E&P Resurgence in Southeast Asia: Key Drivers and Regional Dynamics

The exploration and production (E&P) resurgence in Southeast Asia, particularly in Indonesia and Malaysia, is primarily driven by energy security concerns. According to Miltos Xynogalas, CEO of Conrad Asia Energy, countries like Indonesia urgently need fossil fuels, especially gas, prompting authorities to encourage exploration. This has led to more attractive production sharing contract (PSC) and fiscal terms, alongside efforts to reduce bureaucratic red tape. Xynogalas also highlights the role of new technologies, such as improved seismic imaging, which are unlocking previously overlooked or ignored areas.

Conrad Asia Energy’s corporate strategy focuses on acquiring undervalued or "technically misunderstood" gas assets, with small-scale LNG projects now viable for exploiting stranded resources to bolster regional energy security. Andrew Harwood, vice president at Wood Mackenzie, adds that companies are using novel technologies to find new resources in mature basins, leveraging spare capacity in existing infrastructure. He notes that governments, recognizing past investment declines, are making greater efforts to entice investors with improved fiscal offerings, fueling the resurgence in investment appetite.

Comparative Fiscal Terms: Malaysia vs. Indonesia

Xynogalas describes Malaysia as a "pioneer in fiscal terms," successfully attracting various players with different PSC terms, while Indonesia is still learning and implementing new terms. He suggests Indonesia could learn from Malaysia’s success. Harwood agrees, noting Malaysia’s "more proactive and progressive approach" in tailoring PSCs for specific resources, though Indonesia remains attractive to investors. He observes a competitive interplay between the two neighbors, where policy moves by one often prompt responses from the other. For example, some of Malaysia’s recent changes, particularly for small field late-life assets, were influenced by Indonesia’s experiments. Harwood concludes that this ongoing competition leads to more positive terms for investors.