Boston, MA -- (SBWIRE) -- 07/03/2012 -- BMI View: Production growth is set to outpace consumption growth in the Malaysia oil sector as the removal of fuel subsidies and a move towards coal-fired power plants reduce domestic demand for oil. Production will continue to be strong given our positive demand forecasts for oil within the Asian region. The trend is reversed in gas where consumption growth will outpace domestic production growth as Malaysia's gas prices continue to be the lowest in the South East Asian region and it remains the preferred energy fuel by power companies.

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

- The shift to coal-fired power plants has reduced demand for oil from the power industry. Another factor that is hampering growth in oil consumption is the government's steady reduction of fuel subsidies. In line with these developments, we expect oil consumption to grow to 621,300 barrels per day (b/d) by 2016, an increase of only 14.7% from 2011 levels. This increase is in contrast with our production forecast of 880,500b/d by 2016, a jump of 36.4% from 2011 levels. The regional oil export market continues to be attractive especially given Indonesia's surging oil import needs. Mature fields are generally in decline, but ExxonMobil, Royal Dutch Shell and Hess have new projects that should partly offset the falling output. We expect proven oil reserves to decline from 5,700mn barrels (million barrels) in 2011 to 4,990mn barrels by 2016. ExxonMobil has announced that its enhanced oil recovery (EOR) project at the Tapis field will start in 2013, with an estimated gross investment of more than US$1bn.
- Gas supply from the Malaysia-Thailand Joint Development Area (JDA) and projects such as ExxonMobil's Bintang field should mean continuing growth in Malaysia's gas volumes and exports. We expect gas production to reach 74.2bcm by 2016, an annual average growth rate of 3.4% from 2011 levels. Given substantial gas subsidies, consumption is set to grow faster at an annual average rate of 4.7% from 34.9bcm in 2011 to 43.9bcm in 2016.
- On March 5 2012, Malaysia's national oil company Petronas and Germany's petrochemicals giant BASF signed a heads of agreement (HoA) for the development of the refinery and petrochemical integrated development (RAPID) complex in Pengerang, in Malaysia's southern state of Johor. The integrated petrochemicals complex will have a crude oil refinery capable of producing 300,000b/d, a naphtha cracker that will produce 3mn tonnes per annum (tpa) of ethylene, C4 and C5 olefins, facilities for isononanol, highly reactive polyisobutylene, non-ionic surfactants, methanesulfonic acid, plants for precursor materials, and a gas-fired power plant to supply the site.

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