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Oil and Gas

With its strategic location at key shipping lanes as well as its strong economic fundamentals in China, India and within South East Asia, Malaysia has a definite advantage as a key player in the oil and gas (O&G) industry in Asia. As such, the country is always committed to ensuring a sustainable and successful O&G industry through pro-business policies.

In implementing these policies, Malaysia has in recent years created a vibrant ecosystem which offers competitive rates and skilled manpower to support the growth of the upstream and downstream sectors. Overall, there are over 3,500 O&G businesses in the country comprising international oil companies, independents, services and manufacturing companies which support the needs of the O&G value chain both domestically and regionally. Many major global machinery and equipment (M&E) manufacturers have also set up bases in Malaysia to complement home-grown M&E companies, while other Malaysian oil and gas companies are focused on key strategic segments such as marine, drilling, engineering, fabrication, offshore installation, and operations and maintenance (O&M).

Meanwhile, the declining global crude oil price which began in June 2014 has triggered a wave of cost reduction strategies/tactics among upstream businesses. Global oil and gas companies slashed capital expenditures by about 40 percent, and projects that were not profitable were either cancelled or deferred. As the Malaysia Regulator for the O&G industry, PETRONAS has introduced many cost-cutting measures such as CORAL 2.0, and it also encourages mergers & acquisitions. Indeed, in this ‘new normal’ of low oil price environment, O&G companies have to prepare themselves by optimising operations, improving efficiency, and reducing costs so as to sustain profitability.

Notwithstanding, a total of 13 projects with investments of RM3.28 billion were approved by MIDA in 2019. Five of the approved projects were for the midstream terminal storage of natural gas and petroleum products worth RM2.40 billion, three were projects for upstream O&G services worth RM67.77 million, four project for O&G machinery and equipment worth RM88.05 million and one project for O&G equipment maintenance, repair and overhaul (MRO) worth RM729.11 million. The MRO project involves the establishment of an integrated MRO centre for the oil, gas, petrochemical and power generation industries at the Bintulu Integrated Energy Hub, Sarawak.Out of the total, RM2.80 billion were from domestic sources and RM482.21 million were from foreign sources. These projects were expected to create 972 employment opportunities in the oil and gas sector.

Thus in spite of the global trends in the O&G industry, it continues to play a significant role in the economic development of Malaysia.

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Last Updated : Wednesday 8th July 2020