Sabah’s O&G Aspirations Quietly Brewing

Much has been reported about the Sarawak government’s negotiations via Petroleum Sarawak Bhd (Petros) with Petroliam Nasional Bhd (Petronas) for the Bornean state’s rights to regulate the oil and gas (O&G) developments within its boundaries. Next door, however, information on Sabah’s progress has seemed scant by comparison, given that both states are on a similar quest.
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For the most part, people watching the unfolding of events in Sarawak have perceived Sabah to be sitting in the shadows, as if waiting to ride the efforts of its gallant neighbour.
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Up until about a year ago, SMJ Energy Sdn Bhd, which is, if you will, Sabah’s version of Petros, stayed out of the public eye, maintaining a carefully positioned narrative of having transformed into a RM5.1 billion company since its inception in December 2021, after its acquired assets bore fruit last year.
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Although both states have separate agreements with Petronas, SMJ Energy (formerly known as SMJ Sdn Bhd) says its method to steer the state’s O&G sector is, at least for now, profoundly different from that of Sarawak.
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SMJ Energy has made known that it wants a bigger share and a bigger say in its O&G assets without the exploration risks that come with development. Currently, SMJ Energy is still in discussion with Petronas on various opportunities, and ironing out the “nitty-gritty of assets”.
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Meanwhile, a snapshot at Sabah state as a whole reveals that in 2023, the state contributed 5.5% of national gross domestic product (GDP), making it the sixth biggest state by GDP contribution, ahead of Perak (5.4%) but lagging behind Penang (7.6%), neighbouring Sarawak (9.3%), Johor (9.7%), Kuala Lumpur (16.3%) and Selangor (26.7%).
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While Sabah’s GDP contribution lags behind more economically vibrant states such as Selangor or Penang, the state has made much progress from the standpoint of financial strength, thanks to a bigger share of O&G returns.
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Oil revenue in Sabah, which now comprises both petroleum state sales tax (SST) and oil royalty, has exceeded RM2 billion annually since 2021, when the SST came into force, and touched a high of RM3.53 billion in 2022.

$PETDAG / 5681 (PETRONAS DAGANGAN BHD)

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