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M'sia has 100 active oil production sharing contract, highest ever

Publication Date : 12-12-2013


Petroliam Nasional Bhd (Petronas) has awarded a production sharing contract (PSC) to Salamander Energy Malaysia Ltd in the busy Straits of Malacca, which is a relatively unconventional place to look for oil.

This is the first exploration acreage in the Straits to have been awarded by Petronas since 1992. Only six wells had been drilled in that area.

The PSC also marked a significant milestone as it is the 100th active PSC by Petronas, the most that the oil company has had at any point in time.

Under the terms of the contract, Salamander Energy Malaysia, a UK-based first-time upstream player in Malaysia, will operate the block with an 85 per cent equity stake, while Petronas Carigali Sdn Bhd owns the remaining 15 per cent.

They will drill one exploration well in the Block PM323 to a minimum depth of 1,400 metres and to acquire and process 600 square kilometres of new 3D seismic data.

The minimum financial commitment for the block is US$18 million.

The PSC system was introduced in 1976, two years after the incorporation of Petronas.

Since then, a total of 151 PSCs have been awarded to oil and gas upstream players.

It is the medium used to engage capable oil and gas companies to participate in Malaysia’s upstream petroleum blocks.

“Considering Malaysia’s ‘matured’ basins, reaching 100 active PSCs is testimony to the country’s successful petroleum resource management as it demonstrates our ability to garner continued interest from oil and gas players,” said vice president of petroleum management Ramlan Abdul Malek in a statement on Wednesday.

He added that Petronas currently had 27 PSC contractors participating in the country’s upstream industry on a variety of fiscal arrangements.

More than 300 billion ringgit (US$93 billion) has been invested in Malaysia’s upstream oil and gas sector since the inception of Petronas and the adoption of PSCs in Malaysia.

Through PSC mechanism, it allows the national oil firm, on behalf of Malaysia, to draw on the expertise of established oil and gas companies while limiting exposure to technical and financial risks.

The development of PSC marked significant milestones for socioeconomic development of the country.

A fixed percentage from the revenue is allocated for cash proceeds, which is paid to the Federal and state governments.

In addition, the government also receives income from the Petroleum Income Tax (PITA), which is calculated based on the profits from oil and gas companies.

The oil and gas industry contributes approximately 20 per cent to national gross domestic product with more than 4,000 oil and gas businesses, including international oil companies, independents, services and manufacturing companies.

To date, Petronas has introduced a variety of PSCs, including for deepwater, revenue-over-cost, high-pressure/high-temperature and progressive volume based.

In general, the PSC sets out the arrangement for the sharing of petroleum production and the terms of cooperation between Petronas, as the regulator, and the PSC contractors. In addition to PSCs, Petronas introduced risk service contracts in 2011 for the development and production of discovered marginal fields.


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