Royal Dutch Shell Plc and Petroliam Nasional Bhd will jointly invest US$12 billion over 30 years to recover oil off Malaysia’s Sarawak and Sabah coasts as the country seeks to extend the life of its diminishing reserves.
The production-sharing partners aim to extract 750 million barrels of oil from the two projects by increasing recovery rates, Shamsul Azhar Abbas, chief executive officer of Petroliam Nasional, or Petronas, said in a speech today in Putrajaya, near Kuala Lumpur. This should extend the fields’ lives beyond 2040, he said. Petronas and Shell first announced the tie-up in November.
Prime Minister Najib Razak announced in 2010 incentives, including tax breaks, to encourage the exploration of less- profitable fields in a bid to extend the life of Malaysia’s petroleum reserves. Petronas has since increased offshore drilling with local and overseas partners, including Petrofac Ltd., to boost the nation’s underground holdings of oil and gas.
“These are challenging times for our industry,” Shamsul said. “Competition for depleting resources continues to drive the need to lower operating costs and to increase both hydrocarbon discoveries as well as recovery rates of existing fields.”
Shell’s Malaysia unit will hold a 40 per cent stake in the so-called Baram Delta oil recovery project and an equal holding in the North Sabah project, according to today’s Petronas statement.
“The resulting improvement in the recovery efficiency of the oil fields and will have a positive impact on Malaysia’s oil reserves and benefit the country as a whole, adding further value to the country’s upstream oil and gas industry,” Peter Voser, Shell’s chief executive officer, said in his speech today.
