Focus Paper

Our fast-depleting oil & gas bounty: Basic facts and sticky issues

The oil and gas sector is very important to Malaysia. It fuels economic activity – 17%, or RM111 billion, of our country’s GDP is due to oil and gas activities; and taxes, royalties and other payments from this sector fund the bulk of federal government undertakings – it contributes  nearly 40% of the revenues collected by our federal government.

Oil production dropped 21%However, this national wealth is fast evaporating. Crude oil output has plunged 21% in the last four years; and we are expected to become a net energy importer by 2017. Within this small window of time, it is crucial that we extract the most from our oil and gas resources, and minimise wastage and leakages.

Petronas, our national oil company, which has full control of the oil and gas sector of Malaysia, is generally perceived as well-managed. But, still water runs deep. Underneath its steady management are murky depths of critical issues. For one, its own corporate health is at stake as the federal government has been taking dividends amounting to as much as 70% of its net profit, far higher than the average 38% that other national oil companies pay. This leaves little for Petronas to reinvest in discovering new oil fields to replace the fast-depleting Malaysian ones.

For another, Malaysia’s entire petroleum wealth is controlled by one man – the Prime Minister, who has absolute say over Petronas. Our country has been rated as “weak” in the 2013 Resource Governance Index. Placed 34 out of 58 countries, we rank behind our neighbours Indonesia (14) and the Philippines (23) and other developing and less-developed countries like Ghana (15), Zambia (17) and Kazakhstan (19). Furthermore, even while Petronas contributes so much to federal government coffers, the four oil-producing states themselves (Kelantan, Terengganu, Sabah and Sarawak) are among the poorest in our country.

Clearly, greater public discourse on how best to utilise our fast-depleting oil wealth is crucial. To facilitate informed discussion, peruse our vibrant powerpoint and read our focus paper that set out the basic facts and expose the sticky issues surrounding our oil and gas bounty. And if those whet your  appetite for even more, download the complete 58-page report Scope for Improvement –  Malaysia’s Oil and Gas Sector. We believe that it is the first of its kind. Please read and share.

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