KUALA LUMPUR – Across Southeast Asia, benchmark crude oil prices near US$70 a barrel have triggered fresh exploration and development activity in countries ranging from Indonesia, an original Opec exporter that is now a net importer after years of declining output, to Cambodia, which has never produced oil but may have huge offshore reserves.

With countries like China, Japan, Korea and India on its doorstep, competing for supplies, the region is witnessing significant developments in exploration and production, including the opening of deeper-water exploration blocks in Malaysia and new fields in Indochina, the building of new pipeline infrastructure and the adoption of more investment-friendly tax and revenue-sharing rules, industry analysts say.

In Malaysia, the deep water Kikeh field off Sabah, northern Borneo, discovered by Murphy Oil in 2002 and estimated to hold 350 million barrels of crude oil, is expected to come into production this year following an agreement with the neighboring sultanate of Brunei to end delays caused by a territorial dispute.
Also in deep water off Sabah, the 400 million-barrel Gumusut-Kakap field, discovered in 2003 and operated by Murphy and Royal Dutch Shell, is set to start production within five years.

Other deep water finds off Sabah include the Ubah and Malikai fields. Because deep-water finds are not typical of the region, these projects will require the importation of technology and expertise, adding to the cost and complexity of development, but they also should position Malaysia closer to its long-term aim of becoming the region’s center for deep-water discovery, say officials at the national oil company, Petronas.

The Malaysian government is not only pushing oil field development. Earlier this month it approved construction of a $14.2 billion pipeline stretching 200 miles, or 320 kilometres, across the northern peninsula states of Kedah and Kelantan. The pipeline, to be financed in part by the National Iranian Oil Co. and partly by Malaysia state-sector and private companies, will provide a short-cut alternative to sending tankers through the narrow Malacca Straits, a congested transit route for about half the world’s oil shipments.

Vietnam, the third largest oil producer in the region behind Indonesia and Malaysia, with production of around 350,000 barrels a day, is also aggressively trying to increase output as foreign investment soars. Plans to open bidding for seven offshore exploration blocks are currently under review, said Hoang Ngoc Dang, a senior Vietnamese oil exploration official. The blocks are in fairly shallow waters, with an average depth of 60 to 100 metres, or 200 to 330 feet, in the Song Hong Basin, off northern Vietnam.

Vietnam has between 4 billion and 4.5 billion metric tons – or 30 billion to 33 billion barrels – of crude reserves, and drilling activity has nearly doubled there since 2005, said Hazel Cameron, an analyst at Wood Mackenzie. Most of Vietnam’s oil production comes from the Cuu Long basin, off southern Vietnam.

Three oil fields, Ca Ngu Vang, Su Tu Vang, and Te Giac Trang, in the Cuu Long basin, contain an estimated 700 million barrels and may be on stream by 2010. Last month, Japan-Vietnam Petroleum said a new discovery off the country’s south coast might contain reserves of nearly 37 million barrels, according to the state-run Viet Nam News Agency.

Meanwhile, the state-owned company Vietnam Oil & Gas, known as PetroVietnam, may invest $6 billion for oil and gas exploration projects through 2010, as part of an effort to increase oil output to 440,000 barrels a day by 2009, according to officials. Earlier this month the government said it would scrap fuel price caps in a bid to encourage investment in the oil sector.

Indonesia will also try to improve the business and investment climate in its oil sector, President Susilo Bambang Yudhoyono said this month. Indonesia is now producing just under one million barrels a day, down from an average of just over one million a day last year, according to International Petroleum Monthly.

Complications in taxation due to differing regional and national policies, security issues and overlapping land ownership have deterred investment, as have contract terms under which 15pc of oil revenue goes to the producers and 85pc to the government. In April, however, the state oil company Pertamina said it would invite foreign companies to join in exploration and production work and negotiate the revenue split on a case-by-case basis.

Aging oil fields have led to a slip in production, and Indonesia became a net importer in 2004. The government is now targeting a 30pc increase in output, to 1.3 million barrels a day, by 2009. Among other steps, it has put heavy pressure on Pertamina to resolve a four-year dispute with its partner Exxon Mobil and start production from the Cepu oil block, the country’s biggest untapped reserve, by the end of next year. The $2.6 billion project, bordering East Java and Central Java, is estimated to hold 600 million barrels of oil and 1.7 trillion cubic feet of gas.

– International Herald Tribune