Boston, MA -- (SBWIRE) -- 03/11/2014 -- Malaysia's upstream segment could see good 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:

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- 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.
- Based on projects in pipeline, we expect oil production to continue climbing upwards from an estimated 625,140b/d in 2013 to a forecasted peak of 899,560b/d in 2018. However, the small scale of these fields means that their development can only sustain the country's output for a limited time. However, with the lack of large discoveries able to replace dwindling reserves from mature fields, we do not expect Malaysian oil production to reach the 1mn b/d level, with production levels starting to fall post-2018 unless high and continuous development of new projects brings significant new fields online and sustains the country's increasing production. Over the longer term, deepwater and greenfield developments will therefore remain necessary to maintaining oil production growth past its current expected peak in 2018.
- 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.

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