February 2, 2007 / 6:54 AM / 11 years ago

UPDATE 2-INTERVIEW-Murphy Oil sees scope for more Sabah gas

(Adds total Sabah gas reserves in paragraph 15)

By Mark Bendeich

KUALA LUMPUR, Feb 2 (Reuters) - U.S. oil firm Murphy Oil Corp (MUR.N) has found around 1 trillion cubic feet (Tcf) of gas in deep water off Malaysia, its largest such discovery in the area but not enough yet to develop, a Murphy executive said on Friday.

Murphy announced the discovery on Monday, calling it significant without indicating its size, but the firm’s president for exploration and production, David Wood, told Reuters by telephone it was consistent with pre-drilling estimates of 1 Tcf.

“I‘m really comfortable with that,” he said.

“The discovery is not big enough by itself to be able to develop,” he added, but pointed out that the find, at the Rotan well in deepwater Block H off eastern Sabah state, was just one of a number of leads in the area.

“Rotan was the first one we have drilled and may well be the biggest one. We don’t know yet. We think we have got some pretty good running room to find more gas in and around Rotan.”

Murphy, as operator, has an 80 percent interest in Block H. Petronas holds the rest. Rotan was drilled in about 4,000 ft (1.1 km) of water, with the gas lying another km below the sea bed.

Wood portrayed the discovery as a step toward the overall goal of its partner -- Malaysian state oil firm Petronas -- to prove up enough gas reserves off Sabah to build a pipeline to its Bintulu liquefied natural gas (LNG) plant in adjoining Sarawak state. Both states are on the island of Borneo.

“The importance of Rotan is that it is a new play,” he said, adding that it added to gas discoveries by other explorers off Sabah. “You have to start looking at the aggregate picture here. I think it’s pretty positive for getting over that resource threshold for Sabah gas, justifying the infrastructure.”

“I am pretty bullish and encouraged by what I see so far.”


Petronas plans to build a 480-km (300-mile) gas pipeline to take Sabah gas to Bintulu, site of the world’s largest LNG complex, from a gas terminal at Kimanis, near Kota Kinabalu, the Sabah state capital, but it has not revealed the cost.

    Petronas Gas Bhd (PGAS.KL), a listed subsidiary of Petronas, will operate the pipeline, the Edge newspaper reported last year. Petronas hopes the pipeline and terminal will be ready by 2010.

    Petronas is expected to award the construction contract for the pipeline by the third quarter of 2007, Malaysia’s Business Times said last October, quoting an executive of builder NACAP Asia Pacific, a unit of Dutch firm Koop Group.

    Sabah state’s chief minister told state news agency Bernama in 2005 that the Kimanis terminal would receive and transfer up to 1.25 billion standard cubic feet of gas per day.

    Murphy’s Wood estimated that about 7-10 Tcf of gas would need to be found off Sabah to justify development, given the high cost of exploring and developing gas in deep water, and that he believed the pipeline could cost at least $1 billion to build.

    A Petronas spokesman said on Friday that total Sabah gas reserves stood at about 10.9 Tcf as of January 2006.

    Murphy had also not given up hope of finding oil in Block H, he said. Block H lies next to Block K, where Murphy struck oil in 2002, leading to development later this year of the Kikeh field.

    “Going into this play (in Block H), we thought that there was a chance of finding some oil here -- and there still maybe.”

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