KUALA LUMPUR: An ongoing dispute between Malaysia’s national oil company, Petronas, and the Sarawak state government has raised concerns among investors following the unexpected exit of U.S. oil company ConocoPhillips from an offshore oil project near Borneo.
This month, ConocoPhillips made a surprising announcement, opting out of operating the Salam-Patawali deepwater oil and gas field, which it discovered in partnership with Petronas in 2018. This joint venture, which was expected to cost RM13.7 billion (approximately US$3.13 billion), was not widely reported.
The news of their withdrawal was initially highlighted by Upstream Online, a well-followed industry news outlet, on April 15, but has remained largely unreported in Malaysian media.
Two sources familiar with ConocoPhillips confirmed the withdrawal to CNA, noting that it was part of a broader “country strategy review,” though no further details were provided.
CNA attempted to contact company representatives at their Kuala Lumpur office, but calls went unanswered.
Industry insiders explained to CNA that ConocoPhillips’ decision was influenced by the unclear regulatory circumstances stemming from the ongoing tension between Petronas and the Sarawak government, led by Premier Abang Johari Openg.
The Sarawak government, which has its own oil and gas entity, Petroleum Sarawak (Petros), is seeking increased control over local resources.
According to industry sources with close connections to ConocoPhillips, the firm will now shift its focus to its operations in Sabah, where it already has a presence.
A senior executive from a Western oil contracting firm in Kuala Lumpur stated, “Foreign companies are feeling uneasy because they perceive that Petronas is facing challenges in Sarawak, and Petronas often partners with them in various exploration efforts.”
As noted in ConocoPhillips’ factsheet on its Asia Pacific activities from April 2024, the company engages in exploration, development, and production across around 2.7 million net acres in Malaysia. Net acres represent the company’s leased real estate related to its working interest.
It is involved in six production sharing contracts in Malaysia, with Petronas recognized as a “co-venturer” in all agreements.
The Salam-Patawali exploration block spans 300,000 net acres, primarily covering the Salam and Benum fields off the southern coast of Sarawak.
The firm stated, “We continue to assess the block and analyze previous well results. A 3D seismic survey was conducted in 2023, and we are currently processing and evaluating this data.”
Typically, under the production sharing contracts with Petronas, private companies must relinquish their rights to oil fields back to the Malaysian oil corporation if they choose to halt exploration and production efforts.
