BMI View : A low oil price environment will hit short-term investment, particularly into exploration, and longer-term production prospects. Foreign gas demand for Malaysian gas will also be hit by a more competitive LNG market. Consumption, in contrast, will benefit slightly from lower prices.
|e/f = BMI estimate/forecast. Source: Energy Commission of Malaysia, EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||610.0||616.7||607.1||593.0||589.2||590.0||588.4|
|Refined products production & ethanol, 000b/d||545.7||534.8||535.8||455.5||409.9||410.7||410.7|
|Refined products consumption & ethanol, 000b/d||566.4||577.7||589.3||601.1||613.2||625.4||634.9|
|Dry natural gas production, bcm||64.4||64.9||63.0||61.7||62.6||63.4||64.1|
|Dry natural gas consumption, bcm||31.6||32.2||32.8||33.2||33.5||34.5||35.4|
The main trends and developments we highlight for Malaysia's oil and gas sector are:
Weaker incentives to raise production from existing fields to full capacity in a weak oil price environment will see oil output fall in 2015 and 2016. The rising cost of projects in Malaysia, as project types increasingly move towards more difficult developments such as deepwater and enhanced oil recovery (EOR), will also see investment into longer term projects hit by subdued oil prices.
Short-term gas production will be hit by a loose LNG market. We see flat growth through from 2017 to 2021. However, we see a turnaround from 2022 as a better market outlook and gas reserves growth contribute to production.
Industry consolidation will see Malaysia's refining capacity and refined oil production fall between 2015 and 2019. This will offset the impact that the start-up of Petronas' RAPID project in the next decade will have on Malaysia's total refined production.
Although consumption will be supported by lower prices even under a new fuel price scheme, energy efficiency and slower economic growth will see modest oil consumption growth of about 1.7% per annum between 2015 and 2024.
While a reduction in domestic crude demand would temporarily lift Malaysian exports, in the longer term we expect a downtrend in its crude export availability. Its export market share could also be threatened by strong light, sweet competition in the market, and smaller demand in its key market in Australia. It will remain a net importer of refined oil over our forecast period.
Malaysia will continue to be a net gas exporter, and an important supplier of LNG to Asia Pacific. However, we note that strong competition will see an erosion of its market position, especially in its key market Japan.