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EPP 2
A significant proportion of Malaysia’s remaining resources lay
in fields with less than 30 million barrels of recoverable oil.
Developing these fields in an economically attractive manner is
often challenging, as they need the same expensive infrastructure
as large fields, while the expected revenue streams are smaller
due to the smaller reserve sizes.
Over 2011, PETRONAS and relevant stakeholders have reviewed
the PSC terms and introduced new petroleum agreements
to ensure that operators of these small fields receive enough
economic incentives to make their investment attractive.
Significant work has also been done to attract exploration and
production (E&P) operators that specialise in small fields as well
as facilitating collaboration between players to allow sharing of
facilities and other synergistic measures to improve the economics
of small field development.
Achievements
Developing Small Fields Through
Innovative Solutions
In June 2011, the Petroleum Income Tax Act Bill Amendment was
read and approved in Dewan Rakyat and later in July 2011, it was
approved by Dewan Negara. The amendments will introduce new
tax incentives for the oil and gas sector to unlock and monetise
stranded oil and gas resources.
PETRONAS awarding a risk service contract to the Berantai marginal
field consortium
NKEA: Oil, Gas and Energy EPP 1 – EPP 2
The five new incentives introduced under PITA are:
• An investment tax allowance of up to 60 to 100 per cent of
capital expenditure to be deducted against statutory income to
encourage the development of capital intensive projects in the
area of enhanced oil recovery, high carbon dioxide gas fields,
high pressure high temperature, deepwater and infrastructure
projects for petroleum operations
• The tax rate of 38 per cent currently for marginal oil field
development would be reduced to 25 per cent to improve
commercial viability of the development
• Accelerated capital allowance of up to five years from 10 years,
where full utilisation of capital cost deducted could improve
project viability
• Qualifying exploration expenditure transfer between
non-contiguous petroleum agreements with the same
partnerships or sole proprietor to enhance contractors’
risk-taking attitude, which could encourage higher levels of
exploration activity
• Waiver of export duty on oil produced and exported from
marginal field development to improve project viability
In addition to this, in January PETRONAS awarded a risk
service contract for its Berantai marginal field to a consortium
consisting of, Kencana Energy Sdn Bhd, Sapura Energy Ventures
Sdn Bhd (now Sapura Kencana Petroleum Bhd) and Petrofac
Energy Developments Sdn Bhd. Petrofac Energy, with a 50
per cent equity stake will lead the project, while Kencana and
Sapura each take a 25 per cent stake. The partners are expected
to invest around RM2.56 billion in the development and are
scheduled to complete the first phase of oil wells in 2012.
In August, PETRONAS awarded the Balai Cluster marginal oil
field offshore Sarawak to a venture involving Dialog Group,
Australia’s ROC Oil Co and PETRONAS Carigali. Production from
all the fields in the cluster was planned to be online within 24
months from commencement of the development programme.
Moving Forward
To bolster production of crude oil and gas and maintain production
at 650,000 barrels per day, additional licences to develop marginal
fields will be awarded by PETRONAS in 2012. Having been passed,
the Petroleum Income Tax Act will be utilised to incentivise new
players to enter the marginal field development segment.
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