Are Regional Companies Ready To Dominate South Asian Oil Markets?

Are Regional Companies Ready To Dominate South Asian Oil Markets?

Hibiscus Petroleum Bhd. is set to take over Repsol’s operations in Malaysia and Vietnam as the Spanish company sells its exploration and production assets in a move away from Malaysia to focus on its core market.  Repsol announced it will be selling oil exploration and production assets in Malaysia as well as Block 46 CN in Vietnam to a Malaysian Hibiscus Petroleum-owned subsidiary. Kuala-Lumpur listed Hibiscus will acquire the whole equity interest in Fortuna International Petroleum Corp for $212.5 million.

Rumors have been circulating around Repsol’s departure from Malaysia since February this year. But Repsol still holds a significant stake in the Southeast Asian oil sector, with major assets in Vietnam and Indonesia. 

The shift appears to be in a bid for Repsol to focus its portfolio on a core set of countries and activities, following its recent withdrawal from Russia and the ceasing of its oil production in Spain. Repsol will continue to focus its efforts around upstream activities, reducing its presence from 25 to 14 core countries.

This will take Hibiscus from being a small Asian player to one of the majors in the region, beating Indonesia’s Medco Energi as a rival bidder for the assets.

Readul Islam, an Asia upstream specialist at Rystad Energy stated of the deal, “In the North Sea, there has been a pack of private equity-backed players willing to pick up stakes as the legacy players exit their positions. In this region, Hibiscus seems to be taking on that role pretty much single-handedly.”

While vice president of analysis at Rystad, Prateek Pandey, said the sale to Hibiscus was “an excellent example of a regional independent stepping up to expand their portfolio as international heavyweights trim their exploration and production presence across Asia.”

The deal will see Hibiscus acquire a 35 percent interest in PM3 CAA PSC, 60 percent in 2012 Kinabalu Oil PSC, 60 percent in PM305 PSC, and 60 percent in PM314 PSC offshore eastern Peninsular Malaysia, as well as 70 percent in Block 46 CN in Vietnam.

However, the deal is pending regulatory approval in both countries, with the Vietnamese regulators proving a potential obstacle. Hibiscus also requires a waiver of partners’ pre-emption rights to complete the purchase. 

Malaysia’s oil and gas industry is slowly rebounding, following a fall in profits across the board in response to low oil demand and prices last year. State-owned oil company Petronas managed to double its first-quarter profits year-over-year, as oil prices climb while other costs have fallen. 

This follows the release of a 10-year industry plan, announced in April by the Malaysian government, aimed at prospering in a lower oil price environment. The national oil and gas services and equipment (OGSE) industry blueprint 2021-30 intends to enhance export potential, diversify the sector through renewable energy projects, and consolidate the industry.

Meanwhile, Vietnam’s state oil company Petrolimex is aiming for an increase in earnings of 9 percent, around $5.86 billion, and a rise in revenue and pre-tax profit of 238 percent, approximately $156 million.

The Hibiscus-Repsol deal could be the first of many as we see regional players take on a larger role in the development of the Southeast Asian oil market.

Oilprice , by Felicity Bradstock, June 3, 2021