ConocoPhillips’ decision to exit the $3.13 billion Salam-Patawali deepwater oil and gas project off the coast of Sarawak marks a pivotal development in Malaysia’s energy sector. Discovered in 2018, the field was a joint venture between ConocoPhillips and Petronas, each holding a 50% stake. Production was expected to peak by 2028, with operations projected through 2067. The abrupt withdrawal raises questions about the project's long-term viability and investor confidence.
At the heart of the issue lies a longstanding jurisdictional dispute between Malaysia’s national oil company, Petronas, and the Sarawak state government. Sarawak asserts rights under the colonial-era Oil Mining Ordinance of 1958, challenging the federal Petroleum Development Act of 1974, which grants Petronas exclusive authority over Malaysia’s oil and gas resources. This regulatory tension has fostered uncertainty, complicating foreign investment decisions and casting doubt on project timelines.
The ConocoPhillips exit follows similar moves by other players. Thailand’s PTTEP has reportedly reconsidered its commitment to the Lang Lebah gas project off Sarawak, citing economic and regulatory challenges. These shifts reflect broader apprehension among international investors, who view Malaysia’s current energy governance landscape as increasingly unpredictable. Without clear resolution, future oil and gas investments could face additional risk premiums or delays.
Sarawak is central to Malaysia’s energy economy, contributing roughly 90% of the country’s liquefied natural gas (LNG) exports. The state's drive for greater autonomy aims to secure a larger share of economic benefits but has also resulted in legal battles and operational instability. Sustained uncertainty could impact Malaysia’s ability to meet domestic energy demands and international contractual obligations, ultimately affecting the nation's energy security and growth outlook.
To stabilize its energy sector, Malaysia must prioritize resolving the federal-state dispute and establishing a transparent, predictable regulatory framework. Balancing Sarawak’s regional aspirations with national interests will be key to restoring investor confidence and ensuring the long-term health of the country’s oil and gas industry. Without decisive action, Malaysia risks further erosion of its competitiveness in a rapidly shifting global energy market.
