ExxonMobil Corp. (XOM) is gaining traction in Malaysia in association with state-run oil and gas company Petronas. It will begin its enhanced oil recovery project at the Tapis field in 2013. Investment for this project is expected to be approximately $1 billion.
Along with the Tapis field, both the companies have agreed to develop a total of seven mature fields in Malaysia at a total investment of $2.1 billion. The agreement was signed last year and comes as a 25-year production sharing contract. Located in offshore Malaysia, the Tapis field has been producing for a long time.
Exxon has a long standing relationship with Petronas. As of year-end 2009, it had interests in production sharing contracts covering 500,000 net acres offshore Malaysia. Last year, a total of 5 net development wells were completed. Exxon’s net Malaysian liquids production averaged 52,000 barrels per day in 2009, while its net gas production averaged 5.6 billion cubic meters.
Among the company’s three reportable segments, Upstream holds a significant portion. Last year, this segment accounted for roughly 81% of Exxon’s total earnings.
The company has increasingly been interested in enhancing its international footprint in the upstream arena. It has initiated talks with Chinese national oil firms for several upstream partnerships early this month.
Given Exxon’s significant share in the upstream business, we believe that it will retain its leverage to higher oil prices going forward. Exxon’s return on capital employed has significantly exceeded its peers in the recent years.
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