Southeast Asia is entering a critical second wave of deepwater gas development targeting 28 trillion cubic feet of resources across Indonesia, Malaysia and Brunei. However, delivering these projects won’t be easy, says Wood Mackenzie.
The models suggest these projects have fragile economics, with many delivering less than 15% internal rates of return (IRR). As a result, operators face narrow margins for execution error as they race to deliver over US$20 billion of new infrastructure and supply by 2030, according to Wood Mackenzie estimates.
“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.”
According to Wood Mackenzie, Indonesia's non-associated offshore gas production has fallen more than 12% from its 2018 peak, while Brunei requires 500 million cubic feet per day of new gas post-2030 to sustain its LNG output. Malaysia is projected to source 20% of its gas production from deepwater by 2027.
This second wave targets around 28 trillion cubic feet, or 5 billion barrels of oil equivalent, through six major developments, Wood Mackenzie noted. Critical projects include 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 developments will 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 set is diverse, ranging from majors like Eni and Shell to national oil companies such as PETRONAS and mid-cap deepwater debutant Mubadala. Eni is simultaneously developing three separate deepwater hubs in the Kutei Basin, including the North Ganal development. Ongoing farm-down opportunities from Eni in the Kutei Basin and Harbour Energy in North Sumatra also present entry points for companies seeking deepwater growth assets.
Wood Mackenzie's analysis shows most projects clustering at approximately a 15% IRR threshold under base case assumptions, substantially lower than deepwater developments in other global basins. Sensitivity analysis demonstrates the razor-thin margins: a 20% increase in capital expenditure or 20% reduction in gas price or production volumes erode net present value by approximately 150%. A three-year project delay causes immediate 50% value erosion.
“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 overcome Southeast Asia's historically slow execution timelines, operators are deploying accelerated delivery strategies. Eni is targeting just five years from discovery to first gas at Geng North, while Mubadala is pursuing a phased strategy in North Sumatra, supplying the local market first through Tangkulo while finalising the larger Layaran development.
Regional self-sufficiency becomes increasingly urgent as Russia-Ukraine and Middle East conflicts persist, positioning deepwater gas as a core component of Southeast Asian energy security rather than a high-risk exploration frontier.
The ability of the current crop of projects to deliver will be keenly watched by the industry; the fragile economics of Deepwater 2.0 mean margins for error are narrow. The next five years will determine whether the region can deliver these projects in a timely, cost effective and commercially successful way.