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NEWS UPDATES 9 June 2009

Ageing fields blamed for decline in Malaysia oil output

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Malaysia's crude oil output has fallen to 550,000 barrels per day (bpd) this year from 600,000 bpd in 2008, as ageing fields took their toll after years of steady production levels, Reuters quoted Petronas' chief as saying Monday.

Overall output for both crude oil and condensates fell to 650,000 bpd versus 700,000 bpd last year, Mohd Hassan Marican, Petronas Chief Executive, told Reuters in an interview.

"One needs to accept that (the domestic oilfields) had reached maturity, especially the continental shelf," Hassan said.

Malaysia was forced to reduce term sales of its flagship Tapis crude for this year, due to the falling output and growing domestic demand, trading sources have said.

"Typically this problem of aging oilfield falling is very widespread. It impacts on non-OPEC regions in general, and it makes it very difficult to raise crude production," said John Vautrain, vice-president in Singapore of Houston-based Purvin and Gertz.

Output of the flagship Tapis, used as a benchmark for Asia-Pacific light sweet crudes, has fallen to around 200,000 bpd now from its production of around 300,000 bpd for the past few years, sources close to the development have said.

"For 2009, the reserves replacement ratio for the domestic environment as a country will be less than one... but it doesn't make sense just to look at it year on year," Marican added.

New fields are due on stream in coming years, most notably Shell-operated Gumusut oilfield, expected to come on line in late 2010 and to ramp up output to 150,000 bpd.
"For oil, it is difficult (to maintain a reserves replacement ratio of around one). Our discoveries are more gas than oil, especially in offshore Sarawak, " Marican added.

Oil and gas finds will help Malaysia remain a net exporter for the time being, Vautrain said.

"Even 650,000 bpd is a lot of crude for a country that size. I don't expect Malaysia to be a net importer any time soon," he said.


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