Talisman Energy (NYSE:TLM) has a large base of producing assets in Southeast Asia and plans an extensive development and exploration program here to generate 8% annual long-term production growth from the region.
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Southeast Asia Operations
Talisman Energy reported production of 119,000 barrels of oil equivalent (BOE) per day from its Southeast Asian properties in 2011. The company has producing properties in Malaysia, Vietnam, Indonesia, Timor Leste and Australia.
Talisman Energy's investments in Southeast Asia are based in part on the company's agreement with bullish assessments of future economic growth expected from this region. Economists predict that the GDP in Asia will increase by 5% annually over the long term. This optimistic growth projection will increase demand for natural gas power generation in the region.
Talisman Energy's largest operation in Southeast Asia is Indonesia, where the company reported production of 64,000 BOE per day at the end of 2011. The company is benefiting from recent efforts by the Indonesian government to decontrol long-term natural gas contracts that contain non-competitive pricing, in an effort to stimulate additional development. Talisman Energy expects that the company will benefit from improved pricing as these deregulation trends continue.
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Talisman Energy recently became one of the operators of the Kinabalu field in Malaysia, which comprises a number of onshore and offshore oil and gas fields. The company expects to invest over $1 billion in gross capital at Kinabalu during the term of the contract to increase production growth from these assets. Talisman Energy will also see an immediate increase to its production base and expects to add 8,000 to 10,000 barrels of net oil production per day from this field.
Royal Dutch Shell (NYSE:RDS.A, RDS.B) is the current operator of the Kinabalu field and is set to transfer control to Talisman Energy at the end of 2012.
Talisman Energy also plans development of the PM-3 commercial arrangement area on the Malaysia/Vietnam border. Talisman Energy is targeting infill-drilling opportunities here as well as new plays at PM-3, and estimates that it may get 75 million barrels of additional oil recovery and over Tcf of natural gas here.
SEE: Oil And Gas Industry Primer
In Vietnam, Talisman Energy is advancing the Hai Su Trang and Hai Su Den offshore developments in the Cuu Long Basin. The company has completed 33% of this project and is on track for first oil by second half of 2013.
While Vietnam has many prospective oil and gas areas, some operators have chosen to focus elsewhere. Conoco Phillips (NYSE:COP) sold the company's Vietnam operations in early 2012 for $1.29 billion.
Papua New Guinea
Talisman Energy has significant exploration opportunities in Papua New Guinea, and is involved in a joint venture with Mitsubishi in this country. The company has interests in fourteen licenses covering nearly 14 million acres and plans several exploration wells here in 2012.
Talisman Energy will benefit from a $280 million drilling carry from the Mitsubishi agreement and estimates that these funds will cover up to 14 wells in Papua New Guinea.
Mitsubishi has been active in partnering with established oil and gas operators in other areas as well. In early 2012, the company purchased a 40% interest in natural gas assets in Canada owned by Encana (NYSE:ECA).
SEE: 5 Biggest Risks faced By Oil And Gas Companies
The Bottom Line
Talisman Energy has chosen Southeast Asia as one of the company's core areas to help generate oil and gas production growth going forward. The company has a large inventory of exploration and development projects to choose from in this area.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
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