ConocoPhillips withdraws from US$3 bn oil/gas project in Sarawak; Petronas/state govt at loggerheads

Against the back of a spat between Malaysia’s national oil corporation Petronas and the Sarawak state government, US oil firm ConocoPhillips has pulled out from operating the Salam-Patawali deepwater oil/gas field that the company discovered in 2018 with Petronas in a 50-50 joint venture that was expected to cost around US$3 billion.

Industry sources close to ConocoPhillips separately confirmed the pull-out, according to CNA, adding that the move was part of a “country strategy review”, which the company did not elaborate on.

Furthermore, the CNA report says that ConocoPhillips’ move was in part driven by the uncertain regulatory environment arising from the rift between Petronas and the state government headed by state governor Abang Johari Openg.

The Sarawak government, which owns oil/gas firm Petroleum Sarawak or Petros, is demanding greater control over its resources.

ConocoPhillips is expected to focus on its activities in neighbouring Sabah, where it already has operations.

According to ConocoPhillips’ factsheet on its Asia Pacific operations dated April 2024, it has exploration, development and production activities across about 2.7 million net acres in Malaysia. Net acres refer to the amount of leased real estate that a company holds, pertaining to its working interest.

It has working interests in six production sharing contracts in Malaysia, and Petronas is listed as a “co-venturer” in all six contracts.

The Salam-Patawali exploration block encompasses 300,000 net acres primarily in the Salam and Benum fields off southern Sarawak.

Meanwhile, Sarawak state is challenging the decades-old monopoly Petronas has held since it was incorporated under a parliamentary statute in 1974 known as the Petroleum Development Act or PDA. The PDA, among other things, decrees that the national oil corporation is the sole guardian of the nation’s hydrocarbon reserves.

Sarawak, whose probable and proven reserves of petroleum represent 60.87% of Malaysia’s total and which accounts for 90% of Malaysia’s liquefied natural gas (LNG) exports, is insisting that PDA does not apply to the state.

Instead, it wants all the hydrocarbon reserves in Sarawak to be regulated under a colonial-era Oil Mining Ordinance 1958 that stipulates that oil and gas resources found within 200 nautical miles of its waters belong to the state.