Monday 23 December 2019

Project Sanctions

With the Asia Pacific region expecting a major increase in project sanctions with Australia set to lead the way. With a US$29.5 increase in development expenditure and a 3.4 billion expected increase barrels of oil equivalent (boe) of resource expected to be sanctioned compared to 2019.

Exploration

2019 was a record year for exploration. However, in 2020 the focus will switch to delineating some of the key discoveries over the last 12 months. Appraisal drilling at Repsol’s Kali Berau Dalam, Eni’s Ken Bau, PTTEP’s Lang Lebah, and CNOOC’s Yongle 8-3 will prove up commerciality ahead of development planning.

M & A Opportunities

There is still a strong pipeline of assets for sale. The big players have US$18 billion worth of non-core assets in Asia Pacific alone. What's more divesting late-life assets, low-return, pre-FID projects and positions with limited growth potential will be of significant focus for companies.

Energy Transition

Until recently energy needs national has been prioritised over environmental concerns when it came to upstream development decisions. However, as awareness of the energy transition has accelerated across the industry. Now environmental, social and governance (ESG) criteria is influencing company strategy and investor behavior.

2020 could be the year for more Asian Pacific asset divestments as companies seek to reduce carbon-intensive assets.

IMO 2020 impact extends to Southeast Asian gas producers

Starting from the 1st of January 2020, the impact of the new IMO regulations which govern sulphur content in marine fuels will be vast. As lower demand and thus lower prices for high-sulphur fuel oil (HSFO) will have a direct impact on regional upstream cashflow. This can be seen in the fact that most of the gas supplied from Peninsular Malaysia, the West Natuna Sea and South Sumatra is priced with a linkage to HSFO.

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