Petronas and Shell Malaysia signed two new production sharing contracts (PSCs) for enhanced oil recovery (EOR) projects offshore Sarawak and Sabah.

Under the new contracts, Shell Malaysia’s upstream companies and partner Petronas Carigali Sdn. Bhd. will further develop six oil fields in the Baram Delta offshore (BDO) Sarawak, and three oil fields in the North Sabah development area offshore Sabah, using EOR or other appropriate related technologies.

The Baram Delta EOR PSC comprises the Bokor, Bakau, Baram, Baronia, Betty, Fairley Baram, Siwa, Tukau and West Lutong oil fields, while the North Sabah EOR PSC contains St. Joseph, South Furious, SF30 and Barton fields.

On a combined basis, these EOR development opportunities could be the biggest in the world in an offshore environment, according to Shell.

The technology employed in the North Sabah fields could potentially lead to the first field-scale offshore chemical EOR in the world. The technology employed in the North Sabah fields could potentially lead to the world's first offshore alkaline surfactant polymer EOR project using horizontal wells, Shell explained.

Associated work activities and new investments from the partners are expected to extend the life of the fields to beyond 2040 and lead to increased oil production.

The innovative deal combines the remaining periods of earlier PSCs that would have expired in 2018 (Baram Delta Operations) and 2019 (North Sabah) with license extensions to 2040 and the addition of the EOR component for integrated PSCs with new terms.

Petronas holds a 60% equity interest in the BDO production sharing contract and is operator with Shell holding the remaining 40%. The North Sabah PSC is Shell-operated with each company holding a 50% equity interest.

The projected increase in the average recovery factor in the BDO and North Sabah fields will be from 36% to 50%, adding significant value to the upstream industry in Malaysia.