Strategic initiatives are attracting investors and oil contractors to Asia Pacific's offshore energy markets, enhancing security and economic growth in the region. As countries tap local resources to meet growing demand, the region presents exciting opportunities for investors, energy companies and the interconnected shipping and logistics sectors.
The oil and gas (O&G) sector is experiencing a resurgence across the region, while countries such as South Korea, Taiwan and Vietnam are transitioning to cleaner energy sources and embracing environmental sustainability.
Malaysia is prioritizing traditional oil and gas projects, especially offshore drilling, following the discovery of large offshore reserves totaling more than 1 billion barrels last year. According to BMI analysts, Malaysia's oil and gas sector is playing a role in attracting investors and petroleum agreement contractors (PACs), as evidenced by its active participation in recent oil bidding rounds.
Offshore oil and gas discoveries in both Malaysia and Indonesia are spurring renewed investment, reflecting new confidence after the 2015 oil price collapse.
The Energy Council's regional spotlight report highlights that Southeast Asia's oil and gas industry is expanding as markets strategically shift from coal to natural gas, domestic energy demand increases and industrialization advances.
Image courtesy of GAC Malaysia
Increased demand
Global fuel demand is forecast to grow by 1.7 million barrels per day in the first quarter of 2024, driven in part by emerging markets. The tanker business has also seen strong growth since the pandemic, especially for companies with large global contracts such as Shell and Chevron.
According to a recent report by the International Energy Agency (IEA), the current oil demand in the Asia-Pacific region is around 30.8 million barrels per day and is expected to grow to 38.5 million barrels per day by 2030. Countries in the region are turning to local offshore resources to meet growing demand and enhance energy security.
Recent discoveries and strategic initiatives are increasing the attractiveness of Indonesia's oil and gas sector. Plans are underway to deliver new exploration blocks with a focus on unconventional resources in the North Sumatra Basin by mid-2024. These initiatives are complemented by significant amendments to the Oil and Gas Law and the implementation of investor-friendly fiscal policies to streamline the investment process.
In January, Malaysia's state-owned energy company Petronas was awarded production sharing contracts for six exploration blocks in a bidding round for 2023. A new bidding round has been opened to potential investors to explore 10 blocks and clusters. In July, Petronas signed contracts for three discovery resource opportunity (DRO) clusters offshore Peninsular Malaysia.
Malaysia plans to drill about 30 exploration wells this year and 35 in 2025, a significant increase from just eight in 2021. Meanwhile, Indonesia is expected to drill about 40 wells this year, double the number drilled during the pandemic. Exploration in Indonesia is expected to decline slightly in the second half of the decade, but is expected to remain stable in Malaysia through to 2028 due to successful bidding rounds in recent years.
Three-quarters of Asia-Pacific's energy demand growth through 2030 will come from fossil fuels, leading to a significant increase in associated carbon emissions. To meet growing demand and accelerate the transition to clean energy, the region needs to significantly increase investment in the energy sector.
Image courtesy of GAC Malaysia
Energy projects are becoming more localized in the region, working with local partners and suppliers to gain greater control over production. Significant energy projects such as these require significant local support to reach their potential. Unlike projects in Europe and the North Sea, where foreign investors with their own support networks are welcomed, Malaysia mandates offshore energy projects to leverage extensive local support.
The surge in activity has created a need for comprehensive maritime services to meet growing demand. With an integrated shipping, logistics and marine services portfolio, GAC is well-equipped to meet the diverse needs of the energy sector, supporting projects across multiple locations and borders.
GAC Malaysia has expanded its operations nationwide, covering 23 ports across 17 offices. The Labuan office specifically supports the offshore O&G sector as a supply base for offshore projects, as does the Kota Kinabalu office, which opened in August 2023.
Increased activity is creating a steadily growing demand for supply vessels, drillships, floating production storage and offloading (FPSO) vessels, port facilities and yard space to support energy projects. Competition is fierce, especially for effective transfer and de-transfer projects, but experience and expertise are required to adequately support offshore oil and gas and renewable energy projects.
Outlook
Malaysia's future prospects are promising, with new technological developments creating more opportunities for new entrants into the market. The region as a whole is brimming with offshore energy opportunities. Malaysia is an exciting place to be right now.
Strategic investments and regulatory reforms are driving the growth of the offshore energy sector, transforming the region's market environment and strengthening its potential role in meeting global energy demand. For Asia Pacific to realise its energy potential, it is essential that the marine and logistics sectors are able to effectively support these offshore projects, whether they are oil and gas drilling platforms or wind farms.
