Boston, MA -- (SBWIRE) -- 06/02/2014 -- Malaysia's upstream segment could see better days ahead in the short-to-medium term as the completion of both greenfield and brownfield developments brings new volumes of oil and gas online. New gas supplies will underpin continued expansion in the country's liquefied natural gas production based in Sarawak. Consumption growth will limit some of the export gains to be made from growing output, though a reduction of oil and gas subsidies would see a slowdown in the rate of this. The expansion of its downstream capacity could be more challenging, as it would face fierce competition from neighbouring Singapore.

The main trends and developments we highlight for Malaysia's oil and gas sector are:

- Our expectations for growth in its oil and gas reserves are underpinned by resource upgrades stemming from exploration and development activities in three areas: deepwater, marginal and stranded fields, and enhanced oil recovery (EOR) projects in mature fields.
- Oil and gas production are set to grow, thanks to the development of large discoveries made in recent years. For oil in particular, investment into marginal fields could support a short-term increase in production until larger and more complex deepwater projects come on-stream.
- We expect oil production to maintain relatively stable in the medium term, from 610,000b/d in 2013 to about 657,890b/d in 2018. Output from marginal fields and EOR on producing fields will support production in the short-term. However, the small scale of these fields means that their development can only sustain the country's output for a limited time. Over the longer term, deepwater and greenfield developments will therefore be necessary to maintain oil production growth past its current expected peak in 2018. At the moment, we see oil production falling slightly post-2018, to reach 635,540b/d by 2023.
- A string of prolific discoveries and major projects set to come online between 2014 and 2018 would see gas production continue on an upward trend. Nearly all of these new projects are off the coast of Sarawak, East Malaysia, which will in turn support liquefied natural gas (LNG) production growth at Petronas' LNG complex.
- We are expecting the uptrend in gas production to continue in the short-to-medium term. From an estimate of 62.5bcm in 2013, we project output to hit 68.0bcm in 2018 and continue to climb to 72.2bcm by 2023. We highlight that there is significant upside risk to the tail-end of our forecasts to 2023. These come from recent discoveries made that could see a FID within 2014 to 2016.
- Consumption of both oil and gas is set to rise in the short term as demand grows in tandem to economic expansion and facilitated by a generous subsidy regime. However, we expect growth to slow on expectations that subsidies will be gradually reduced over time owing to fiscal necessity, thereby correcting some of the excesses in domestic oil and gas consumption.

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