SK Earthon signs Production Sharing Contract for Block SK 427 offshore Malaysia with Petronas and PSEP
2022.04.24

■ SK Earthon acquired 85% shares and operatorship of Block SK 427 offshore Sarawak, Malaysia, and signed a Production Sharing Contract (PSC) with Petronas and PSEP on April 22.

– Proving its position as one of the best petroleum developers with technical excellence in the region, securing a bridgehead for its mid- and long-term business expansion in Malaysia

– Block SK 427 offers good prospects for exploration and has several geological structures where drilling is possible, as well as benefits from infrastructure nearby

– SK Earthon and Petronas shared a consensus on the importance of carbon reduction as well as agreed to seek a collaboration opportunity in CCS business

■ “We will increase our chance of success in this Malaysian block by exerting our capabilities and technical excellence while accelerating our plan to expand business in Southeast Asia,” said Myeong Seong, CEO of SK Earthon

 

On April 22 (KST), SK Earthon announced that the company signed the Production Sharing Contract (PSC) with Malaysia’s state-owned oil and gas company Petronas (Petroliam Nasional Berhad) and PSEP (Petroleum Sarawak Exploration and Production Sdn., Bhd.) after winning the bid on Block SK 427, an oil block located off the coast of Sarawak region last year. This is the first time SK Earthon successfully won a bid for the operatorship of an oil block in Malaysia. By securing the mineral rights and operatorship, the company is now ready to start the exploration of Block SK 427 in full swing.

 

The mineral rights are property rights acquired for exploiting a particular area on land or at sea, authorized by a legitimate procedure, such as winning a bid, for natural resources, such as oil and gas, that the plot harbors. According to the acquisition of the mineral rights, a party that signs the mineral rights contract* with an oil-producing country is referred to as an operator.

* Mineral rights contract: A contract on technical and business liability, rights, and obligations of developing a block (e.g., Production Sharing Contract)

 

SK Earthon acquired 85% participating interest of the Block SK 427, and, as an operator, it is responsible for the exploration, development, and production of the block. SK Earthon will be partnering with PSEP, which owns the remaining 15%, to carry out exploration. The final decision on the development and production of the block will be made by exploration results over the next four years.

 

SK Earthon officials said, “Winning the bid on Block SK 427 in Malaysia proves that SK Earthon has gained recognition as one of the best petroleum developers and block operators in the region with technical excellence.” “By leveraging the technologies and capabilities that we gained through our experiences in the nearby exploration block in Vietnam, we will maximize the prospects of the Malaysian block that will serve us as a bridgehead for our mid- and long-term business expansion in the Southeast Asian countries.”

 

Block SK 427 is a shallow-water block off the coast of Sarawak, and it is known as an area that has good exploration prospects as a series of medium- and large-size petroleum resources has been discovered in Sarawak and its surrounding areas. The block also has multiple geological structures* that allow for drilling within the block. Moreover, the area has advantages for the E&P as infrastructure, including a pipeline system already built for exploration blocks nearby which have been operated for oil development.

* Geological structure: The spatial distribution of rocks or strata on the crust

 

SK Earthon and Petronas share the same aspiration about the need for carbon reduction and look forward to finding opportunities and solutions for Carbon Capture and Storage (CCS) together in the future.

 

SK Earthon chose the green sector based on the CCS as its new growth engine to execute its Financial Story of “Carbon to Green,” and the company has been discovering opportunities for various business projects inside and outside Korea.

 

Myeong Seong, CEO of SK Earthon, emphasized, “By exerting our E&P capabilities and differentiated technologies that have been long accumulated, we will increase our chance of success in this Malaysian block while accelerating our plan to expand the business in Malaysia and Southeast Asia.”

 

SK Innovation and its subsidiaries, including SK Earthon, began the resource exploration business in 1983. As of 2022, they are operating projects in 11 blocks and running four LNG projects in eight countries, and producing about 51,000 barrels of oil and natural gas equivalent per day. As of the end of 2020, its reserves were a total of 380 million barrels of oil and natural gas equivalent.

 

[Reference]

Current status of oil development projects of SK Innovation affiliates: participating in 11 oil blocks and 4 LNG projects in 8 countries (2022)

 

Classification Country Block Participating Year
Production

(5 Blocks in 3 countries)

Peru Block 8 1996
Block 88 2000
Block 56 2004
Vietnam Block 15-1 1998
Libya NC 174 2000
Exploration

(6 Blocks in 3 countries)

Vietnam Block 15-1/05 2007
Block 15-2/17 2019
Block 16-2 2019
China 17/03 2015
26/26 2019
Malaysia Block SK 427 2022
LNG

(4 projects in 4 countries)

Oman Oman LNG 1996
Qatar Ras Laffan LNG 1999
Peru Peru LNG 2003
Yemen Yemen LNG 1997

 

[Photos]

(Photo 1) SK Earthon representatives take a commemorative photo after signing a Production Sharing Contract for Block SK 427 offshore Malaysia with Petronas and PSEP on April 22 (local time). From left: Head of E&P Portfolio Transformation Office Kim Kyoung-jun, Head of Exploration & New Venture Office Bang Sun-taek, CEO Myeong Seong, Head of E&P Tech. Center Han Young-ju.

 

 

(Photo 2) SK 427 Block located offshore Sarawak, Malaysia

 

Author | SKinno News