HIBISCUS Petroleum Bhd’s recent award of a 65% participating interest and operatorship in a production sharing contract (PSC) with Petroliam Nasional Bhd (PETRONAS) marks the first time the group has won a bid in Malaysia.
The PSC consists of four discovered opportunities in the Pertang, Kenarong, Noring and Bedong fields, located in water depths of between 65 and 75 metres off the east coast of Peninsular Malaysia.
Managing director Dr Kenneth Pereira says their previous assets were all acquired, such as the Fortuna International Petroleum Corp from Repsol, as well as the Sabah Shell Petroleum Company Ltd and Shell Sabah Selatan Sdn Bhd (collectively Shell).
“We’re quite excited by this because it’s the first time we have become a part of a PSC in Malaysia. This is very fulfilling,” he tells StarBizWeek in a recent interview.
Having partnered again with PETRONAS Carigali Sdn Bhd, Pereira says the PSC has all the elements to make it a rewarding one.
“Apart from risks, having a partner allows for a check and balance system, so you do not have a myopic view on it, but rather a multi-dimensional one,” he said.
He adds that as the key operator of these new assets, the group will plan strategies on how to fully utilise the expertise and infrastructure at hand.
“Our thinking, and this is subject to our partner’s approval, is that we can tie it back to our existing PSC, whereby we will optimise the usage of our existing facilities. This will be a nice add-on to our existing assets,” he said.
Pereira says, however, it will not be completely cost-free, as some drilling will still need to be done, but the group will continue using its facilities nearby which they operate.
He says the assets contain discovered resources, believed to be some of gas and some condensate.
In fact, the discovery of these assets are not new – it was publicly disclosed by global oil exploration company Murphy Oil that they discovered Kenarong back in 2005.
According to Murphy Oil, the shallow water field had reserves of about half-a-trillion cubic feet of gas and 40 million barrels of oil and condensate; however, the area had never been further developed.
Nevertheless, Pereira says Hibiscus group sees much potential for the new assets, strengthened by the fact that the PSC is valid for the next 24 years.
“This PSC will take the group post 2040, proving the longevity and our long-term plans,” he says.
Production is expected to begin registering in the next three to four years, as the group carries on with its development stages.
On the challenges, Pereira notes one of the largest concerns he sees for Hibiscus is the lack of young talent.
He says that scrutiny surrounding the oil and gas industry has caused many from the younger generation to shy away from it.
“If we look at this PSC, it is for the next 24 years, which means a fresh graduate joining us could have 24 years of work experience. Unfortunately, we are not seeing that many come onboard for the technical side, like geologists or petroleum engineers,” he says.
To mitigate this, he says the group has been taking in engineers from a more generalised field and providing them with the relevant training needed.
Meanwhile, Pereira notes that for the near future, the group will continue to focus on its ongoing projects, namely its Brunei expansion, UK’s Teal West, as well as the Water Flood project in north Sabah.
“This year, the group will be spending RM202mil, mainly in Malaysia and a little bit for the United Kingdom project. Next year, an allocated sum of RM207mil will be spent on the United Kingdom project. For Brunei, the key objective is the transition,” he said.
The Brunei expansion is expected to significantly impact both the group’s earnings and its production of barrels of oil.
Pereira says the group’s mission to hit 50,000 barrels of oil per day by 2026 is well on its way to becoming a reality.
“With the deal in Brunei, we should be able to get 29,000 barrels of oil equivalent a day, up from our current production of about 21,000 barrels of oil equivalent a day. So, hopefully, by the end of next year, we will be close to the lower end of our 2026 target,” he notes.
Additionally, with the Brunei deal, the group is looking at its reserves of gas.
“Gas will be the fuel of the future, and is very important in the energy mix according to the National Energy Transition Roadmap.
“Today, we are about one-third gas, two-thirds oil. So, what we have been trying to do is increase that to about half and half, and the Brunei asset has allowed us to do that. We are already there with those goals,” he explains.
On top of that, the pricing of gas is linked to liquefied natural gas markets, providing valuable exposure.
Pereira says that after Brunei, gas reserves are likely to increase by 36% for gas production, enhancing the gas component to 49% of its production.
He also notes that another positive aspect of the Brunei deal is that gas is produced with a very low greenhouse gas emissions intensity at 11 kg of carbon dioxide (CO2) per barrel per equivalent.
“The worldwide average is about 18kg of CO2 per barrel, so this is much lower. The best way to describe it is that it is a relatively clean production facility,” he says.
On sustainability opportunities, the group has identified a solar project related to the Brunei deal.
Pereira highlights that TotalEnergies SE has permits for a 12-megawatt solar project adjacent to the onshore processing plant.
“This is something we find quite interesting because it allows us to start talking about an energy transition agenda. What we’re trying to do is offset our own emissions with a solar project to provide power to our own facility. And it’s quite a big project,” he says.
He adds the indicated timeline for this project is between 2025 and 2027 for commercial operation.
“We will remain focused on all the current projects for now. We are cautious yet optimistic about where we are,” he notes.
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