Oil and gas
BMI has said that a low oil price environment will hit short term investment in Malaysia, particularly into exploration, and longer term production prospects. However, the company has also said that consumption, in contrast, will benefit slightly from lower prices.
For gas, ongoing developments will apparently support an uptrend in production. However, BMI has said that as the rate of production growth will be more moderate, it expects producers to direct fewer resources into maintaining gas output in a low oil price and uncertain demand environment. The fall in oil prices is expected to boost gas consumption in the short term, however a short shift away from gas in the power sector and the removal of gas subsidies would slow the rate of gas consumption growth in the longer term. BMI expects the country to remain a net gas exporter, supported by growth in gas production, and an important supplier of LNG to Asia Pacific. However, there is a high risk that a policy decision not to curb gas consumption increases will lead to Malaysia being a net gas importer.
For the refining sector, industrial consolidation will see capacity and production fall between this year and 2019. This will, BMI says, offset the impact that the startup of Petronas’ RAPID project in the next decade will have on Malaysia’s total refined production. Even though 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 approximately 1.7% /y between 2015 and 2024. BMI has also said that while a reduction in domestic crude demand could temporarily lift Malaysian exports, in the longer term it is expected that there will be a downtrend in its crude export availability. Its export market share could 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 to 2023.
According to BMI, Malaysia is set to end the decade with a major increase in petrochemicals capacity, yet, the company has also warned that new plants will be dependent on imported crude oil and be forced to compete with low cost ethane based US producers. The focus of development, BMI has reported, will be Petronas’ refinery and petrochemical integrated development (RAPID) project in Pengerang, which is scheduled for completion in 2019. It is set to have a refining capacity of 300 000 bpd and petrochemicals production capacity of over 7 million tpy. RAPID has been delayed due to concerns over its economic viability due to rising costs and falling domestic crude oil volumes at a time when the US is planning to boost petrochemicals production.
Edited from report briefs by Claira Lloyd