Southeast Asia’s oil & gas renaissance

The oil and gas sector in Southeast Asia is undergoing significant transformations, shaped by evolving market dynamics, the energy transition, and geopolitical developments. After years of setbacks due to the departure of major international oil companies, the upstream industry in Southeast Asia is seeing a resurgence. Companies like ConocoPhillips, Shell, TotalEnergies, ExxonMobil, and ENI are returning or increasing their investments, while national oil giants such as Malaysia’s Petronas, Thailand’s PTTEP, and Indonesia’s Pertamina remain focused on deepwater and offshore projects. This revival is evident in Malaysia and Indonesia, with new licensing rounds in Thailand and Timor-Leste adding further momentum. A prime example is Shell’s recent production launch for phase four of the Gumusut-Kakap-Geronggong-Jagus East offshore oil project spanning Malaysian and Bruneian waters.

Southeast Asia O&G Projects

Gas projects are also receiving substantial investments to ensure long-term energy security. The $7 billion expansion of Indonesia’s Tangguh LNG project, led by BP, and the Kasawari Gas Development offshore Sarawak in Malaysia, developed by Petronas, highlight the region’s commitment to leveraging natural gas as a transition fuel. Simultaneously, the ongoing war in Ukraine has prompted Asian governments to reduce dependence on volatile LNG imports, driving the rapid expansion of LNG infrastructure, including new import terminals and Floating Storage and Regasification Units (FSRUs) across Malaysia, Indonesia, and the Philippines.

Southeast Asia is also making strides in carbon capture initiatives, leveraging its abundant natural gas fields and depleted reservoirs for carbon storage. Several large-scale projects are underway, such as Petronas’ Kasawari Project offshore Sarawak, a partnership between Pertamina and ExxonMobil for carbon capture in the Asri Basin in Pertamina's Offshore Southeast Sumatra block, and Singapore’s regional carbon capture hub led by the S-Hub consortium comprising Shell and ExxonMobil. These efforts reflect the industry's drive to balance energy demands with sustainability goals.

Despite positive developments, the oil & gas sector faces key challenges, including supply chain risks, cost volatility, and financing constraints. Companies are grappling with uncertainties in yard availability, labor shortages, and material supply, which affect project timelines and operational efficiency. Fluctuations in prices and operational costs further strain financial predictability and stability, while securing funding has become increasingly difficult for some contractors as some investors prioritize Environmental, Social, and Governance (ESG) criteria. On the other hand, the financing landscape for oil & gas is shifting. While many European and UK banks, including Société Générale, BNP Paribas, and ING have effectively exited the oil & gas sector due to ESG concerns, recent trends suggest a potential change. Macquarie’s withdrawal last month from the Net-Zero Banking Alliance, following similar moves by Morgan Stanley, Bank of America, Wells Fargo, Goldman Sachs, and Citi, signals renewed opportunities for the financing of oil & gas projects.

M&A and Southeast Asia O&G

Mergers, acquisitions and joint ventures are reshaping the industry, enabling companies to streamline operations and expand their market reach. Key transactions in Southeast Asia for example include TotalEnergies’ acquisition of OMV and Sapura Upstream Assets in Malaysia, Glencore and Chandra Asri’s acquisition of Shell’s refinery in Singapore, Hanwha Group’s acquisition of contractor Dyna-Mac, and Petronas’ transfer of operatorship for the Kebabangan Cluster offshore Sabah to ConocoPhillips. Additionally, ENI and Petronas have announced plans to combine their upstream assets in Indonesia and Malaysia, while a proposed merger between Bumi Armada and the FPSO business of MISC underscores the industry’s shifting dynamics.

Looking ahead to the rest of 2025, the oil & gas sector in Southeast Asia is poised for both opportunities and challenges. Rising energy demand, particularly for natural gas, will continue to drive industry momentum, while LNG infrastructure expansion and upstream project advancements remain central to regional strategies. Regulatory changes and ESG considerations will exert pressure, but strategic investments, technological innovation and collaborative efforts provide a promising outlook for the energy landscape in Southeast Asia.

Editor’s note: Ton van den Bosch is a partner in the Singapore office of global law firm Clyde & Co. Before moving back into private practice many years ago, Ton was the general counsel of a global oil & gas contractor. Ton van den Bosch advises upstream companies, contractors, banks and investors on energy projects and transactions around the world, particularly in emerging markets in Africa, the Middle East and Southeast Asia. For further information: www.clydeco.com/en