Rystad: Ande-Ande Lumut project sanction to mitigate declining Indonesian oil output

Rystad Energy’s research indicates that Santos’s Ande-Ande Lumut (AAL) project in Indonesia’s NW Natuna Sea, which holds 107 mmboe, could comprise around 20% of the 2017 sanctioned volumes in the Asia Pacific region.

In total, projects holding 512 mmboe could potentially reach final investment decisions (FIDs) within Australia & South East Asia during 2017.

Rystad Energy forecasts declining Indonesian oil production to the end of the decade; a sanction of the AAL project will help mitigate this decline.

AAL is one of several projects in the region which has been delayed due to the low oil price environment. Other delayed projects include Repsol’s Ca Rong Do (CRD) FPSO project in Vietnam, as well as a Petronas EOR project in Baram Delta offshore Sarawak, Malaysia. CRD is roughly half the size of AAL, accounting for 12% of 2017 FID volumes.

“Projects such as AAL or CRD could already have been approved had prices not tanked. The downside risk is that projects expecting 2017 approvals could have their FIDs sliding into 2018 due to a few months of turbulence,“ says Readul Islam, Senior Analyst, Rystad Energy.

According to Rystad, an example is KrisEnergy’s pioneering Apsara project offshore Cambodia, where timing could have been affected by the operator’s recent challenges. KrisEnergy had indicated Apsara to be one of its “NPV-positive” investment priorities as it emerges from debt restructuring.

Upside to the volumes exists as a result of projects currently expecting FIDs during 2017 which have been risked into 2018. One example is Mubadala’s Pegaga project in the Sarawak waters of Malaysia, with EPCI tendering expected after FEED completion around 3Q17, Rystad said.

Australia Worldwide Exploration’s Waitsia Phase 2 onshore gas scheme, in Western Australia, is another project with recent positive buzz where FID has been risked into 1Q18 against the operator’s end-2017 FID goal.

“Positive appraisal results and increasing momentum in signing gas sales agreements could tip the sanction back into 2017,” comments Islam.

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