Mission Statement

Oil and Gas Equipment and Services Trade Mission

Hanoi, Singapore, Kuala Lumpur

Mission Description:

The U.S. Department of Commerce, International Trade Administration, U.S. Commercial Service, Office of Global Trade Programs, is organizing an Oil and Gas Equipment and Services Trade Mission to Malaysia, Singapore, and Vietnam, June 6-14, 2005. This event offers a timely opportunity for U.S. firms to tap into some of the world’s fastest growing marketplaces for oil and gas equipment and services. The mission will target companies in all sectors of the oil and gas industry, with particular focus on pipeline and tubular goods, drilling machinery and equipment, surveying technology, and safety equipment. In addition to receiving a personalized schedule of one-on-one appointments with qualified agents, distributors, representatives, licensees, and joint venture partners, mission delegates will visit Oil and Gas Asia (OGA), a leading oil and gas trade show in Asia and a U.S. Department of Commerce Certified Trade Fair. OGA 2005, to be held in Kuala Lumpur, will offer mission participants an extra venue to network and learn about business opportunities in South East Asia.

Commercial Setting:

The International Energy Agency predicts that more than 60% of the increase in world primary energy demand between 2000 and 2030 will come from developing countries, especially in Asia. Critical to satisfying this demand is a move to develop South East Asia’s massive gas resources; large reserves have been found in Indonesia (158 trillion cubic feet) and also in the Malaysian/Thailand Joint Development Zone (7.6 trillion cubic feet). Producing and exporting these reserves, particularly as LNG to South Korea, Japan and China, represents a huge export revenue generator. The latest World Offshore Drilling Report by analysts Douglas-Westwood project that some US$8.26 billion was to have been spent on offshore drilling in Asia in 2003, with the total investment between 2002 and 2007 set at US$38.62 billion.

Malaysia:

Prospects for Malaysia’s oil and gas industry are still bright and the sector should experience healthy growth rates. During the past five years, approximately US$6.6 billion has been spent on exploration and production. About fifty percent of Malaysia’s crude reserves remain undeveloped. A total of about US$16.2 billion will be invested by the petroleum industry during the Eighth Malaysia Plan period (2001-2005), as stated in the Government of Malaysia's five-year plan. Of this, US$10.9 billion (67.5%) will be spent for exploration, development and production activities by Petronas (National Petroleum Corporation) and its production-sharing contractors.

Malaysia has a broad, shallow continental shelf (330,000 sq. km) and some deepwater prospective areas. In total, Malaysia has approximately 500,000 square kilometers available for oil and gas exploration, of which 205,000 square kilometers are currently covered by Production Sharing Contracts (PSC). The country’s deeper offshore areas, with water depths of 200 meters or more, have only more recently been opened to oil and gas exploration. There are now 70 producing fields in Malaysia, 51 of which are oil fields. As of January 1, 2004, oil and gas reserves were estimated to be 4.84 billion barrels of crude oil and 87.0 trillion standard cubic feet (tscf) of natural gas. At current rates of production, oil reserves in Malaysia are expected to last 18 years and gas reserves, 34 years. Malaysia’s current production of crude oil and condensates is about 750,000 barrels per day and about 2.20 tscf per year respectively.

Four new PSCs were concluded during the last 15 months, bringing the number of PSCs in operation in Malaysia to 49, the highest level so far. Petronas has estimated that the PSC contractors invested US$2.88 billion during the April 2003-March 2004 period, with most of the investments channeled into development projects.

Efforts to search for oil and gas have recently extended to some of the more unconventional areas, such as the deepwater acreage, where very limited exploration activities were carried out in the past due to technological constraints and high investment costs. Petronas recently introduced the Deepwater Production Sharing Contract (PSC), which provides added incentives to production sharing contractors to undertake exploration activities in the prospective deepwater areas. Since the 1993 signing of its first deepwater PSC with Mobil, Petronas has awarded 13 blocks under the Deepwater PSC terms to 11 multinational companies. The latest: two deepwater blocks were awarded to Murphy Oil in January 2003, and one deepwater block to Newfield Exploration Company (U.S.).

The Malaysian market for oil and gas equipment in 2003 was estimated at US$575 million. Malaysia’s oil and gas equipment is supplied mostly through imports because local production is very small. It is expected that equipment needs will continue to be supplied through imports for the next several years. Malaysia uses primarily American made oil and gas equipment and tools, with at least 60% of the imports coming directly from the United States.

Singapore:

Singapore is the world’s third largest oil refining and trading center, and has long been a global hub for oil refining and a cost-competitive location for highly integrated, world-scale petrochemical plants. Jurong Island, created in the 1990s by merging some seven smaller islands, houses some of the world’s biggest names in the petroleum and petrochemicals industries. Companies like ExxonMobil, Shell, ChevronTexaco, BASF, Sumitomo Chemical and Mitsui Chemical are based on Juorng Island. Singapore also plays a dominant role in the specialty chemicals industry, in the area of lube and fuel additives, consumer care specialties, electronic chemicals and materials, polymer additives, and coatings and inks. The chemical industry grew strongly in 2002 despite difficult conditions. Output grew by 7 percent to S$31.2 billion (Singaporean Dollars) and value-added grew 22 percent to S$4.9 billion. The petroleum sector accounted for slightly more than half, or S$17.6 billion, of the total output, with petrochemicals generating S$8.5 billion. Singapore also offers 12 research institutes and three universities which offer opportunities for R&D collaborations.

The Singapore market for oil and gas equipment in 2004 was US$961 million, up from US$700 million in 2003. The increase is largely attributed to the economic recovery in the region. Imports from the U.S. were valued at US$344 million in 2004, representing approximately 27% of the total imports into the country. Singapore’s oil and gas equipment is largely imported and given the increase in activity in the region, demand is expected to grow steadily over the next several years.

Asia’s strengthening economy and the implementation of the US-Singapore Free Trade Agreement further enhance Singapore’s reputation as the gateway to South East Asia and present increased incentives for U.S. companies.

Vietnam:

Vietnam has so far discovered over 50 oil and gas fields with total estimated reserves of about 1.15 billion tons of proven crude oil equivalent, which include 540 million tons of oil and 640 billion cubic meters (cbms) of natural gas. The production of crude oil and gas in 2003 reached 17.16 million tons and 3.7 billion cbms respectively. It is estimated that Vietnam will produce about 16-18 million tons of crude oil from local operation, 3 million tons from foreign operation and 11-13 billion cmbs of gas by 2010.

The industry is expected to achieve the growth rate of 10-15 percent per year over the coming years. The total investment required to realize such a rapid growth is about US$19-20 billion by 2010, of which over US$10 billion may be funded by local sources and the remaining US$10 billion by foreign investors. According to PetroVietnam, a state-owned monopoly in the sector, oil and gas exploration and exploitation will be increased in the coming years to raise the country’s total discovered oil and gas reserves to 1.5-1.6 billion tons of crude oil equivalent by 2010.

In particular, upstream and mid-stream operation will need about US$900 million to 1.1 billion in new investment per year for exploration and production activities as well as the construction of two refinery facilities, in Dung Quat and Nghi Son, and possibly a third refinery in the South.

American technologies, expertise and experience are highly respected in the oil and gas industry in Vietnam. This presents significant opportunities for U.S. firms to export/ transfer equipment, services and technologies to Vietnam.

Indonesia:

The market for oil and gas equipment in Indonesia remains attractive and has a promising outlook for the long term. In 2003, the government awarded 15 new oil and gas concessions, receiving a total of $343.82 million in investment commitments. This was a significant improvement over 2001 and 2002, when the government awarded only six contracts and one contract respectively.

(In 2002, the total investment (for exploration, production, and administration) reached $3.4 billion, down 13 percent from 2001.) In 2003 (preliminary figures), investment from production-sharing contractors (PSCs) reached $3.97 billion, including $1.13 billion for exploration, $2.5 billion for production and $329,000 for administration. The government expects to award another 17 new oil and gas contracts this year with a target of 50 new contracts over the next five years. Total investment in 2004 is predicted to reach $7 billion, which in turn is expected to create significant market opportunities for U.S. oil and gas equipment and services.

Industry sources estimate that the market increased by 20% in 2004, with U.S. market share increasing by 10%, given planned exploration and development of existing oil fields.

Timetable:

Criteria for Participation:

• Relevance of the company’s business line to mission goals;
• Potential for business in the selected markets;
• Timeliness of the company’s completed application and payment of the mission participation fee;
• Provision of adequate information on the company’s products and/or services and communication of the company’s primary objectives to facilitate appropriate matching with potential business partners;
• Certification that the company meets Departmental guidelines for participation, including certification that the company’s products and/or services are manufactured or produced in the United States or if manufactured/produced outside of the United States, the product/service must be marketed under the name of the U.S. firm and have U.S. content of at least fifty-one percent of the value of the finished good or service.

The mission will be promoted through the following venues: U.S. Export Assistance Centers and Teams; the Federal Register; relevant trade publications; relevant trade associations; past Commerce trade mission participants; various in-house and purchased industry lists; and the Commerce Department trade missions calendar – www.ita.doc.gov/doctm/tmcal.html – and other Internet websites.

Any partisan political activities of an applicant, including political contributions, will be entirely irrelevant to the selection process. The participation fee will be approximately $3,500 for the trade mission. Participation fees do not include the cost of travel and lodging. Participation is open to the first 10 qualified U.S. companies. Recruitment will begin immediately and will close on Friday, May 6, 2005. Applications received after that date will be considered only if space and scheduling constraints permit.

Contact Information:

Matthew H. Wright
International Trade Specialist
Global Trade Programs
U.S. Department of Commerce, Room 2012
Washington, D.C. 20230
Tel: 202-482-2567 / Fax: 202-482-0178
Email: Matthew.Wright@mail.doc.gov