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Sabah targets RM1 billion oil & gas contract awards for local, this year

Petronas Chairman Tan Sri Mohd Bakke Salleh (right) at the courtesy call and meeting with Chief Minister Datuk Seri Panglima Haji Hajiji Haji Noor in Sri Gaya yesterday, where both discussed the ongoing Sabah-Petronas collaborations in the State and cross-checking to ensure that the Commercial Collaboration Agreement (CCA) in Dec 2021 is on track.

KOTA KINABALU: Sabah targets to get RM1 billion local contract awards or 20 per cent of the total oil and gas contracts awarded this year, said Chief Minister Datuk Seri Panglima Haji Hajiji Haji Noor.

He said the target will increase to 30 per cent for next year.

“To date, local contract awards have reached RM564 million, equivalent to 11 per cent total spend in 2022,” the Chief Minister disclosed.

“We are equally serious in the recruitment and development of local talents in this sector and it is a key priority for Sabah,” he said at the 10th Sabah Oil, Gas and Energy Conference and Exhibition (SOGCE) held at the Sabah International Convention Centre (SICC) here today.

The requirements for local content are aimed at creating jobs, promoting local enterprise development and accelerating the transfer of skills and technologies, particularly for the oil and gas sector, he added.

The Chief Minister said that under the state’s investor-friendly Sabah Maju Jaya (SMJ) initiatives, Sabah is targeting to acquire additional Upstream and LNG-producing assets and will consider suitable green energy opportunities at the same time.

“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,” he said.

“When we took over the reins of government more than two years ago, we set a clear direction and made it known what our defining actions would be. We set out key priorities in our five-year development roadmap, the Hala Tuju Sabah Maju Jaya (SMJ), that outlined a new strategic direction for Sabah’s economic development.

“Today, I am proud to say we have done well and are on the right track seeing the progress we have achieved. In spite of the economic challenges faced not only by the state but globally, Sabah has, as at end of December 2022 achieved RM6.960 billion in revenue, the highest recorded thus far.

“This represented a 28 per cent increase from the previous year’s achievement of RM5.449 billion. We will not rest on our laurels but will continue to implement a robust policy to bring in more investments to the state, create more economic spin-offs and double our efforts to generate more revenue through new and innovative means and resources,” he said.

Since the signing of the Commercial Collaboration Agreement with Petronas in Dec 2021 and the launch of the Sabah Gas Masterplan in January last year, coupled with other petroleum operations, Sabah is expected to collect additional revenue of RM2.45 billion annually in Sales and Services Tax (SST) from the oil and gas sector.

In fact, as of May 31, 2023, RM715 million has already been collected and since 2022, Sabah’s 10 per cent equity in LNG9 has earned the state RM337 million to date.

Sabah’s 25 per cent equity acquisition in SAMUR and its 50 per cent stake in Samarang is also expected to generate good returns, he said.

Hajiji said Sabah has vast potential with good oil and gas resources in place, producing about 40 per cent oil and just under 20 per cent 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,” he said.

Phase 1 is expected to be in commercial production by 2026-2027, providing some 2,800 direct employment opportunities during peak construction period.

Another Petronas-Sabah state collaboration that will create multiple spin-offs for the state is the multi-billion ringgit ZLNG floating LNG facility also to be built at nearshore SOGIP.

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