Via The Peninsula (Qatar), a report that Southeast Asia’s major oil and gas firms are gearing up for an aggressive expansion to overhaul local operations and snap up foreign assets to meet the needs of a fast-growing, power-hungry region.  As the article notes:

“…From the archipelagos of Indonesia and the Philippines to the rapidly developing economies of Malaysia and Thailand, energy firms are signing loans or tapping fixed income markets to finance expansion plans at a time when some Western oil majors such as Royal Dutch Shell Plc are scaling back spending.

But whether energy groups such as Thailand’s PTT can catch up with bigger rivals like Malaysia’s Petronas and grow outside their home markets depends on whether they can outsmart bigger Chinese rivals or in some cases overcome a chequered past of troubled overseas forays.

For Southeast Asia, “the domestic reserve profile is becoming more challenging and difficult,” said Standard & Poor’s analyst Andrew Wong, adding deeper drilling requirement and complex terrains require additional financial resources.

Facing limited long-term domestic resources, national oil firms such as Petronas, PTT and its upstream unit PTT Exploration and Production are scouting for foreign assets.

The Thai energy giant, for example, is squaring off with China’s CNOOC, Italy’s ENI and Osaka Gas Co Ltd in bidding for a stake in Canada’s InterOil’s liquefied natural gas (LNG) project in Papua New Guinea. But with signs of a global economic recovery, assets up for sale are not cheap.

“The common trend is that countries with huge reserves do not want to open too much due to security reasons,” said Petroleum Institute of Thailand Director Pipop Pruecksamars. “That means investing overseas will be more difficult.” Apart from acquisition plans to boost growth, many companies are also scrambling to upgrade domestic facilities and infrastructure.

Indonesia urgently needs to build new refineries to meet growing domestic demand and reduce imports. State-owned PT Pertamina plans 22 trillion rupiah ($2.2bn) in capital spending this year, up an estimated 30 percent from last year.

Indonesia, Asia’s top importer of oil products, has huge hydrocarbon resources. But it is tapping alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

In Manila, Petron Corp plans to spend up to $1 billion on additional refinery units as part of a plan to convert residual products into higher-value gasoline, liquefied petroleum gas, diesel and propylene.

The top Philippine oil refiner raised 10 billion pesos ($207m) through fixed-rate notes in May to fund the expansion of its retail network and construction of additional facilities at its refinery.

In Vietnam, where oil and gas resources are largely untapped, state oil Petrovietnam plans to resume operations of the country’s first refinery, Dung Quat, by the end of this month.

With energy demand playing a major role in the recovery of Southeast Asian economies, national oil companies are under pressure to secure supplies in the net oil importing region.

“The challenge for upstream companies is to continue to invest to maintain and replace current production despite the current depressed energy price environment, and position themselves to satisfy demand once the global and regional economy recovers,” said Singapore-based Wong.

Power demand in Southeast Asia, a region of 568 million people, is expected to triple by 2025, according to data compiled by the Petroleum Institute of Thailand. The figure excludes the Philippines, with a population of 96 million.

According to most recent data, demand in the region including the Philippines was 438,000 gigawatt-hours (GWh) in 2007, said the institute, which projects Southeast Asia will require at least $100 billion in investment in the power sector over the next 10-15 years.

Motivated to generate profits for governments and ensure stable supplies, national oil firms like Petron, PTT and Petronas face some unique challenges compared to Western rivals.

“One potential risk is the motivation for the government to intervene in their operations by directing them to provide subsidized fuels to domestic markets and intervene in their finances by requiring higher dividends to fund stimulus measures or fiscal deficits at the expense of using internal funds for capital expenditure,” Wong said.

Although some of that risk is offset by investments that flow from government-to-government, political uncertainty cannot be ruled out. And lessons from PTT’s past overseas forays are not encouraging.

PTT first went overseas just two years ago, acquiring 25 percent of a gas pipeline between Egypt and Israel for $487 million. But the deal has been marred by political tension in the region that casts some uncertainty over the investment.

“It has not been involved in real competition because of its state-owned status. Now, it won’t be easy for PTT to face the reality outside its homeland,” said Supanna Suwankird at Thanachart Securities, a Thai partner of BNP Paribas.”