SMJ Energy defends strategy, avoids high-risk oil & gas bids due to financial concerns

Borneo Post

5 days ago

KOTA KINABALU (July 9): State-owned SMJ Energy has clarified its decision not to bid for high-investment oil and gas blocks, citing significant financial risks.
The company emphasized a cautious approach, opting to secure free carry or back-in rights in exploration projects to mitigate potential losses.
Under back-in rights, SMJ Energy only participates after successful exploration, avoiding upfront costs and shielding itself from expensive failures.
The statement follows remarks by State Finance Minister Datuk Masidi Manjun, who acknowledged that SMJ Energy and Sabah International Petroleum (SIP) lacked the technical expertise and capital to bid for blocks like the Mutiara Cluster, recently awarded to Dialog Group Berhad's subsidiary.
SMJ Energy explained that the Mutiara Cluster falls under Discovered Resource Opportunities (DROs), requiring heavy investment with no guaranteed success.
'These prospects are not a current priority,' the company said in a statement on Wednesday.
Instead, its focus remains on securing greater revenue sharing and participation in Sabah's oil and gas sector through its Commercial Collaboration Agreement (CCA) with Petronas. The deal allows SMJ Energy to acquire developed DRO assets from Petronas post-successful exploration.
SMJ Energy highlighted its RM5 billion portfolio, including stakes in Samarang PSC (50%), LNG9 (10%) and SAMUR Petrochemical Plant (25%), all generating strong cash flows. Since its inception, SMJ Energy has declared RM160 million in dividends in under three years.
'Oil and gas is high-risk, high-reward — exploration failures can lead to losses in the billions,' the company stated, defending its prudent financial strategy of acquiring profitable, producing assets with reputable operators.
Earlier, Parti Warisan information chief Datuk Mohd Azis Jamman criticized the state government for relying on subcontracting instead of direct bidding.
SMJ Energy, however, maintains its strategy ensures sustainable growth while minimizing exposure to volatile exploration risks.
The company plans to announce further strategic acquisitions aligned with its risk-managed approach.
Azis called Masidi's statement that Sabah is 'not ready' to directly participate in bidding for oil blocks an excuse that exposes the real problem with how the state's resources have been managed.
'With due respect, Datuk Seri, your statement that Sabah is 'not ready' reveals more about how our resources have been handled so far: distributing concessions to cronies and sub-contractors, letting others do the work, while the government merely collects 'percent-percent',' he said in a statement.
Azis argued that if the state genuinely lacks technical expertise, there should be no excuse not to recruit the right people.
'If we claim we lack expertise, why not recruit and appoint true experts? Find and hire qualified professionals, not political loyalists whose only skill is 'samun dan jilat',' he said, adding that Sabah must start somewhere if it ever hopes to gain experience.
'Every million always starts with number one. Waiting forever keeps Sabah permanently at the margins of its own wealth,' he stressed.
Addressing concerns over funding, Azis pointed out that the state government had previously issued almost RM1 billion in SUKUK to settle legacy debts, including buying vessels worth hundreds of millions, the whereabouts of which, he claimed, remain unknown.
'So don't tell us it's impossible to raise funds for SMJ Energy to participate upstream and downstream in Sabah's resource-rich waters,' he said, adding that smart partnerships with credible investors could also be pursued, but with Sabah retaining control over management and its natural resources.
Azis also questioned how much experience Petronas contractors had when they first ventured into upstream and downstream operations.
'If those companies were 'ready' back then, why can't Sabah — or SMJ Energy — also be ready now?' he asked.
Taking aim at Masidi's oft-cited mantra of 'kerja diam-diam tapi hasil ada' (quiet work, but results are there), Azis countered that the reality on the ground tells a different story.
'It's ironic to hear about 'kerja diam-diam tapi hasil ada' when in reality, Sabah's oil wealth still leaves our shores, and our people see so little,' he said.
For Azis, the real issue is not Sabah's readiness but whether its leaders are truly prepared to prioritize the people's interest over political convenience and the sub-contracting of opportunities to cronies.
'True leadership doesn't wait for perfect conditions. True leadership means starting now — building expertise, controlling our resources, and ensuring Sabah finally benefits directly from the wealth beneath our own soil and sea,' he said.