HANOI (April 10): The 20-year production sharing contract (PSC) extension for Hibiscus Petroleum Bhd’s (KL:HIBISCS) largest oil asset works as a key enabler to monetise the group’s development plans offshore northeast Malaysia, which includes new wells and gas processing from nearby fields. 

Hibiscus secured the 20-year extension to its PM3 Commercial Arrangement Area (CAA) cluster PSC from Petroliam Nasional Bhd (Petronas) and its Vietnamese counterpart Vietnam Oil and Gas Group, which pushed the contract’s cut-off date to end-December 2047. 

Hibiscus owns a 35% interest in the PM3 CAA cluster, PetroVietnam Exploration Production Corp Ltd holds a 30% interest, while Petronas Carigali Sdn Bhd holds the remaining 35%.

Its development plans, dubbed the PM3 Hub Masterplan, surround the gas processing facilities in its PM3 CAA cluster. 

The extension serves as a key enabler for its development plan for the group’s assets near PM3 CAA, according to Hibiscus managing director Kenneth Pereira. It owns a 65% operating interest in the PKNB Cluster PSC, which is in the development stage, and 30% in PM327 PSC, which is in the exploration phase. 

“We now have a clear, long-term runway to monetise our PM3 Master Hub programme, which comprises production (PM3 CAA), development (PKNB) and exploration (PM327),” Pereira told The Edge here. 

The extension makes it financially feasible for Hibiscus to develop new wells in PM3 CAA, and potentially use its existing gas processing facilities for gas from PKNB and PM327.

This is expected to save the group capital expenditure (capex) — by avoiding the need to develop new gas processing facilities — as well as increase PM3 CAA’s gas processing facilities’ operating efficiency — with the same or similar operating expenditure (opex) used to process a higher volume of gas. 

PKNB has four discovered gas fields, namely: Pertang, Kenarong, Noring and Bedong. A field development plan — which outlines the number of wells to drill and the design of the pipeline — is in the works and is slated for completion by 2026, which will then require approval from partner Petronas Carigali, who owns the remaining 35% interest in the cluster.  

First gas production from PKNB is expected in 2028. PM3 CAA produces about 11,000 barrels of oil equivalent per day (boepd).

As for PM327, Petronas Carigali, the cluster’s operator with a 70% interest, is undertaking exploration work. Hibiscus, with its 30% interest, is positioned to benefit from gas fields discovered in the cluster. 

Pereira said PM3 CAA’s gas processing facilities have sufficient spare capacity to cater to PKNB’s projected gas production. He noted that depending on PM327’s production, the group may need to expand PM3 CAA’s gas processing capacity. 

The PM3 CAA PSC was one of five clusters acquired in its US$212.5 million purchase of Fortuna International Petroleum Corp from Repsol back in 2022. 

The PM3 CAA PSC valuation as at Jan 1, 2021 was pegged at US$6.1 per boe on 2P (proven and probable) reserves up to end-December 2027 — RM142 million on 23.3 million barrels of oil equivalent (MMboe) in 2P reserves. 

The 20-year extension adds more 2P reserves and 2C resources, Pereira noted, but did not provide further details.

In a statement on Thursday, Petronas senior vice-president of Malaysia Petroleum Management Datuk Bacho Pilong said PM3 CAA has an estimated remaining reserve of up to 60 MMboe.

Meanwhile, PM3 CAA is also expected to include plans for the reinjection of carbon dioxide produced during oil and gas activities — positioning the area as a potential hub for carbon dioxide sequestration.

On why Hibiscus was chosen to continue as operator of the PSC licence, the group listed Hibiscus’ track record of operational excellence, the group’s PM3 Hub Masterplan, and the PM3 CAA’s strategic significance to Vietnam. 

The primary off-taker for gas produced from PM3 CAA is PetroVietnam. According to Hibiscus, the gas caters to 40% of demand from South Vietnam. 

Meanwhile, when speaking on the recent decline of Brent crude oil price in the face of a global economic slowdown after the US announced its blanket reciprocal tariff plan, Pereira said the group is experienced in managing costs amid a low oil price environment. 

Recalling the O&G firm’s time during Covid-19, Pereira noted that the group was able to weather Brent prices of US$20-US$25 at the time by deferring non-critical opex, while prioritising profitability and positive cashflow. 

“We’ve seen all these cycles before, so we know how to manage it accordingly,” he noted. 

Brent fell below the US$60-mark on Wednesday to US$59.81. But, in the wake of the US’ walkback on reciprocal tariffs, the benchmark crude oil index rose to US$64.90 at the time of writing on Thursday.