Shell has been in Malaysia for over a century and looks set to expand its operations even further.

Its recent ventures in exploration and production (EP) saw Shell moving into the more challenging and costly deep waters of Sabah and Sarawak, an affirmation of its long-term commitment.

"Exploration is the key growth engine for our EP company," says Shell Malaysia's new chairman and chief executive Jon Chadwick.

Total investment per year is expected to be more than RM1 billion ($2.6 million).

"Our deep water exploration has been very successful. We have drilled seven wells since 1995 and have made five significant discoveries to date. This is a very good rate based on the international industry's benchmark," he says.

According to him, this has been enabled by 3D seismic acquisitions combined with specialised processing and visualisation technology. The implementation of a surface blow-out preventer drilling technology allows drilling in deepwater at a much lower cost than competitors, he says.

"We are the lowest unit cost operator in Malaysia and, in fact, for Shell EP worldwide. Our focus is very much on deepwater Sabah but we are also expanding exploration activities in Sarawak [with Durian-1]."

Next year, Shell will be adding 2,500 sq km of 3D seismic data in offshore Sabah, making a total of 8,000 sq km, allowing it to select optimal drilling locations for the years ahead.

The company's EP activities are being further expanded to include offshore waters of peninsular Malaysia - an area that Shell has never explored before despite being in the country for so long. Block PM303 in offshore Terengganu marked Shell's first entry into exploration activities here.

Chadwick acknowledges that offshore peninsular Malaysia is new to Shell and that it is stepping out of its traditional heartland of Sabah and Sarawak.

"We intend to be actively exploring in PM303 with our partner Petronas. We will be drilling some wells and are determined to give our best shot," he says.

Shell first started its operations selling kerosene but last year, turnover from its oil products, exploration and production and gas/power activities reached RM17 billion. Its capital expenditure for this year stood at RM2.8 billion.

The company that first struck oil in Malaysia at Miri Well No 1 on top of Canada Hill in Sarawak in 1910 has today secured 15 production sharing contracts (PSC) - agreements signed by oil companies with Petronas to allow them to carry out EP activities in Malaysia.

"We are not scaling down our operations or investments plan," Chadwick assures, hinting at a plan to make Malaysia a regional services hub, mostly for information technology for some of Shell's businesses in the Asia-Pacific.

Shell will open about 20 new petrol stations a year to maintain its market position, says Chadwick. This year, RM106 million was invested.

Shell's three major businesses in Malaysia are oil/gas EP, oil products (OP), which comprise marketing, distribution, trading and manufacturing and gas/power.

The bulk of its PSCs are in offshore Sarawak and Sabah for oil. A large volume of gas is also produced from its fields in the Central Luconia area off Bintulu.