and PETROS will each hold a 7.5% stake in the acreage.

Since the 1970s, significant oil and gas reserves have been discovered offshore the eastern Malaysian state of Sarawak, which have helped supply one of the world’s largest liquefied natural gas (LNG) export plants in Bintulu.

Crucially, there has been widespread resentment in East Malaysia over how the region’s natural resource wealth has been managed and distributed in the past. Although the area produces much of the nation’s petroleum wealth, Sarawak and the neighbouring state of Sabah remain much less developed than Peninsular Malaysia. Sarawak intends to reverse this trend.

Petronas surrenders to Sarawak tax demands as CEO walks

Sarawak, after winning a recent battle against the federal government and national oil company Petronas for greater control of its natural resources, has hit another milestone with its maiden participation in offshore exploration.

PETROS said it will be free carried during the exploration phase and that its participation offers the opportunity to expand its role in exploration activities offshore Sarawak.

Besides Block SK437, the Sarawak state-energy company holds 50% interests in the MLNG Satu PSC and Kumang Cluster PSC, which are producing offshore Sarawak.

Petronas, which is seeking to boost upstream investment in Malaysia, said the latest award will bolster exploration in the Southeast Asian nation, in particular off Sarawak.

Moreover, Shell’s participation sends a positive signal for the Malaysian upstream sector, especially as other majors, such as ExxonMobil seek to exit the country. Shell is looking to divest its non-operated stakes in Malaysia but will retain its operated projects as the country remains a core focus area.

Shell seeks to divest Malaysia assets

Currently, Shell has interests in 15 PSCs in Malaysia, of which eight are located off Sarawak, whilst the remaining seven are off the coast of Sabah.

“Indeed, this new award is a further testament of Malaysia’s attractiveness as a global investment destination. Under our ‘right asset, right player’ strategy, supported by a progressive fiscal regime, we hope to unlock the full potential of the hydrocarbon resources in Malaysia, thus maximising value for our partners and PETRONAS as the custodian of the national hydrocarbon resources,” Petronas said in a statement yesterday.

Potential investors seeking to invest in Malaysia can participate in the Malaysia Bid Round 2021 (MBR 2021) which is currently ongoing with the bid submission deadline set on 3 September 2021.

Petronas readies 13 blocks for 2021 offshore round

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