Sabah sees O&G windfall as foreign giants commit long-term

Free Malaysia Today

7 days ago

SMJ Energy CEO Dionysia Kibat attributes sustained investor confidence in Sabah's oil and gas sector to its collaborative engagement with Petronas. (AFP pic)
PETALING JAYA : Sabah is drawing robust foreign direct investment (FDI) into its oil and gas (O&G) sector, bolstering state revenue and driving local economic growth—underpinned by a strategic collaboration with Petronas.
Dionysia Kibat, CEO of SMJ Energy, said leading industry players are intensifying their activities across Sabah's resource-rich basins.
'Major international O&G companies are committing towards further exploration, development and production in the state,' she told FMT in an exclusive interview, adding that the state now leads the rest of the country in near-term FDI inflows.
Among them, ConocoPhillips and Pertamina are active in the Layang-Layang basin, while INPEX Malaysia and TotalEnergies hold stakes in exploration blocks off the east and west coasts.
Dionysia Kibat.
Meanwhile, Shell Malaysia and ConocoPhillips have extended their production-sharing contracts (PSCs) to 2050, while PTTEP Malaysia is ramping up deepwater redevelopment in Blocks H and Kikeh.
Dionysia said these partnerships are already providing a substantial boost to state coffers.
'Approximately half of the state government's revenue of RM6.7 billion is derived from oil and gas activities in the form of cash payment and SST.'
She attributed the sustained investor confidence to Sabah's collaborative engagement with Petronas, contrasting it with Sarawak's legalistic and litigious stance.
'To date, this collaborative partnership has demonstrated commercial and financial success for Sabah,' said Dionysia.
In 2021, Sabah chief minister Hajiji Noor's administration signed a commercial collaboration agreement (CCA) with Petronas, allowing the state greater say, revenue and participation in the O&G industry while respecting national laws, including the Petroleum Development Act 1974.
SMJ Energy, a wholly-owned entity of the Sabah government established in 2021, has been tasked with overseeing, managing, and coordinating the state's participation across the entire O&G value chain.
'The CCA provides a commercial solution to overcoming the issue of O&G rights in Sabah while preserving the existing legal rights and privileges belonging to the state and federal governments,' said Dionysia.
Through the CCA, SMJ Energy has acquired equity in multiple ventures: a 50% stake in the Samarang PSC, 25% in Petronas Chemicals Fertiliser Sabah, and 10% in a Petronas LNG plant in Bintulu.
These have yielded RM1.8 billion, RM323 million, and RM866 million respectively in dividends and revenue.
'Dividends from SMJ—amounting to RM160 million to date—have been channelled back to the state government.
'SST paid to the state by SMJ Energy amounts to RM91 million to date,' she said.
Sabah's contractors ride OGSE wave
Sabah's oil and gas service and equipment (OGSE) industry is also seeing marked growth under the CCA framework.
'For Q1 of 2025, the value of OGSE work already awarded to Sabah contractors amounted to RM582 million, compared to RM613 million for the whole of 2021,' Dionysia noted.
'In 2024 alone, Sabah OGSE contractors were awarded RM2 billion worth of work, demonstrating Sabah as a OGSE powerhouse for the future.'
SMJ is also working with Petronas to ensure adequate local gas supply to spur downstream industrialisation.
'We're jointly ensuring the availability of gas supply for a RM20 billion investment (in three phases) by E-Steel Enterprise Sdn Bhd to build a hot briquetted iron plant in Sipitang Oil and Gas Industrial Park, and Phase 2 of the SBH Kibing New Solar Energy SB's solar glass plant amounting to RM7.2 billion,' she said.
Investing smart sans risk
Asked about SMJ's strategic posture, Dionysia said the company would remain a financial investor in producing assets with strong cash flow.
'We work within our limitations and financial resources. SMJ Energy will do away with exploration risk and will not assume an operational role in its upstream investments for now.'
She said SMJ leverages 'free carry interests' and 'contractual back-in rights'—mechanisms that allow it equity participation without initial capital exposure.
A deeper partnership with Petronas is not ruled out, she added.
'There are ongoing discussions at the highest level between the state and federal governments under the MA63 committees,' said Dionysia.
'These relate to oil royalties, cash payments and the continental shelf which involve both existing state and federal legislation.'