Japanese player farming into Malaysian oil & natural gas block pair

Japanese petroleum company Idemitsu Kosan has acquired interests in two blocks located off the coast of Sarawak, Malaysia, from South Korea’s SK Earthon and signed a production sharing contract (PSC) for the blocks with Malaysia’s state-owned PETRONAS, Petroleum Sarawak Exploration and Production (PSEP), and SK Earthon. 

As a result of acquiring a 40% interest through its subsidiary Idemitsu Sarawak E&P, the Japanese player has the right to explore, develop, and produce oil and natural gas in Block SK427 and Ketapu cluster blocks proportionate to its participating interests. The former was awarded under Malaysia Bid Round (MBR) 2021, and the latter under MBR Plus Round I. 

Idemitsu shared that it is currently conducting oil and gas upstream business in Vietnam and Norway as its main focus areas. The company expects that this acquisition in Sarawak, Malaysia, where multiple oil and gas fields have been discovered and developed, to serve as a foothold for us to establish a new core.

“In the blocks participated in this time, several promising structures have been identified by the subsurface data acquired in 2023, and Idemitsu will continue to contribute to mature the possibility towards the development phase through collaboration with its partners in the evaluation and drilling of exploration wells,” said Idemitsu.

The Japanese firm said it plans to receive an investment from the Japan Organization for Metals and Energy Security covering up to 50% of the exploration cost that Idemitsu Sarawak will bear in the future.

Both blocks are located in water depths of 10-50 meters. Covering an area of 3,324 square kilometers, Block SK427 is larger of the two, while the Ketapu Cluster covers approximately 27 square kilometers. They have the same ownership structure, with SK Earthon as operator and 45% interest holder, Idemitsu Sarawak holding 40%, and PSEP 15%.

The company’s medium-term management plan entails contributing to the realization of a carbon-neutral society by 2050 and providing a stable energy supply. Following the latest acquisition, the company aims to further expand its oil and gas upstream activities while also actively attempting and pursuing carbon-neutral initiatives in the region, including carbon capture and storage (CCS).

The Japanese player says it has positioned the oil and gas upstream activities in and around Southeast Asia as a core business during the transition period to achieve this goal, which is important for Japanese energy security and holds what the company says is promising demand potential.

It has been a busy week for Petronas. In addition to signing this PSC, the Malaysian giant inked a small field asset production sharing contract over the Temaris cluster with Seascape, awarding it its first operatorship.

The state-owned company also inked LNG supply deals with Commonwealth LNG and Woodside, and entered into a framework agreement with Eni for their proposed business combination.