Southeast Asia is entering a pivotal second wave of deepwater gas development, targeting an estimated 28 trillion cubic feet of resources across Indonesia, Malaysia and Brunei.
However, industry analysts warn that delivering these projects will be challenging, with fragile economics and tight execution margins shaping the outlook.
According to Wood Mackenzie, operators are racing to bring more than US$20 billion of new infrastructure and supply online by 2030.
Yet many of these projects are expected to generate internal rates of return (IRR) of less than 15 per cent, leaving little room for delays or cost overruns.
“Southeast Asia’s shallow-water and onshore gas fields are maturing rapidly, and this necessitates a focus on deepwater resources that were once considered too risky and expensive,” said Dr Munish Kumar, Senior Research Analyst (Upstream) at Wood Mackenzie.
“Asia’s first wave of deepwater gas projects between 2008 and 2017 proved the commercial viability of the concept in new countries, such as India, China and Malaysia.
“But since then, activity has been sporadic due to various commercial, regulatory and subsurface challenges. Now we are entering a new phase – Asia’s ‘Deepwater 2.0’ moment.”
The renewed push comes amid growing energy security concerns across the region.
Indonesia’s non-associated offshore gas production has declined by more than 12 per cent since its 2018 peak, while Brunei is expected to require 500 million cubic feet per day of new gas beyond 2030 to sustain LNG output.
In Malaysia, deepwater is projected to account for 20 per cent of gas production by 2027.
Wood Mackenzie identified six major developments underpinning this second wave, including North Ganal, Rapak and Ganal in Indonesia’s Kutei Basin; South Andaman (Tangkulo and Layaran) in North Sumatra; Kelidang in Brunei; and Rosmari-Majoram in Malaysia.
Combined capital expenditure across these projects is expected to exceed US$20 billion in 2026 terms.
“These projects will deliver critical gas supply into domestic markets and LNG export plants to replace declining legacy production,” said Kumar.
The operator landscape is diverse, ranging from international majors such as Eni and Shell to national oil companies like PETRONAS, as well as newer entrants including Mubadala.
Eni is advancing multiple hubs in the Kutei Basin, while farm-down opportunities in Indonesia and North Sumatra are attracting companies seeking exposure to deepwater growth.
Despite the strategic importance, the economics remain highly sensitive.
Wood Mackenzie’s analysis shows that a 20 per cent increase in capital expenditure or a similar decline in gas prices or production volumes could reduce project net present value by around 150 per cent.
A three-year delay could halve project value.
“Without progressive fiscal mechanisms to share risk, there’s virtually no cushion for execution failures, so any delay or cost overrun directly threatens project viability,” said Kumar.
“In addition, a severely constrained global supply chain adds execution pressure, with the ongoing Middle East conflict lifting cost inflation and extending lead times for subsea equipment.”
To counter these risks, operators are pursuing accelerated development strategies.
Eni is targeting a five-year timeline from discovery to first gas at Geng North, while Mubadala is adopting a phased approach in North Sumatra to prioritise early domestic supply.
With geopolitical tensions continuing to reshape global energy markets, deepwater gas is increasingly viewed as a cornerstone of Southeast Asia’s energy security.
However, the success of this “Deepwater 2.0” phase will depend on whether operators can deliver complex projects on time and within budget.
The next five years are expected to be decisive for the region’s deepwater ambitions, as the industry closely monitors whether these high-stakes developments can achieve commercial success under tightening economic conditions.
