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Daily Express
4 days ago
- Business
- Daily Express
Sabah emerging as Malaysia's next frontier of O&G investment
Published on: Monday, July 21, 2025 Published on: Mon, Jul 21, 2025 Text Size: Clearer regulatory frameworks amid rising geopolitical risks are shifting upstream oil and gas investment toward Malaysia with Sabah offering a stable operating environment per analysts. Photo source: PETALING JAYA: Driven by investor-friendly policies and untapped reserves, Sabah is outranking Sarawak as a more appealing destination for foreign direct investment (FDI) in Malaysia's upstream Oil and Gas (O&G) sector, according to industry observers. Sabah is drawing increased interest from international oil companies as geopolitical instability in the Middle East shifts focus toward Malaysia's stable investment climate, said economist Samirul Ariff Othman, an adjunct lecturer at Universiti Teknologi Petronas. Advertisement 'The 2025 Iran-Israel conflict and escalating Red Sea tensions have driven up freight insurance and security costs while disrupting supply chains across the Middle East and North America,' he said, hinting that investors are looking for lower-risk and high-potential alternatives, with Southeast Asia, particularly Malaysia, emerging as a preferred destination. The Sabah advantage Samirul noted that Sabah is better positioned to capitalise on the shifting global investment trends, especially in terms of near-term foreign direct investment (FDI) inflows. "Currently, Sabah is attracting the strongest near-term FDI inflows, followed by Sarawak,' he said, citing that ConocoPhillips' strategic shift from Sarawak to Sabah indicates the untapped potential of North Borneo's deepwater blocks. Samirul also pointed out that while the Langkasuka basin off Peninsular Malaysia's west coast is generating investor interest, monetisation through commercial development may be slow due to the lack of existing pipelines and processing facilities, as compared to the more developed infrastructure found in other basins, including that of Sabah. 'With ongoing studies in Blocks SB409 and SB310, and Kota Belud's redevelopment, Sabah is set to gain momentum in the second half of 2025,' he said. Regulatory roadblocks in Sarawak Commenting on the competitive landscape in East Malaysia, Samirul observed that while Sarawak has strong LNG infrastructure and active basins such as the SK318 and SK408 gas blocks, regulatory uncertainty involving national oil company PETRONAS and the state-owned PETROS continues to undermine investor confidence. "The overlapping authority between state and federal regulators has created a legal and fiscal limbo at the same time. Investors want clarity, not confusion. Until we resolve these jurisdictional ambiguities, billion-dollar projects will remain stuck at the drawing board," Samirul cautioned. 'While Sarawak's state oil company PETROS has bolstered its role in managing upstream resources, overlapping jurisdictions have added ambiguity in fiscal split and licensing processes.' In May, the federal and Sarawak governments announced a high-level agreement granting PETROS a bigger role as the state's gas aggregator. However, both entities are still engaged in negotiations over legal frameworks, operational control, and commercial terms, with unresolved complexities still hampering progress. Echoing this, Dr. Tricia Yeoh, associate professor at University of Nottingham Malaysia, remarked that Prime Minister Anwar Ibrahim's announcement of a broad agreement reached in February this year with Sarawak Premier Abang Johari Openg did little to resolve the prolonged regulatory ambiguity. "With PETRONAS and PETROS still locked in legal proceedings over an RM8 million bank guarantee in addition to the lack of regulatory clarity, investor confidence remains questionable," she said, hoping that both parties should jointly withdraw the suit and establish a clear, forward-looking partnership. The good news is that there is one positive takeaway from the announcement - all existing PETRONAS contracts with third parties will remain honoured. "However, this assurance still comes short of resolving the broader ambiguities surrounding the Petronas-Petros relationship as the statement does not address Sarawak's claim to resources over 200 nautical miles of its territorial waters, for instance,' Yeoh said, referring to Anwar's speech in the Dewan Rakyat on Feb 17 and a media statement issued by Abang Johari the following day. Yeoh stressed that the federal government should clearly outline the conditions for exceptions or carve-outs granted to individual states. 'If the unclear and confusing situation drags on, it is not helping our national O&G development,' she warned, calling for a joint committee compromising legal, financial and technical representatives from the federal and state governments - to work out a solution. 'With a clear direction in place, the nation can then move forward constructively,' she said. Production Sharing Contract (PSC) By the same token, Samirul favours the idea of creating a more competitive environment through a clearly defined regulatory framework governing the Production Sharing Contract (PSC). "Faster PSC approvals and better regulatory clarity in East Malaysia is needed to sustain FDI momentum through 2026 and beyond," he emphasised. Nevertheless, he acknowledges that Malaysia's PSC remains regionally competitive as compared to that of Indonesia and Vietnam where operators enjoy relatively low oil and gas royalties i.e. 5% to the federal government and 5% to state government - out of a 10% split - with up to 70% of cost recovery. PETRONAS to strengthen partnership Despite regulatory friction, PETRONAS continues to fortify its global ties with energy giants like ConocoPhillips, TotalEnergies, Eni, and Idemitsu, including upstream joint ventures in Indonesia. Commenting this, Samirul said: 'With global upstream costs rising due to inflation, supply chain bottlenecks, and deeper offshore exploration needs, joint ventures have become an essential risk mitigation strategy." "By pooling resources, companies can distribute exploration costs, mitigate capital risk, and combine cutting-edge technologies to make ambitious projects more viable," he pointed this out, wishing for policy and legal frameworks to catch up with investor expectations. * Follow us on our official WhatsApp channel and Telegram for breaking news alerts and key updates! * Do you have access to the Daily Express e-paper and online exclusive news? Check out subscription plans available. Stay up-to-date by following Daily Express's Telegram channel. Daily Express Malaysia
New Straits Times
7 days ago
- Business
- New Straits Times
Sabah emerges as Malaysia's strategic frontier for upstream O&G investment
KUALA LUMPUR: Amid intensifying global energy uncertainty, Sabah is fast emerging as a compelling destination for upstream oil and gas (O&G) investments. The state offers international players a stable, underexplored and increasingly investor-friendly environment, industry analysts said. The shift reflects broader regional realignments in upstream energy strategy, as geopolitical instability in traditional oil-producing regions pushes investors toward safer, high-potential frontiers especially in Southeast Asia, they added. Economist Samirul Ariff Othman, an adjunct lecturer at Universiti Teknologi Petronas, told FMT that Sabah had recently been attracting more international oil companies. This was spurred by instability in the Middle East and Malaysia's comparatively stable investment climate. "Presently, Sabah leads in near-term FDI flows, followed by Sarawak," he said. "The 2025 Iran-Israel skirmish and heightened Red Sea tensions have made freight insurance, security costs and supply stability in the Middle-East and North America increasingly uncertain. "Investors are looking for lower-risk (and) high-potential alternatives, and Southeast Asia fits that profile," the portal quoted him as saying. Sabah's Rising Profile in Deepwater Exploration According to Samirul, Sabah's underexplored deepwater blocks particularly Blocks SB409 and SB310 are drawing renewed attention, alongside the redevelopment of the Kota Belud field, which is expected to ramp up activity in the second half of 2025. Industry players have taken notice. ConocoPhillips' recent pivot away from Sarawak toward Sabah underscores growing confidence in the latter's upstream potential. While Sarawak continues to command significant attention due to its advanced LNG infrastructure and active gas blocks such as SK318 and SK408, analysts warn that lingering regulatory ambiguities are clouding investor sentiment. "The friction between Petronas and Sarawak's state oil company, Petros, has created uncertainty around fiscal terms and licensing processes," said Samirul. In May, federal and state authorities announced a framework granting Petros the role of gas aggregator in Sarawak. However, legal disputes and unclear operational boundaries between the two entities remain unresolved. Tricia Yeoh, associate professor at University of Nottingham Malaysia, told the portal that Prime Minister Datuk Seri Anwar Ibrahim's announcement of broad agreement reached in February this year with Sarawak Premier Tan Sri Abang Johari Openg had failed to clear the air sufficiently. "Neither statement addresses Sarawak's claim (to resources) over 200 nautical miles of territorial waters, so that remains at large," she said, referring to Anwar's speech in the Dewan Rakyat on Feb 17 and a media release issued by Abang Johari the following day. Regulatory clarity is still lacking, Yeoh said, adding that ongoing lawsuits, such as the RM8 million bank guarantee dispute, continue to cast a shadow. Malaysia's PSC Framework Still Competitive Samirul acknowledged that Malaysia's production-sharing contracts (PSCs) remain among the most attractive in the region, especially when compared to Indonesia and Vietnam. Under current terms, contractors pay five per cent royalty each to federal and state governments, after recovering 70 per cent of costs. However, he warned that delays in PSC approvals, combined with high royalty burdens for marginal fields, could dull Malaysia's competitiveness. "The fundamentals are strong but speed and predictability are everything in today's investment climate," he said. Yeoh echoed the sentiment, calling on Putrajaya to clarify the conditions under which states like Sabah and Sarawak may receive PSC carve-outs. "Dragging this issue for another year or 10 would severely damage Malaysia's upstream outlook," she cautioned. "As I have stated previously, there needs to be a joint Petronas-Petros committee (comprising lawyers, financial and technical representatives and members of the federal and state governments) that works out these details." Yeoh added that the joint committee should be given the space to deliberate in private until a consensus is reached after which the outcome should be made public. "The nation can then move forward constructively," she said. Stronger Petronas Future Despite local challenges, Petronas continues to bolster its global standing through strategic upstream partnerships with international oil majors such as Eni, TotalEnergies, Idemitsu and ConocoPhillips both within Malaysia and in regional plays like Indonesia. Joint ventures help Petronas hedge geopolitical and cost-related risks while gaining access to advanced technologies, particularly in deepwater exploration and carbon management, said Samirul. "With global upstream costs rising due to inflation, supply chain bottlenecks, and deeper offshore exploration needs, joint ventures are a rational de-risking strategy," he said. Samirul explained that shared equity spreads exploration costs, reduces capital exposure and allows partners to pool advanced technologies. These partnerships also allow Petronas to gain technical know-how from international oil majors experienced in carbon management and digital exploration and production, which supports its energy transition goals, he added.
Free Malaysia Today
18-07-2025
- Business
- Free Malaysia Today
Sabah set to gain more O&G investor interest
Petronas's upstream collaborations with ConocoPhillips, Eni, TotalEnergies, and Idemitsu have enhanced Malaysia's upstream credibility and allowed the company to hedge against operational and geopolitical risks. (AFP pic) PETALING JAYA : Sabah is outpacing Sarawak as a more appealing destination for foreign direct investment (FDI) in Malaysia's upstream oil and gas (O&G) sector, according to industry insiders. Economist Samirul Ariff Othman, an adjunct lecturer at Universiti Teknologi Petronas, said Sabah has recently been attracting more international oil companies, spurred by instability in the Middle East and Malaysia's comparatively stable investment climate. 'The 2025 Iran-Israel skirmish and heightened Red Sea tensions have made freight insurance, security costs and supply stability in the Middle-East and North America increasingly uncertain,' he said. 'Investors are looking for lower-risk (and) high-potential alternatives, and Southeast Asia fits that profile.' Samirul told FMT certain O&G zones in Malaysia will benefit more from these trends. He said that while the Langkasuka basin off Peninsular Malaysia's west coast is receiving a certain level of interest, monetisation may be slow on account of its less developed infrastructure. 'Presently, Sabah leads in near-term FDI flows, followed by Sarawak,' he said, adding that Conoco Philip's pivot away from Sarawak reflects a belief in the North Borneo state's underexplored deepwater blocks. 'With ongoing studies in Blocks SB409 and SB310, and Kota Belud's redevelopment, Sabah is poised for more activity in H2 2025,' said Samirul. Previously, it was reported that the O&G giant had pulled out of Sarawak, partly due to regulatory uncertainty. Samirul said that despite Sarawak's strong LNG infrastructure and active basins— including the SK318 and SK408 gas blocks, regulatory uncertainty continues to undermine investor confidence. 'Regulatory friction between Petronas and Petros remains a political risk variable,' he added. 'While Sarawak's state oil company Petros has bolstered its role in managing upstream resources, overlapping jurisdictions have added ambiguity in fiscal split and licensing processes.' In May, the federal and Sarawak governments announced a high-level agreement on a new arrangement which will see Petros take on the gas aggregator role in Sarawak. However, both companies remain locked in negotiations over the legal, operational and commercial terms, and the attendant overlaps and complications. Tricia Yeoh, associate professor at University of Nottingham Malaysia said Prime Minister Anwar Ibrahim's announcement of broad agreement reached in February this year with Sarawak Premier Abang Johari Openg had failed to clear the air sufficiently. She told FMT the announcement lacked regulatory clarity, leaving investor sentiment unresolved, especially with legal proceedings between Petronas and Petros over a RM8 million bank guarantee still ongoing. Yeoh said both parties should jointly withdraw the suit and establish a clear forward- looking agreement. She, however, identified one positive in the announcement, namely that all existing Petronas contracts with third parties will continue to be honoured, though there were broader ambiguities surrounding the Petronas-Petros relationship. 'Neither statement addresses Sarawak's claim (to resources) over 200 nautical miles of territorial waters, so that remains at large,' she said, referring to Anwar's speech in the Dewan Rakyat on Feb 17 and a media release issued by Abang Johari the following day. Samirul said domestic reform—particularly faster production-sharing contract (PSC) approvals and better regulatory clarity in East Malaysia—was needed to sustain FDI momentum through 2026 and beyond. He said that Malaysia's PSCs are competitive, especially compared to regional peers particularly Indonesia and Vietnam, with companies paying federal and state governments 5% royalty or cash payment each after 70% of revenue is used to pay for oil costs. However, the combined royalty burden of 10% can be high for smaller fields, especially offshore gas, and PSC approvals could be faster, said Samirul. Yeoh urged Putrajaya to outline in clear terms the conditions under which carve-outs or exceptions may be granted to specific states, along with the rationale behind each decision. 'Dragging this out for another year—or 10—would be horrifically detrimental to national oil and gas development,' she warned. 'As I have stated previously, there needs to be a joint Petronas-Petros committee (comprising lawyers, financial and technical representatives and members of the federal and state governments) that works out these details,' she said. Yeoh said the joint committee should be given the space to deliberate in private until a consensus is reached—after which the outcome should be made public. 'The nation can then move forward constructively,' she said. Stronger Petronas future Commenting on recent joint ventures, Samirul said Petronas has been strengthening its upstream collaborations with ConocoPhillips, Eni, TotalEnergies, and Idemitsu—including in Indonesia—enhancing Malaysia's upstream credibility while hedging against operational and geopolitical risks. 'With global upstream costs rising due to inflation, supply chain bottlenecks, and deeper offshore exploration needs, joint ventures are a rational de-risking strategy,' he said. Samirul explained that shared equity spreads exploration costs, reduces capital exposure and allows partners to pool advanced technologies. These partnerships also allow Petronas to gain technical know-how from international oil majors experienced in carbon management and digital E&P (exploration and production), which supports its energy transition goals, he added.
The Sun
09-07-2025
- Business
- The Sun
Malaysia-US trade tensions rise as tariffs strain bilateral relations
KUALA LUMPUR: Trade relations between Malaysia and the United States face growing strain after the US imposed a 25 percent tariff on Malaysian exports, prompting concerns over long-term economic disruptions. Analysts suggest Malaysia must strengthen ties with other trade partners and enhance economic resilience to mitigate external shocks. Economist Samirul Ariff Othman noted that while Malaysia has refrained from retaliatory measures, prolonged US pressure could force a tougher stance. 'Quiet diplomacy can only go so far. Should the US persist, Malaysia will need to recalibrate its strategic alignments,' he said. Khazanah Research Institute Deputy Director Yin Shao Loong attributed the tariffs to missed US negotiation deadlines but expressed optimism for future progress. Meanwhile, Federation of Malaysian Manufacturers President Soh Thian Lai warned of destabilised supply chains, stating, 'This latest escalation risks further destabilising an already fragile industrial landscape, severely impacting export competitiveness.' The Institute for Democracy and Economic Affairs (IDEAS) urged ASEAN solidarity against disruptive US policies, emphasising collective action to counter Washington's divide-and-conquer approach. 'Malaysia must continue to avoid being drawn into retaliatory trade barriers or a false choice between major powers,' it said. - Bernama
Sinar Daily
09-07-2025
- Business
- Sinar Daily
Increased tariffs will strain Malaysia-US ties, disrupt trade links
Although Malaysia has avoided emotional retaliation, continued provocation or further economic pressure may leave the government with no choice but to adopt a tougher stance. 09 Jul 2025 04:31pm Photo for illustration purposes only. KUALA LUMPUR - Bilateral ties between Malaysia and the United States (US) are likely to be strained following the US administration's imposition of a 25 per cent tariff on Malaysian exports, according to analysts, reported Xinhua. Noting that Malaysia has limited leverage against the unilateral decision by the US, they urged the country to deepen ties with other key trade partners and build economic resilience against such external disruptions, as the tariffs and other disruptive policies are likely to persist as a long-term trend. Economist Samirul Ariff Othman told Xinhua that although Malaysia has avoided emotional retaliation, continued provocation or further economic pressure may leave the government with no choice but to adopt a tougher stance. "Quiet diplomacy can only go so far. Should the US persist, Malaysia will need to recalibrate its strategic alignments," he said. Khazanah Research Institute Deputy Director of Research Yin Shao Loong said that the tariffs seem to be driven more by the US administration's failure to meet its own deadlines for tariff negotiations, and that negotiations are likely to continue and eventually make headway. Meanwhile, Federation of Malaysian Manufacturers President Soh Thian Lai said that the latest round of tariffs risks destabilising business links and supply chains with feedback from manufacturers during the initial implementation of the 10 per cent tariff already pointing to serious concerns over the sustainability of export operations. "This latest escalation risks further destabilising an already fragile industrial landscape, severely impacting export competitiveness and placing additional strain on manufacturers," he said. Soh added that while strategic exports such as semiconductors were exempted, the broader ecosystem supporting the semiconductor industry including parts, machinery and services remains exposed to disruption. The Institute for Democracy and Economic Affairs (Ideas), a Malaysian think-tank, cautioned the government against accepting terms imposed by the US that will be harmful to Malaysia's long-term strategic interests while stressing the need for a collective defence by the Association of Southeast Asian Nations (Asean) against disruptive policies. "The underwhelming outcomes from bilateral negotiations for Malaysia and other countries reinforce the need for collective action to combat Washington's divide-and-conquer strategy. We can not allow fragmented engagement to weaken Asean's position on the global stage," it said in a statement. "Malaysia must continue to avoid being drawn into retaliatory trade barriers or a false choice between major powers, and continue to diversify and deepen partnerships with countries that share its interest in open and mutually beneficial trade," it said. - BERNAMA
