Driven by energy security concerns, Southeast Asia’s oil-producing countries are seeking to revive the upstream industry. Malaysia, Indonesia, Vietnam and Thailand are competing for upstream investments from both local and international companies, according to research by BMI, a Fitch Solutions company. The following is a look at the current state of play:
– Foreign investment inflows into the oil and gas sector of Malaysia in 2022 stood at 287 million ringgit (US$61.7 billion), accounting for 47% of the country’s total investment. Foreign investments are expected to rise further in 2024 as the state oil company Petronas is expected to announce new production-sharing contracts (PSCs) for oil and gas blocks offered in the 2023 petroleum bidding round.
– Indonesia appears to be leading the competition with significant commitments from both local and foreign investors. The country has managed to attract new upstream investors, including South Korea-based Posco International, and commitments from existing players since it launched petroleum licensing rounds in 2021 and 2022.
Indonesia saw a spike in investments in the upstream sector, with total investments rising by 10% from $12.2 billion in 2022 to $14.8 billion in 2023. The $3-billion development plan for the Tuna offshore gas field, operated by Harbour Energy, is one of the largest development projects approved by the Indonesian state energy group SKK Migas in 2023.
– Vietnam is seeking to improve the competitiveness of its upstream oil and gas industry by offering greater incentives for oil and gas companies to invest.
In November 2022, the National Assembly approved amendments to the Law on Petroleum (2008). These amendments include a reduction in the corporate tax rate from 32% to 25%, a halving of the crude oil export tax to 5%, and an increase in the cost recovery rate from 70% to 80% for blocks and fields entitled to special investment incentives.
– Foreign investment in Thailand remains lukewarm towards the upstream sector due to dwindling reserves and the lack of new discoveries. Currently, only two PSCs held by PTTEP are active in Thailand. The acquisition of key upstream assets by PTTEP from Chevron, along with divestments by Shell and TotalEnergies from the upstream industry, was a major setback for Thailand. Chevron and Mitsui Oil Exploration remain the largest foreign players in the country.
Thailand is not in a better position to compete with Malaysia and Indonesia, where upstream industries are recovering quickly. Thailand has limited options but to look into overseas assets in neighbouring countries such as Malaysia, Vietnam, Myanmar and Indonesia. PTTEP is currently ramping up investments in upstream gas projects in Malaysia, alongside existing investments in natural gas and LNG-related upstream projects. Source: Bangkok Post
