Southeast Asia faces its deepwater gas 2.0 moment

Southeast Asia is entering a second wave of deepwater gas development as shallow-water and onshore fields mature. Deepwater resources, once considered high risk, have shifted from the margin to a core component of regional energy security.

The first wave of Asian deepwater projects (‘Deepwater 1.0’) took place between 2008 and 2017, during which approximately 23 tcf of gas (4 bnboe) was developed. This period saw the first-ever deepwater gas projects in Malaysia, India and China. Since then, activity has been sporadic, constrained by commercial, strategic, technical and regulatory challenges.

Today, projects such as Kelidang in Brunei; North Ganal, Rapak, Ganal and South Andaman in Indonesia; and Rosmari–Majoram in Malaysia are aiming to monetise around 28 tcf of gas. We term these developments ‘Deepwater 2.0’. Collectively, they will deliver critical new supply to domestic markets and LNG export plants.

Read on as we assess why, despite their scale, these projects face a narrow path to commercial success.

A geopolitical safe harbour

Despite geopolitical tensions and related global supply chain disruptions, Southeast Asia continues to offer a relatively stable investment environment. 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.

Navigating fragile economics

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

Breaking the mould to unlock value

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.