This article first appeared in The Edge Malaysia Weekly on January 22, 2024 - January 28, 2024
WHEN US-based oil and gas giant Chevron Corp announced plans to acquire Hess Corp in a US$53 billion (RM250 billion) deal last October, many were wondering how this would impact the latter’s operating assets in Malaysia.
Chevron is said to be focused on acquiring Hess’ assets in North America and Guyana, which raises the question of what it will do with the two operating assets here in Malaysia.
One of them is the North Malay Basin, 300km off the coast of Peninsular Malaysia and made up of Blocks PM-302, PM-325 and PM-326 B or the Bergading, Bunga Dahlia, Teratai, Gajah, Melati, Kamelia, Zetung, Anggerik and Kesumba fields, in an equal production sharing contract (PSC) with national oil company Petroliam Nasional Bhd (Petronas).
Hess also holds a 50% stake in Carigali Hess Operating Co, which operates Block A-18 in shallow water in the Malaysia-Thailand Joint Development Area — also in a joint venture with Petronas.
Hess did not respond to questions sent by The Edge.
In Malaysia, Chevron’s only presence is via its network of more than 430 Caltex service stations, selling petrol and related products. However, fuel and lubricants are imported from refineries and blending facilities in Singapore and Thailand, while unleaded gasoline, diesel and lubricants are received through three terminals in Peninsular Malaysia.
Views are divided on whether Chevron will sell or retain the Malaysian assets. One oil and gas executive asked to comment by The Edge, says, “It’s a question of strategy. Once the takeover by Chevron is concluded, we will see … Chevron does not have a presence here in Malaysia, so it’s a question of whether they will decide to sell, or maintain and grow the presence. Oil prices are high, so they could fetch a good amount if they sell, or stay and milk the asset.”
Another source, a CEO at a publicly traded oil and gas company, says, “I doubt they will sell it now … oil prices are high … make hay while the sun shines.”
Nevertheless, Brent crude last Friday traded at just below US$80 per barrel, coming off highs of US$96.55 per barrel in late September last year, and has shed some 18% in value.
According to Hess’ annual report for FY2022, net production from its 50% share in the North Malay Basin as well as the Carigali Hess-operated Malaysia-Thailand Joint Development Area averaged 64,000 barrels of oil equivalent per day (boepd) in 2022, up from 61,000 boepd in 2021. The forecast for net production in 2023 was in the range of 60,000 to 65,000 boepd.
The company chalked up an operating profit of US$368 million on the back of US$873 million in revenue from the Malaysian and Joint Development Area operations. At the current exchange rates, that would translate into an operating profit of RM1.74 billion and revenue of RM4.12 billion.
In the North Malay Basin, the first gas was achieved in 2017, while in the Joint Development Area’s Block A-18, gas was discovered in 1971 and production commenced in 2005.
Hess’ annual report has it that under the Malaysian operation, it had developed three million barrels of crude oil and condensate, as well as 304 million cubic feet (mcf) of gas as at end-December 2022. Hess had no undeveloped crude oil and condensate but 71 mcf of undeveloped natural gas.
There is also a question of who might be interested to take up Hess’ assets if they do come on to the market.
Thailand’s PTT Exploration and Production PCL (PTTEP), the oil drilling arm of Thai state-controlled oil and gas conglomerate PTT Public Company Limited, in 2019 acquired Murphy Oil Corp’s Malaysian assets for US$2.13 billion.
In January 2022, Hibiscus Petroleum Bhd acquired Repsol’s oil and gas assets in Malaysia and Vietnam for about US$212.5 million.
Back in 2018, there were murmurs of Hess exiting Malaysia, and PTTEP and Austria’s OMV Group were said to be the front runners to buy its Malaysian assets.
Then again, ExxonMobil Corp was looking to hive off its Malaysian assets back in 2019, for a price tag of between US$2 billion and US$3 billion, but did not manage to do so.
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