INTERVIEW: Malaysia's Petronas looks to accelerate upstream push after 2024 successes

Malaysia is making efforts to make its upstream policies increasingly investor-friendly, as the country plans to leverage attractive oil prices and revamped fiscal policies to draw international energy companies into its exploration and production sector, Bacho Pilong, senior vice president of Malaysia Petroleum Management at Petronas, said in an interview.

MPM's vision and strategic direction for its upstream sector is to unlock Malaysia's advantaged barrels and the potential of its mature and frontier basins -- which would be achieved through a combination of both domestic and international investments, Bacho told Platts, part of S&P Global Energy.

"Our oil and gas production has remained consistent over the past few years, and we have managed to arrest the decline from mature fields. And now, we have made our current upstream policies attractive enough in terms of taxes and in terms of production sharing agreements. We are hopeful of bringing in investments," Bacho added.

Malaysia is currently producing approximately 2 MMboe/d from three mature basins. In line with its aspiration to unlock more advantaged barrels, MPM is undertaking artificial intelligence and machine learning initiatives with multiple technology partners to redefine these mature basins, Bacho said.

According to Energy, entry to the upstream segment could be done through various methods, including licensing rounds, direct negotiations, and farm-in deals. There has been a gradual increase in contract awards since the improved fiscal terms were introduced in 2021. Exploration drilling work has so far remained concentrated mainly in the shallow waters of Peninsular Malaysia and Sarawak.

Global partnerships

MPM is aiming to activate five frontier basins across Malaysia. A key enabler for this strategy will be the expansion of 3D seismic acreage from the current 5% to 50% by 2030. To support this ambition, MPM is investing MR500 million ($117.8 million)annually, translating into 10,000 to 12,000 square kilometers of new 3D seismic data every year. This data is made available free-of-charge to potential investors, underscoring MPM's strategy to accelerate basin activation and attract partnerships.

"With these initiatives, we are making the entry point more welcoming for international players and hopefully their interest in Malaysia's upstream sector will grow," Bacho said. "We already have big names like Eni, TotalEnergies, BP and ExxonMobil working with us, a testament to how conducive the current regime is. Otherwise, they wouldn't have chosen to invest here."

Highlighting some key milestones in 2024, Bacho said Malaysia witnessed MR50 billion in upstream investments -- the highest since Petronas' inception -- in 2024, the year in which 14 production sharing contracts (PSCs) were awarded, including three exploration PSCs and 11 discovered resource opportunity clusters.

"We remain committed to unlocking Malaysia's energy potential, with nine new discoveries and one successful appraisal in 2024, which added over 600 MMboe to the nation's resource base," Bacho said.

Latest bid round

In 2025, Petronas is targeting around MR60 billion in upstream investments, Bacho said, adding that its E&P strategy would move into the top gear by the recently launched Malaysia Bid Round 2025 (MBR 2025).

As part of the latest bid round, MPM awarded a small field asset production sharing contract (SFA PSC) for the Mutiara Cluster, off the coast of Sabah, to Dialog Resources Sdn. Bhd. as the sole operator with 100% participating interest in the block.

The Mutiara Cluster comprises five fields, namely Nymphe, Nymphe North, Kuda Terbang, Benrinnes, and Mutiara Hitam. It is the first PSC awarded under MBR 2025 and is expected to achieve first production by 2029. Positioned off the coast of Sabah's East Coast, the SFA PSC is envisioned as a catalyst to open up Sandakan Basin for further exploration.

"We are also looking forward to welcoming more investors to participate in Block SB505, offered in MBR 2025, the next gateway to unlock the potential of the Sandakan Basin," Bacho added.

MPM has also awarded the Temaris Cluster SFA PSC to Seascape Energy Asia (One) Sdn Bhd, a wholly owned subsidiary of Seascape Energy Asia plc (Seascape). Located in the Malay Basin offshore Peninsular Malaysia, the Temaris Cluster comprises the Tembakau and Mengkuang gas fields. This marks the second SFA PSC awarded from the three discovered resource opportunities (DRO) clusters offered under MBR 2025.

"When oil prices are lower obviously, upstream investors are a bit worried. Current price levels are relatively fine for upstream investments, but if prices fall below $50/b, projects will have to undergo stress tests to see how robust the cost structure is," Bacho said.

"At the same time, we have a responsibility to ensure collaborative innovation across the entire oil and gas value chain to accelerate decarbonization and align with national energy transition roadmaps," he added.

Amid heightened tensions in the Middle East recently, oil markets witnessed the peak of the fear premium when Dated Brent surged past $80/barrel. But in the third quarter of this year, S&P Global Energy expects Dated Brent to fall to the mid-$60s/b. And by the end of the year, strong oil supply growth relative to demand is expected to push Dated Brent into the $50s/b.

MPM is the governing body for the country's petroleum development since Petronas was established in 1974. It is entrusted to act for and on behalf of Petronas in the overall management of Malaysia's petroleum resources throughout the lifecycle of upstream oil and gas assets.