Malaysia, Brunei sign series of oil, gas agreements

Singapore (Platts)--9Dec2013/531 am EST/1031 GMT


Malaysia and Brunei have signed a series of oil and gas deals under which the national oil companies of the two countries will work together on several upstream projects and Brunei will get a stake in Petronas' Canadian LNG project.

The latest agreement was signed Sunday at the 17th Annual Malaysia-Brunei Leaders' Consultation held in Bandar Seri Begawan. It builds on an agreement signed between the two neighbors in March 2009 that resolved a host of bilateral issues, including the final delimitation of their maritime boundaries.

"Petronas views the agreements reached with the Brunei petroleum authorities as a positive step forward in strengthening its presence in Brunei and deepening its relationship with its Brunei counterpart for mutual future growth in Brunei, Malaysia and elsewhere," Petronas said.

UNITIZATION AGREEMENT

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Under Sunday's deal, Malaysia's Petronas and the National Unitisation Secretariat of Brunei Darussalam have signed a heads of agreement to formalize the unitization arrangement for the Kinabalu West NAG field and Maharaja Lela North Panel field, Petronas said in a statement Monday.

"The HOA paves the way for the two parties to resolve a number of issues relating to the unitization and future development of these straddling fields," Petronas said.

The Kinabalu NAG (non-associated gas) project is a greenfield project intended to extract gas reserves not associated with the Kinabalu oil field.

It is located about 52 km (32.24 miles) from Labuan in water depth of 55 meters and is part of the Sabah Integrated Gas Development Project initiated by Petronas, according to local media reports.

The Maharaja Lela field is located in block B offshore Brunei. French oil major Total operates the block with a 37.5% stake, alongside Shell (35%) and Petroleum Brunei (27.5%).

Maharaja Lela has been producing since 1999, and is currently undergoing expansion. Gas from the project is delivered to Brunei LNG.

The partners expect to commission the new phase by 2015, which will boost gas delivery from the project to Brunei LNG from 2.7 million cubic meters/day (95,310 Mcf/day) to 5 million cu m/day, a senior Total official said in October.

JOINT FIELD DEVELOPMENT

Separately, Petronas and the National Unitisation Secretariat of Brunei Darussalam signed another HOA to establish joint development parameters for the Gumusut-Kakap, Geronggong and Jagus-East fields based on a provisional production and cost sharing arrangement, Petronas said.

These parameters will remain in place until a further agreement is reached on the status of the fields, the company said.

The Jagus-East field lies in block CA-1, which became part of Brunei following the 2009 agreement. Total has an operating stake in the block and Petronas is expected to be part of the project.

The Gumusut-Kakap field is Malaysia's second deepwater development after the Kikeh field and began production in November 2012. The field is located offshore Sabah and is expected to reach a peak production of 120,000 b/d.

The project is operated by Sabah Shell Petroleum Co. with a 33% stake.

Its partners include ConocoPhillips (33%), Petronas' upstream arm Petronas Carigali (14%), and US-based Murphy Oil (20%).

The Geronggong oil field is located offshore Brunei and is so far the deepest offshore and most remote reservoir discovered in the Brunei territorial water. Shell has a 50% operating interest in the field, with the Sultanate of Brunei holding the remaining 50%.

Shell has been exploring the possibility of developing Geronggong by tying it back into Gumusut-Kakap, and the latest agreement may facilitate that option.

Separately, PetroleumBRUNEI, the national oil company of Brunei, Sunday awarded Petronas Carigali -- Petronas' upstream arm -- and Shell production sharing agreements for blocks N and Q, which are located in the eastern shallow water areas offshore Brunei.

The two partners have 50:50 equity interests in the two blocks. Petronas Cargiali is the operator of block N, while Shell will operate block Q, the Malaysian company said.

PETROLEUMBRUNEI TAKES STAKE IN CANADIAN LNG PROJECT

Petronas and its Canadian subsidiaries Progress Energy Canada and Pacific NorthWest LNG have also signed an agreement with PetroleumBRUNEI for the latter to acquire 3% equity in Progress Energy Canada's natural gas assets and in the proposed Pacific NorthWest LNG's export facility, Petronas said.

As part of the proposed transaction, PetroleumBRUNEI has agreed to buy a 3% share of the LNG facility's production for a minimum of 20 years, it said.

Pacific NorthWest LNG is planning to build an LNG export facility on Canada's West Coast at Lelu Island near Prince Rupert, British Columbia. The proposed facility will comprise an initial development of two LNG trains of approximately 6 million mt/year each and a subsequent development of a third train of approximately 6 million mt/year.

--Mriganka Jaipuriyar, mriganka.jaipuriyar@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com

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