Tuesday, December 17, 2019

Sale of ExxonMobil's Malaysian assets: What are the security implications for Malaysia, given China's claims over all of the South China Sea

by Ganesh Sahathevan


ExxonMobil announced its intention to sell its long held Malaysian assets in October this year (see story below). The process is believed to be well underway, even if closely managed by ExxonMobil, its banker BAML, and Petronas. 

Meanwhile, tensions between Malaysia and China over the South China Sea are growing :

Luconia Shoals saga continues: Malaysia discovers that China is not interested in its diplomacy , orders UN "not to consider Malaysian claim in South China Sea"

Which brings us to the question-is anyone in Malaysia or the US considering the security implications of the sale? Petronas has in the past shown a willingness to be led by Exxon (and the other majors), so one should not expect anyone at Petronas to be concerned about the long-term implications of the sale for Malaysia's oil and gas interests in the South China Sea.



Exxon Appoints Bank to Sell Malaysia Assets

 October 9, 2019
© karlstury / Adobe Stock
Exxon Mobil Corp has appointed Bank of America Merrill Lynch to run the sale of its Malaysian oil and gas assets as the U.S. firm accelerates a vast disposal program, banking and industry sources said.
The Malaysian assets, which include stakes in two large fields, are expected to fetch up to $3 billion, the sources said.
Exxon is exploring a sale of its Malaysian oil-and-gas producing assets, among a number of other properties worldwide, confirmed spokeswoman Julie King.
The oil major has no agreements with potential buyers for the Malaysian properties and will continue to operate the fields as it explores their sale, she said. Exxon has said it aims to sell $15 billion in assets by 2021.
Bank of America declined to comment.
Irving, Texas-based Exxon has ramped up sales of assets around the world in recent months. Those it has offered or sold include production in Norway, Australia, Nigeria, Azerbaijan and Britain.
In Malaysia, Exxon operates 35 oil and gas platforms in 12 offshore fields and has working interests in another 10 platforms in five fields in the South China Sea, according to its website.
The operations produce 15% of Malaysia's oil output of 600,000 barrels per day and half of its natural gas output of over 2 billion cubic feet per day.
The fields are operated under a 50% and 78% stake in two large production sharing contracts (PSC), consultancy WoodMackenzie said in a note.
"The Malaysian assets are both operated and generally highly mature, with a significant amount of ageing infrastructure. A buyer will need to have strong operating credentials, and be recognised by (Malaysian national oil company) Petronas to be a suitably qualified and reputable operator," one banker said.
Exxon, which has operated in Malaysia for more than 125 years, will continue to operate other businesses in the country after any sale. It runs two support centers in Kuala Lumpur for its upstream, fuels, lubricants and chemicals manufacturing and for information technology support. It also is a provider of polyethylene to the Malaysian market.

(Reporting by Ron Bousso, Anshuman Daga, Florence Tan and Gary McWilliams; Editing by Alexandra Hudson and Nick Zieminski)

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