Upstream: A Bright Future for Hess - and Malaysia
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Upstream: A Bright Future for Hess - and Malaysia

  • NorthMalay_FirstProduction

Author: Russel Searancke
11 October 2017

US independent Hess recently generated first production from the full-field phase of its $5 billion North Malay Basin gas and condensate project in Malaysia, but start-up signifies more to Hess than just another successful field development.

Firstly, the project has become an important growth asset for Hess, and secondly the company is making a big contribution to Peninsular Malaysia’s security of gas supply. Gerbert Schoonman, Hess’ vice president for global offshore production, adds that the North Malay project has transitioned from being “a large capital investment to being a significant cash generator moving forward”.

North Malay currently equates to net production of about 25,000 barrels of oil equivalent per day and, within the context of Hess’ global portfolio, represents a major increase. Along with a planned ramp-up in production in the Bakken shale play in the US area, North Malay is a key growth story for Hess, Schoonman says. The company has long had a presence in South-East Asia, and is not a newcomer to Malaysia, having bought an interest about two decades ago in the prodigious Block A-18 production asset in the Malaysia/Thailand joint development area. Block A-18 is operated by the Carigali Hess Operating Company, and it is the long experience garnered through this joint operatorship that gave Hess the skills and knowhow to embark on the North Malay project.

The North Malay area is immediately south of Block A-18, where Schoonman says Hess had learned how to “optimise gas production from these types of reservoirs”. Water depths in the North Malay area average 55 metres, and there are multiple gasbearing zones at depths of between 1000 metres and 3000 metres. In 2011, there were concerns about gas shortages in Peninsular Malaysia, which is where about 80% of Malaysia’s population resides.

Hess quickly identified a commercial opportunity to move ahead with a fast-track gas development, but the company only had one permit at that time, PM302, which contained the Kamelia field. Everything changed in mid-2012 when Hess and Petronas signed a series of agreements to create the North Malay Basin Integrated Gas Development project, with Hess and Petronas Carigali on a 50:50 equity basis and Hess as operator. Block PM302 was enlarged to include nine discovered gas fields, while two exploration permits — PM325 and PM326B — were awarded to Hess and Petronas Carigali. The nine discoveries were made more than a decade previously by Petronas Carigali and a Shell-Petronas Carigali joint venture, but by themselves were not economic to develop — integrating them was the key to unlocking them.

Hess swung into action with the Kamelia project, for which it already had a field development plan. Kamelia, therefore, became the initial phase, or early production system. The concept for Kamelia was a wellhead platform that was based on a design similar to those platforms in Block A-18, and the leased floating production, storage and offloading vessel Perisai Kamelia (formerly the Lewek Arunothai).

Kamelia was brought on stream in October 2013, and since then is understood to have generated about 40 million cubic feet per day of gas production net to Hess. All North Malay gas is sold at an oil-indexed price into Peninsular Malaysia.

A 300-kilometre pipeline transports the gas to the Terengganu Gas Terminal in Kertih, which Petronas has said uses a proprietary membrane technology for carbon dioxide removal.

Reprinted with permission

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