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Sabah showing signs of becoming an Oil and Gas powerhouse
- SOGCE ADMIN
- Apr 21
- 4 min read
Published on: Sunday, April 20, 2025
By: Sherell Jeffrey, James Sarda
SINCE independence in 1963 right until the 1980s, it was timber, earning the State upwards of RM2 billion revenue per year under the Berjaya administration at one point.
A bold logging ban in 2008 for the sake of conservation under the Musa administration, except for Yayasan Sabah areas, brought in only RM200 million to the State’s coffers – or 10pc of what it used to in its heyday.
Global demand for vegetable oils made palm oil the golden crop for Sabah from the 1990s until tourism replaced it from 2000 following the securing of direct international flights to Sabah by former Chief Minister Tan Sri Chong Kah Kiat.
The post Covid-era is beginning to see oil and gas development laying the foundation for Sabah’s future earnings with income from the sector contributing about 50 per cent of the state's RM6.97 billion revenue in 2023.
Thanks largely to SMJ Energy Sdn Bhd (SMJE). Since its setting up in 2022 under Chief Minister Incorporated, SMJE has shown strong financial performance and growth.
It even managed to raise RM900 million through oversubscribed Sukuk and obtaining AAA rating and has since grown into a company with assets worth RM5 billion and net-profit-after-tax of RM259 million last year.
SMJE's strategic investments to date include a 50pc interest in the Samarang Production Sharing Contract, which generates RM940 million from crude oil sales and RM336 million from gas sales.
Nevertheless, SMJE whose chairman is State Finance Minister Datuk Seri Masidi Manjun, who is no novice when it comes to strategic planning having headed the Institute of Development Studies think tank previously, is cautious about placing all the eggs in one basket.
“Over 50 per cent of the State’s revenue is from oil, including palm oil, so we cannot be dependent on crude oil alone. That’s why we need to widen our revenue base.
“When the ringgit strengthens, imports become cheaper, so fertiliser and machinery will cost less. On that basis, that is good news for us.
“Oil is traded in US$ but converted to ringgit. It’s a big difference from the previous 4.8 to 4.2 exchange rate against the dollar,” he said, recently.
Masidi noted that Sabahan-owned companies also have been making significant strides in the oil and gas services and equipment (OGSE) industry since.
Several local companies have been awarded contracts in engineering, procurement, construction and commissioning, maintenance, construction and modification, turnaround maintenance, integrated wells services, third-party logistics and marine vessel supply.
These are expected to create some 1,000 job opportunities for Sabahan companies relevant to the industry.
“It is indeed a remarkable moment for Sabah because we have proven that our local companies can compete in the big leagues of OGSE,” said Masidi.
He hoped the trend of Sabahan participation in OGSE would continue to grow, enabling more Sabahans to seize opportunities in the industry.
SMJE has played a role in the strategic partnerships with experienced technical service providers, focusing on new OGSE service frontiers while maintaining cost-effectiveness, safety, quality and project timelines.
Since the signing of the Commercial Collaboration Agreement between the State Government and Petronas in December 2021, the value of local contract awards in OGSE in Sabah increased from RM341 million to RM780 million.
The number of local contractors also grew from 263 to 475 last year. SMJ Energy’s Executive Director for OGSE and Corporate, Terry Biusing, said Sabahan companies are securing a larger share of local OGSE contracts.
The revenue projection for Sabah OGSE companies was expected to exceed RM2 billion in 2024, with over 60 companies earning between RM1 million and over RM300 million in revenue up to August 2024.
SMJE is collaborating closely with Petonas, oil and gas firms and local contractor associations in Sabah through a newly established Local Contents Council for OGSE, chaired by Biusing.
Through increased local opportunities, strategic partnerships and skill development, Biusing stated that Sabah is well-positioned to become a leading force in the State and national OGSE landscape.
Masidi sees Sabah becoming an OGSE industry powerhouse due to the win-win collaboration.
“Local talents must step up, whether by starting their own OGSE businesses or joining existing local companies.
“For years, Sabahans have called for more opportunities in oil and gas; now is the time to make it happen,” he said.
Since the signing of the Commercial Collaboration Agreement between the State Government and Petronas in December 2021, Sabahan OGSE companies saw a 38 per cent increase in revenue from 2022 to 2023, he said.
A Sabah Local Content Council consisting of representatives from all O&G operators in the State, Sabah OGSE industry associations (SOGSC and PKPBS) and representatives from Petronas and Sabah was set up in May 2024 to further drive local contractor participation in OGSE.
Which is appropriate as Sabah has set a target to award 30pc of OGSE spending within Sabah to qualified Sabahan companies.
“With the support of Petronas and all Production Sharing Contracts (PSCs), the State aims to achieve 80pc Sabahan employment rate within the OGSE industry for this year.
“These developments bode well for our State’s economic growth, aligning with the State Government’s aspirations under its Hala Tuju Sabah Maju Jaya initiatives,” he said.
He said Sabah is fortunate to hold most of the country’s remaining oil resources, making the State a cornerstone of Malaysia’s oil and gas production.
Sabah contributes nearly 40pc of the nation’s oil and nearly 20pc of its gas production.
“Sabah has abundant resources, including significant reserves within existing PSCs, near fields and promising deep-water sites.
“These resources underscore our capacity and emphasise our potential to drive future energy innovations and sustainability,” he said.
“Through SMJ Energy, the State has strategically secured interests in the Samarang PSC, the Samur petrochemical plant and exploration rights in blocks SB409 and SB403.
“SMJ Energy is now a RM5 billion asset company. Additionally, Sabah Energy Corporation’s (SEC) landmark acquisition of Petronas onshore gas contracts in Sabah has propelled them to the forefront of the domestic gas market. SEC now stands as the country’s largest domestic supplier and transporter of natural gas.”
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