Abstract

Those responsible for leading their respective energy companies over the next 10 to 20 years in Asia have a very challenging responsibility. In the past, many of us were comfortable in our various disciplines and it was up to someone else in the company to integrate the strategies into an overall plan.

Today, as we think about "Upstream in Asia" — we are confronted with a complex environment which challenges each of us to step out of our comfort zone and see the real Asia before us — not the one that forms from our past successes and failures.

When talking about upstream in Asia, we must consider to which Asia we're referring. Is it an Asia that, as a region has embraced globalization and is partaking in the world energy marketplace? Or is it an Asia that is more comfortable in a regional energy marketplace? Or perhaps, are we looking at an increasing "green" Asia, where natural gas and other less polluting fuels are a mandated part of the region's energy supply? Of course it's all three — but in varying degrees in different parts of Asia.

Conditions also alter with time. Industry observers predict in the next five years, energy companies will compete in an aggressive environment to provide resources to undersupplied countries such as China, India, Japan and Korea. In five to ten years, the market will level and after ten years, we'll begin to see tremendous opportunities for economic growth within the oil and gas industry in Asia. No matter what scenario or what timeframe it's difficult to discuss upstream operations in isolation. Companies must not only find the gas they must find a market for the gas.

So we see it's becoming increasingly complex for energy companies to strategize for a three dimensional Asia and a three dimensional timeframe. But the energy market in Asia is sending signals, indicating some steps companies might take in planning their strategy. These signposts include:

• Globalization of LNG

• Companies going from role of supplier to direct sales

• U.S. demands for LNG potentially affecting energy supply and costs in Asia

• Governments exporting domestic resources in order to fund domestic infrastructure

• National oil companies competing on a global basis and with a capital advantage

Given all of these factors, how does a large independent position itself for successful natural gas production in Asia? Unocal sees several possible solutions including:

• Continuing gas exploration to maintain existing markets

• Linking discoveries to markets by becoming involved in midstream operations or forming close, mutually beneficial partnerships with midstream operators

• Analyzing the potential for internal, sub-regional, regional and global markets before looking for natural gas resources in a specific region

• Apply experience working in deregulated markets

• Developing innovative financing plans

Unocal can provide examples of its success or lack of success in each possible solution.

In summary, large independents can successfully compete with NOCs and super majors if they understand their market, know how to get resources to the market and form long-standing relationships with businesses, governments and communities in Asia.

Presented at: 2005 South East Asia Petroleum Exploration Society (SEAPEX) Conference, Singapore, 2003