ADVERTISEMENT

Small-Field Approach Holds Promise for Operators in Southeast Asia

This paper shows how a new approach to small fields could unlock more than twice the net present value (NPV) of larger conventional fields in Southeast Asia at a similar level of capital expenditure (CAPEX). Capturing this value, though, will require a fundamental change in the operating models of operators in the region. The small-field approach focuses on margin maximization instead of recovery and productivity maximization.

Introduction

Southeast Asia has attracted sizeable foreign interest in recent years after weathering the global financial crisis while establishing strong manufacturing bases, expanding domestic infrastructure, and stabilizing financial markets. These developments fueled economies and continued to push energy demand higher.

However, Southeast Asia is facing its own challenges. Oil and gas companies in the region have been tasked with meeting domestic demand through local petroleum resources since the 1990s. Although companies have continued to discover new fields, efforts were insufficient to meet the growing demand, causing Southeast Asia to become a net importer in the early 2000s.

Moreover, the industry has accepted a new oil price norm approximately 60% lower than June 2014 levels. As some early signs of recovery emerge, another disruption is on the horizon: Because of a combination of technological and socioeconomic factors, demand for oil is expected to peak as early as 2030. Concurrently, on the supply side, assets such as shale and nonhydrocarbon sources (e.g., solar and wind) are eating increasingly into oil’s share of the energy market. These factors are forcing exploration and production (E&P) companies to cut capital and operational spending significantly and refocus their portfolios on core areas of advantage. Investors now are wary of locking up capital in long-cycle megaprojects.

Given the smaller size of discoveries, the need for decreased spending, and the demand for shorter-cycle projects, significant market opportunities exist for any player who can make a small-field business model work.

This article, written by Special Publications Editor Adam Wilson, contains highlights of paper SPE 186434, “Small Is Beautiful: Why Small Fields Are the Next Big Thing in Southeast Asia and How to Capitalize on Them,” by Arnold Volkenborn, Andrew Lea-Cox, SPE, and Bo Sun, Accenture Strategy Energy, prepared for the 2017 SPE/IATMI Asia Pacific Oil and Gas Conference and Exhibition, Bali, Indonesia, 17–19 October. The paper has not been peer reviewed.
...
This article is reserved for SPE members and JPT subscribers.
If you would like to continue reading,
please Sign In, JOIN SPE or Subscribe to JPT

Small-Field Approach Holds Promise for Operators in Southeast Asia

01 October 2018

Volume: 70 | Issue: 10

STAY CONNECTED

Don't miss out on the latest technology delivered to your email weekly.  Sign up for the JPT newsletter.  If you are not logged in, you will receive a confirmation email that you will need to click on to confirm you want to receive the newsletter.

 

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT