Drilling, deepwater projects face uncertain future in Southeast Asia
March 31, 2020
Offshore staff
OSLO, Norway – Southeast Asia’s rig market looks set to decline this year, with various oil companies in the region already making significant cuts to their 2020 capex budgets due to the current global conditions, according to Rystad Energy.
The analyst pointed out that E&P companies in Southeast Asia have been very cautious, locking in rigs on long-term contacts, with options unlikely to will be exercised.
If no new contracts are signed and no options exercised for the remainder of 2020, rig utilization will fall by 54% throughout the region from March to December - equivalent to an 18% year-on-year decline from 2019 levels.
Petronas has 40% of options in the regional market for 2020. The company is striving to keep its operations running as smoothly as possible, Rystad said, and rigs staffed by local crews might not be greatly inhibited.
However, following Malaysia’s recent announcement of a two-week extension to the country’s lockdown, several rigs operating in the country are expected to scale back activity in the next few weeks due to crew timeouts.
Most of the planned drilling programs in Southeast Asia this year are for brownfield projects, and the analyst expects operators to scale back their infill drilling budgets.
“On a slightly more positive note,” said the company’s senior oilfield service analyst Jo Friedmann, “existing rig contracts probably face less danger of being terminated in Southeast Asia – where national oil companies tend to support the national drilling contractor – than in other regional markets.”
Lower oil prices will likely slow sanctioning activity in the region, which will mean less demand for drilling and completion services and for general offshore oilfield services. And as with the previous downturn, sanctioning of long-cycle deepwater projects seems likely to slow.
New deepwater projects under review also appear set for delays, with INPEX’s Abadi project offshore Indonesia, the Limbayong project in Malaysia, Shwe Yee Htun in block A6 off Myanmar, and the Kelidang Cluster in Brunei, are potentially at risk in the current oil price environment.
03/31/2020
