Economic Appraisal of the Potential Petroleum Resources of the Asian Pacific Region
Authors: Gaffney P.D. , Moyes C.P. , Aling B. 
Published: December 2007

Recent successes in the Asian Pacific Region serve to underline the area's long term potential as a major petroleum producing province. At the same time it is apparent that economic and political factors are contributing to subtle, but significant changes in the pattern of petroleum development within the region. The emergence of a degree of competition between consumers and producers has caused a marked increase in the surplus production capacity of certain countries; in addition the economic production capacity of certain countries; in addition the economic pressures in developing countries generally have produced a degree of pressures in developing countries generally have produced a degree of competitive demand for the limited capital and technical abilities available worldwide within the industry.

The cumulative effect of changes in the economic base of the oil industry, both in terms of intraregional and extra-regional factors, has led to a serious reassessment of future plans on the part of producing countries and international oil companies alike. The conclusion is that these overall changes will promote a healthy and less concentrated political environment in which the development of petroleum resources in this vast region will continue to outpace the other major world areas of activity. To this end it is projected that production over the next 10 years will rise from the present level of 3.8 million barrels per day to more than 11.5 million present level of 3.8 million barrels per day to more than 11.5 million barrels daily, a more than threefold increase.

Introduction

Definition of the Asian Pacific Region in the context of the oil industry has been continuously expanded in recent years in response to the emergence of exploration activity in hitherto neglected developing countries. Reference to the map attached to this paper illustrates the enormous extent both land and marine, of the region. At present exploratory work is being conducted at varying levels of intensity in some 19 countries across an arc stretching from India in the West to Japan in the North East and South to Australasia. Including China and the Indian sub-continent the Region encompasses no less than one half of the world's population and one fifth of its land area and foreign companies are now committed to exploration in every country in the Region except China; even here, many feel that it will only be a matter of time before foreign companies are invited to participate in offshore exploration. It is for this reason that the updated forecast has been expanded to include China and the Indian subcontinent.

During the past 8 years more than 300 companies have assumed petroleum investment commitments in the Region, establishing it as one of the major provinces of petroleum activity in the world. More than one-tenth of the global mobile drilling rigs are currently operational in the area and with some 33 rigs due for completion in the next twelve months, the Region's share of overall activity is bound to grow. For the international companies, the increasing spread of prospective exploratory areas, which may effectively be managed from one or possibly two locations in the Region, provides the ideal degree of diversification potential that is provides the ideal degree of diversification potential that is so critical to management policy in the industry today. For this reason it may be safely assumed that the Region as a whole will retain its basic rig fleet and expenditure commitments, even though operating conditions in specific countries may cause swings within the area from time to time.

Current Activity

During 1974 the pace of the 'quiet' boom, which had started as early as 1968, reached a peak as more and more countries opened their doors to the international companies. Even though areas such as the North Sea have proved to be more prolific in recent years than the Asian Pacific area, the prolific in recent years than the Asian Pacific area, the consistent high rate of success, attractive and pragmatic operating terms and lower cost environment, have all helped to promote the influx of a large number of companies, including many smaller, entrepreneurial concerns. With a total of 66 rigs active in Indonesia at the end of 1975 this country alone had the fourth highest total of active rigs in the world, ranking only after the U.S., Canada and Mexico. For the region as a whole, the active rig tally was 180, more therefore than either Europe or the Middle East.

Historically the small independent companies have gained an impressive success record in the region through aggressive exploratory programs. However the very nature of small company operations renders them more subject to political pressure and this factor undoubtedly contributed to the pressure and this factor undoubtedly contributed to the 1975 slowdown following the Malaysian disagreement between two major companies and Petronas.

In assessing the impact of fluctuations in activity it is necessary to weigh carefully all contributing factors - political and economic, intra-regional and extra-regional. Only by evaluating these factors in a global sense are we able to determine whether the slowdown is in any sense permanent or whether it is merely a temporary cyclical swing resulting from the economic situation in the industrial world.