Southeast Asia’s deepwater gas expansion faces ‘fragile economics’ challenge

May 4, 2026, by Melisa Cavcic

As Southeast Asia’s second wave of deepwater gas projects targets a 28 trillion cubic feet (tcf) supply, Wood Mackenzie, an energy intelligence group, has shed light on the way operators can navigate what it describes as ‘fragile economics’ to unlock this new deepwater gas supply across the region.

Wood Mackenzie’s Angus Rodger, Vice President of SME Upstream APAC & Middle East, and Munish Kumar, Senior Research Analyst of APAC Upstream, explain that Southeast Asia is entering a second wave of deepwater gas development as shallow-water and onshore fields mature, since deepwater resources, once considered high risk, have shifted from the margin to a core component of regional energy security.

The company underlines that the first wave of Asian deepwater projects, called Deepwater 1.0, took place between 2008 and 2017, during which approximately 23 tcf of gas (4 billion boe) was developed, enabling the first-ever deepwater gas projects in Malaysia, India, and China. However, the activity has since been sporadic, constrained by commercial, strategic, technical, and regulatory challenges.

Currently, projects such as Kelidang in Brunei; North Ganal, Rapak, Ganal, and South Andaman in Indonesia; and Rosmari–Majoram in Malaysia are aiming to monetize around 28 tcf of gas. WoodMac terms these developments as Deepwater 2.0, since they will deliver what it deems to be critical new supply to domestic markets and LNG export plants.

Rodger and Kumar have assessed why, despite their scale, these projects face a narrow path to commercial success. Despite geopolitical tensions and related global supply chain disruptions, Wood Mackenzie claims that Southeast Asia continues to offer a relatively stable investment environment.

View on Offshore-energy.

“We see renewed exploration and upstream interest from both national oil companies (NOCs) and international oil companies (IOCs). Ongoing farm-downs by Eni in the Kutei Basin and Harbour Energy in North Sumatra present timely entry opportunities for companies seeking to build or expand deepwater portfolios,” emphasized the firm.

Despite the material resource volumes, the economics of Deepwater 2.0 projects are exceptionally fragile in Wood Mackenzie’s view, as its data shows that achieving a targeted 15% internal rate of return (IRR) leaves little margin for cost overruns, schedule delays, or fiscal slippage.

“Success will depend on three critical factors: accelerating development timelines, leveraging brownfield infrastructure and maintaining disciplined project execution. Those that secure infrastructure early, lock in service capacity and move decisively will capture value. Those that cannot risk seeing project value erode rapidly,” concluded the company.