A dynamic oil, gas and energy (OGE) sector is key to Malaysia's transformation into a high-income nation. Contributing about 20 per cent to the nation's gross domestic product, OGE has long been a pillar of the Malaysian economy.
Prime Minister Najib Razak is determined to generate about US$40 billion in incremental income from the OGE sector by 2020. "We will ensure that we develop an energy-efficient, diversified and sustainable energy mix to power our future," he says.
There are four key thrusts: sustaining production, enhancing downstream growth, positioning Malaysia as the No 1 Asian hub for oilfield services and building a sustainable energy platform for the country's growth.
"We have surpassed our first-year targets for OGE," says Idris Jala, CEO of PEMANDU and minister in the prime minister's department.
The overall OGE score was 109 per cent last year, encompassing achievements in 12 EPPs identified in this key economic area. PEMANDU reported exceptional results in rejuvenating maturing fields and attracting oil trading companies to set up base in Malaysia. These reflect broad private sector enthusiasm for the country's long-term goals.
"Malaysia's competitive edge has catalysed the transformation of our oil and gas industry to create business opportunities for foreign investors, and our own people in terms of better career prospects and new skills," says Mustapa Mohamed, Minister of International Trade and Industry.
Through the ETP, the country aims to create 52,300 new jobs in the sector, 40 per cent of which would be in specialised fields such as engineering and geology.
Malaysia paved the way for new upstream investments with the passage of the Petroleum Income Tax Act Bill Amendment (PITA) in June last year. With tax perks for capital-intensive projects, PITA encourages enhanced oil recovery (EOR) from maturing fields and makes it more viable for investors to develop small fields and intensify exploration activities. As the regulator of Malaysia's petroleum resources, Petroliam Nasional (PETRONAS) is at the forefront of optimising exploration, development and production activities.
One broad goal is to increase oil recovery from underground fields to a range of 30 to 50 per cent - well above the industry norm of 20 to 35 per cent. PETRONAS is encouraging EOR through a progressive profit sharing scheme. Under revitalised production sharing contracts (PSCs), the likes of Exxon Mobil, Shell Malaysia and Talisman Malaysia are deploying new technologies that represent more than US$16 billion in new investment commitments.
Marginal fields have been teeming with activity since the launch of the ETP. The Berantai field, being developed by SapuraKencana Petroleum and British firm Petrofac Energy Developments, is due to come into production by year-end. Offshore Sarawak, PETRONAS Carigali is jointly developing the Balai Cluster field with the Dialog Group and Australia's ROC Oil. Meanwhile, a total US$5.2 billion will be invested to commercialise about 1.7 standard trillion cubic feet of gas reserves from the North Malay Basin within the next five years. New York-headquartered Hess Corporation has partnered with PETRONAS Carigali for the North Malay Basin development.
PETRONAS' exploration programme involves more than 50 exploration wells that will be drilled offshore Malaysia by 2015. This presents vast opportunities for investors to come in through PSC or risk-service contract tenders.
Enhancing downstream growth
To capture a larger share of the global trade for crude oil and refined products, Malaysia is building a regional oil storage and trading hub and developing a re-gasification terminal for imported liquefied natural gas.
"The petroleum storage and trading business will create a completely new service sector for Malaysia, as it will allow us to extract greater benefits from the oil and gas value chain. Global trading companies are very receptive to what Malaysia is offering them in terms of operational and human capital requirements," Mustapa says.
Asian hub for oilfield services
Taking advantage of the rapid growth in the oilfield services and equipment (OFSE) market, Malaysia is being positioned to become the No 1 Asian hub for engineering, procurement and construction (EPC) services. It aims to attract 10 to 20 global heavyweights to its OFSE industry within the next eight years. Actual investments by OFSE multinational companies reached US$143 million as of last year, 42 per cent above the US$100.7 million target for the year.
Increasing multinational investments in OFSE is a key performance indicator in the OGE sector, along with consolidating domestic fabricators and developing capabilities through strategic partnerships. These moves should propel Malaysia as a major player in the global EPC arena.
To ensure that future generations benefit from the country's progress, Malaysia is institutionalising energy efficiency measures and looking into alternative energy sources.
Malaysia's Energy Ministry has rolled out a national rebate programme to promote energy efficiency through the use of five-star refrigerators, air conditioners and chillers in households and commercial establishments.
Energy audits at government facilities will drastically lower costs and waste. To encourage the use of fuel-efficient vehicles, hybrid cars are imported duty-free in the country.
The Sustainable Energy Development Authority, a one-stop renewable energy centre, is supporting the development of solar, biomass, biogas and small hydro projects in Malaysia. The country aims to build four gigawatts of additional power capacity between 2015 and 2020, of which a minimum of 220 megawatts should entail solar power. Malaysia is considering the use of nuclear power to help it comply with global carbon emission commitments.
"Malaysia has made rapid progress moving from an agrarian economy into an industrial economy and now, moving towards a green economy," says Peter Chin Fah Kui, Minister of Energy, Green Technology and Water. "One of the main reasons for our success is the government's focus on providing excellent infrastructure to support and promote economic growth. We have to ensure that the infrastructure is available and well-maintained."
Acronyms at a glance
ETP - Economic Transformation Programme
Launched in October 2010, the ETP lays out the framework to fulfilling Malaysia's vision of becoming a high-income nation with a per-capita income of at least US$15,000 by 2020.
NKEA - National Key Economic
These are 12 of Malaysia's strongest and most competitive sectors, ranging from oil, gas and energy to education and tourism. The NKEAs reinforce the private sector as Malaysia's new champions, in close partnership with the government.
SRI - Strategic Reform Initiative
The SRIs represent policy recommendations and cross-cutting reforms that will allow Malaysia to be competitive on the global stage, all for the benefit of the rakyat, or the ordinary people.
EPP - Entry Point Project
The ETP outlines specific projects that are geared towards catalysing investment, and has identified about 131 EPPs and related BOs to kick-start growth.
BO - Business Opportunities
Alongside EPPs, BOs invigorate high-potential business areas under each NKEA. Together with EPPs, these are expected to fuel up to 1.7 trillion ringgit (HK$4.2 trillion) in gross national income and create more than 3.3 million jobs by 2020.
PEMANDU - Performance Management and Delivery Unit
An agency under the Prime Minister's department, PEMANDU oversees the implementation of the programme. It combines the best talent from both the civil service and private sector.