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New Straits Times
10 hours 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
15 hours ago
- 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
New Straits Times
15-06-2025
- Business
- New Straits Times
Global oil price surge to have dual impact on Malaysia
KUALA LUMPUR: The surge in global oil prices poses a mixed effect on Malaysia's economy, with the local energy-related stocks seeing immediate gains. The likes of Velesto Energy Bhd, Bumi Armada Bhd, Hibiscus Petroleum Bhd and Dialog Group Bhd saw their shares rising on Friday as oil prices jumped following rising geopolitical tensions in the Middle East. Industry observers, however, said stronger oil prices may drive up fuel and transportation costs, leading to broader inflationary pressures. Oil prices surged more than nine per cent on Friday to around US$75, their highest in almost five months, after Israel struck Iran. Brent crude futures jumped US$6.29, or 9.07 per cent, to US$75.65 a barrel by 0315 GMT after hitting an intraday high of US$78.50, the highest since Jan 27. US West Texas Intermediate crude was up US$6.43, or 9.45 per cent, at US$74.47 a barrel after hitting a high of US$77.62, the loftiest since Jan 21. Reuters reported that Friday's gains were the largest intraday moves for both contracts since 2022 after Russia invaded Ukraine, causing energy prices to spike. Pressure on inflation Economist Samirul Ariff Othman told Business Times that rising oil prices may drive up fuel and transportation costs. This will lead to broader inflationary pressures across consumer goods and business operations, particularly in sectors such as manufacturing and palm oil. At the same time, he said trade and logistics may come under strain due to potential shipping reroutes and rising freight charges. "Regional equities and currencies often react negatively to spikes. Asia saw stock drops immediately after today's strike. "However, Malaysia is also an oil and gas (O&G) exporter, so government revenue and energy sector profits will benefit, partially offsetting broader inflation pressures," he said. Samirul said if the conflict remains contained and no critical energy facilities are targeted, prices may retreat to US$70-US$75 per barrel, maintaining elevated risk premiums but not exceeding historical averages. However, if tensions escalate or the conflict persists, the situation could trigger a more sustained increase in prices. "Supply-chain barriers, through both oil and shipping lane disruptions, could keep prices elevated for months, potentially into the US$90 to US$120 range," he added. Samirul said the intraday surge in oil prices is deeply significant, as it constitutes one of the largest one-day moves in recent years. "Historically, such spikes have occurred only during major shocks, like the 2022 Ukraine war or 1970s oil-crisis era," he said. Worst case scenario Samirul also noted that global analysts at JP Morgan have warned that current oil prices already factor in a seven per cent probability of a worst-case supply disruption scenario, where prices could hit US$120 per barrel. "Yet if Iran retaliates, striking energy infrastructure or disrupting the Strait of Hormuz, the spike could accelerate and deepen. "If they don't, prices may ease back toward the low-US$70s, although elevated risk premiums could maintain somewhat higher levels than pre‑shock," he added. The economist explained that an escalation would likely affect global supply through two primary channels. The first is actual disruption, where Iran might launch direct attacks on oil tankers or production facilities in the region, with worst-case scenarios putting up to 20 million barrels per day (bpd) at risk. The second is a precautionary risk premium, where even in the absence of physical damage, heightened fears could lead to the closure of key shipping routes such as the Strait of Hormuz. "The World Bank models a 500,000 to two million bpd loss as 'small disruption' and six-eight million bpd in 'large disruption' scenarios. "That could drive prices sharply higher up by 20 to 75 per cent and force global supply chains to reroute, adding cost and time," he explained. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the sharp increase in Brent crude prices was mainly driven by Israel's strike on Iran, noting that geopolitical factors typically cause short-term shocks to oil prices. "After a while it would fade and it will go back to the fundamental aspect of the industries where the demand for oil is expected to trend lower as global growth momentum is expected to moderate based on the recent downward revision by the International Monetary Fund and World Bank," he said. Afzanizam noted that members of the Organisation of the Petroleum Exporting Countries and its allies (Opec+) had agreed to increase oil supply during their meeting in May this year, pointing to stable global growth and solid market fundamentals as the basis for the decision. "On that note, there are no issues on supply of oil and therefore, the sharp spike in crude oil prices are likely to be unsustainable," he said. He added that the price surge is temporary and primarily driven by geopolitical tensions. "Fundamentally speaking, the global oil supplies are sufficient and the expected moderation in global growth would demand for oil would remain fairly stable. The price spike looks like a temporary knee-jerk reaction," Afzanizam said. Hot stocks On Friday, Bursa Malaysia's Energy Index, which boasts 31 stocks, opened at 735.96 and climbed 2.01 per cent, gaining 14.63 points to end the day at 740.76. Meanwhile, the benchmark FTSE Bursa Malaysia KLCI fell by 0.56 per cent, shedding 8.51 points to close at 1,518.11. UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said markets were in the process of repricing geopolitical risk, with Brent crude potentially surging past US$80 per barrel. "In the short term, this presents a tactical opportunity for oil and gas sector trades. "Unlike the relatively short-lived two-week spike observed during the early phase of the Russia-Ukraine war, the duration of the current oil price shock could prove to be longer-lasting," he said. Sedek added that stocks worth trading on short-term oil price momentum are the stocks that have upstream exposure or increasing mix of upstream concessions vs performing O&G services. Among the most actively traded stocks, Velesto climbed 2.78 per cent to finish at 18.5 sen, while Bumi Armada edged up 2.08 per cent to 49 sen. Dialog Group advanced 3.97 per cent to RM1.57, and Perdana Petroleum rose 5.56 per cent to 19 sen. On the top gainers list, Petron Malaysia Refining & Marketing Bhd increased 3.74 per cent to close at RM3.88, while Hibiscus Petroleum surged 7.10 per cent, closing at RM1.66. Meanwhile, Deleum Bhd gained 6.21 per cent to RM1.54, Yinson Holdings added 1.29 per cent to RM2.36, and Wasco Bhd was up 4.35 per cent to close at 96 sen.
