Sector Organization

As in the oil sector, Malaysia’s state-owned Petronas dominates the natural gas sector. The company has a monopoly on all upstream natural gas developments, and also plays a leading role in downstream activities and the LNG trade. Most natural gas production comes from production-sharing agreements operated by foreign companies in conjunction with Petronas.

Exploration and Production

Gross natural gas production has been rising steadily, reaching 2.7 Tcf in 2010, while domestic natural gas consumption has also increased steadily, reaching 1.1 Tcf in 2010, 42 percent of production. There are several important ongoing projects that will expand natural gas production in Malaysia over the near term. Exploration and development activities in Malaysia continue to focus on offshore Sarawak and Sabah.

Malaysia-Thailand Joint Development Area

One of the most active areas for natural gas exploration and production is the Malaysia-Thailand Joint Development Area (JDA), located in the lower part of the Gulf of Thailand. The JDA reportedly holds 9.5 Tcf of proven plus probable natural gas reserves. The area is divided into three blocks, A-18, B-17, and C-19, and is administered by the Malaysia-Thailand Joint Authority (MTJA), with each country owning 50 percent of the JDA’s hydrocarbon resources (map of the JDA). The Carigali-Triton Operating Company (CTOC), a joint venture between Petronas Carigali and Hess, operates Block A-18, while Blocks B-17 and C-19 are operated by the Carigali-PTTEP Operating Company (CPOC), a joint venture of each country’s national oil company. Block B18 phase 1 came online in 2005, and in September 2009, production was reported to have reached 1 Bcf/d. According to the MTJA, 10 million barrels of condensate were sold in May 2010, and 1 Tcf of natural gas was sold in September 2010. Block B17 came online in 2009. In October 2010, Block B17 natural gas shipments reportedly reached 335 MMcf/d, with half going to Thailand and half to Malaysia. In September 2011, 5 million barrels of condensate from this field were reported sold by the MTJA.

New Sarawak Natural Gas Projects

Murphy Oil announced in September 2009 the startup of several smaller new gas fields located in Blocks SK309 and SK311. The first phase of this project, located 137 miles offshore Sarawak, is to produce gas from the Golok, Golok Barat, Serampeng, and Merapuh gas fields, which are being developed in a cluster and will supply the Bintulu LNG Terminal. It was reported in fourth quarter 2010 that gross production had reached 250 MMcf/d and is expected to remain at that level for 5 years. Murphy Oil holds an 85 percent interest and Petronas holds 15 percent. Murphy Oil projects that Phase 2 could produce 350 MMcf/d for another 10-year period when additional fields in SK311 are brought online.

The Kumang Cluster in Block SK306, Central Luconia province, a major gas field offshore Sarawak, is being developed by Petronas. Phase 1 is expected to provide 500 MMcf/d and 22,000 bbl/d of condensate to the Bintulu Terminal when it goes online at end-2012.

Three new gas fields in Block SK 308, 124 miles offshore Sarawak, are being jointly developed by Shell and Petronas. They are projected to produce 90 MMcf/d in 2012.

Pipelines

Malaysia has one of the most extensive natural gas pipeline networks in Asia. The Peninsular Gas Utilization (PGU) project, completed in 1998, expanded the natural gas transmission infrastructure on Peninsular Malaysia. The PGU system spans more than 880 miles and has the capacity to transport 2 billion cubic feet per day (Bcf/d) of natural gas. Other gas pipelines run from offshore gas fields to gas processing facilities at Kertih.

A number of pipelines link Sarawak's offshore gas fields to the Bintulu facility. Petronas is building the 310-mile Sabah-Sarawak Gas Pipeline to transport gas from Sabah's offshore fields to Bintulu for liquefaction and export. Some of the gas will be used for downstream projects in Sabah. This pipeline is expected to be completed by the end of 2013. Other pipelines link the gas fields offshore Sabah to Labuan Gas Terminal.

The Association of South East Asian Nations (ASEAN) is promoting the development of a trans-ASEAN gas pipeline system (TACP) aimed at linking ASEAN's major gas production and consumption centers by 2020. Because of Malaysia’s extensive natural gas infrastructure and its location, the country is a natural candidate to serve as a hub in the ongoing TACP project. The first pipeline connected Malaysia with Singapore and was commissioned in 1991. This was followed by gas pipeline links between West Natuna, Indonesia and Duyong, Malaysia, commissioned in 2002, and the Trans-Thailand-Malaysia gas pipeline, commissioned in 2005, which allows Malaysia to pipe natural gas from the Malaysia-Thailand JDA to its domestic pipeline system.