Hess hires Velesto rig for Malaysian gas project

Hess Exploration and Production Malaysia, a subsidiary of the U.S. oil and gas company Hess Corporation, has picked Malaysia’s rig owner Velesto Energy to carry out the drilling work on a project located offshore Peninsular Malaysia.

Velesto Energy reported on Monday that Velesto Drilling – a wholly-owned subsidiary of Velesto Malaysian Ventures, which in turn is a wholly-owned subsidiary of Velesto Energy – had received a letter of award from Hess for the provision of the integrated rig, drilling and completion (I-RDC) services.

Megat Zariman Abdul Rahim, President of Velesto, commented: “The i-RDC services contract is the first jack-up rig drilling contract to be awarded through an i-RDC arrangement in Malaysia. This is a step change in Velesto’s business offering as it demonstrates our unique value proposition that paves the way for closer collaboration among the client, lead contractor, and services partners.

“We are partnering with Halliburton as our technical partner to provide these services to drill and complete 14 offshore wells. As our service portfolio expands through this strategic partnership, we are well-positioned to secure more potential opportunities to cater to the needs of our clients.”

During the signing ceremony, Velesto was represented by its president, while Hess was represented by Khazimad Yusof, Senior Manager, Drilling. The signing was witnessed by Senior Vice President of Malaysia Petroleum Management, Mohamed Firouz Asnan; Vice President of Hess Asia, Zhiyong Zhao; and Chairman of Velesto, Mohd Rashid Mohd Yusof.

As per the terms of the contract, the offshore drilling contractor will provide its NAGA 5 jack-up rig, which is expected to start the work, covering 14 wells, in the fourth quarter of 2022. This deal for Hess’ 2022 to 2024 North Malay Basin (NMB) full field development campaign has an estimated contract value of $135 million.

NAGA 5 is a premium independent-leg cantilever jack-up drilling rig with a drilling depth capability of 30,000 feet and a rated operating water depth of 400 feet.

This comes months after Hess revealed plans in January 2022 to use $270 million for production activities at its NMB project and the Malaysia/Thailand Joint Development Area in the Gulf of Thailand. At the time, the firm explained that these funds would cover drilling and facilities along with work previously deferred due to COVID-19 and low commodity prices.

The Hess-operated North Malay Basin project comprises 10 discovered gas fields tied to a gas terminal onshore. According to Hess, these gas fields are being developed on a phased basis to support energy demand in Peninsular Malaysia.

The first phase of this gas project involved the installation of an Early Production System (EPS) over the Bunga Kamelia field and the first gas for Phase 1 of full field development was achieved in 2017, just three years after the project was sanctioned. The NMB Phase 2 achieved the first gas in 2019 while the first gas from Phase 3 of this project came in September 2022. This led to the total production of 400 MMscfd. 

The NMB Block PM302 lies in a water depth of approximately 180 feet (55 m) with multiple gas-bearing zones situated at depths of 3,500 – 10,000 feet (1,000 – 3,000 m). This block is operated by Hess with a 50 per cent participating interest, in partnership with Petronas Carigali, which owns the remaining 50 per cent. Hess expects Phase 4A production to be achieved in 2023.