Sabah targets RM1bn local oil and gas contracts, eyes green energy

Sabah’s Chief Minister, Datuk Seri Hajiji Noor, announced that the state aims to secure RM1 billion in local contract awards, accounting for 20% of total oil and gas contracts awarded this year. As of now, local contract awards have reached RM564 million, which is equivalent to 11% of the total spend in 2022.

The revenue from oil and gas has been a crucial aspect of the state’s pursuit of its rights within state and federal relations. Hajiji emphasised the importance of recruiting and developing local talents in this sector, stating that it is a key priority for Sabah. The announcement was made at the 10th Sabah Oil, Gas and Energy Conference and Exhibition (SOGCE) held at the Sabah International Convention Centre.

The state plans to increase its target to 30% next year. Under the Sabah Maju Jaya (SMJ) initiatives, which promote investor-friendly policies, Sabah aims to acquire additional Upstream and liquefied natural gas (LNG) producing assets, while also considering suitable green energy opportunities.

“While oil and gas will provide an important revenue stream for the state, we also welcome investors to explore renewables such as solar and storage technologies, hydro, geothermal, and also carbon market opportunities in Sabah,” Hajiji said.

The Chief Minister expressed pride in the state’s economic achievements since the Gabungan Rakyat Sabah took over the administration less than three years ago. Despite global economic challenges, Sabah’s revenue reached RM6.960 billion by the end of December 2022, marking the highest recorded figure and a 28% increase from the previous year’s RM5.449 billion.

The state will continue to implement robust policies to attract more investments, create more economic spin-offs, and generate more revenue through new and innovative means and resources.

Following the signing of the Commercial Collaboration Agreement with Petronas in December 2021 and the launch of the Sabah Gas Master Plan in January last year, Sabah is expected to collect an additional RM2.45 billion annually in Sales and Services Tax (SST) from the oil and gas sector. As of May 31 this year, RM715 million has already been collected, and since 2022, Sabah’s 10% equity in LNG9 has earned the state RM337 million.

Sabah has vast potential with its abundant oil and gas resources, producing about 40% of oil and just under 20% of gas in Malaysia. The state works in partnerships with Petronas, international oil and gas companies, and local companies to create a favourable FDI environment from Upstream to LNG to domestic downstream developments and oil and gas services.

“This includes the US$2 billion Esteel investment to produce HBI (Hot Briquette Iron) and flat steel at the Sabah Oil and Gas Industrial Park (SOGIP) for Phase 1 to be followed by multi-billion dollar investments to produce green steel products in subsequent phases,” Hajiji said.

Phase 1 is expected to commence commercial production by 2026-2027, providing approximately 2,800 direct employment opportunities during the peak construction period.