The new administration led by Tun Dr Mahathir Mohamad is relying more on Petronas - a significant contributor to government revenue and the country's largest employer - to offset a revenue shortfall from the government's plan to scrap a consumption tax.
Oil prices were trading close to 3-1/2-year highs on Wednesday as Petronas reported a 26-percent surge in first quarter profit.
With oil prices improving, Malaysia may collect 8-9 billion ringgit ($2-$2.26 billion) more in revenue from Petronas this year, Ong Kian Ming, a special officer to the finance minister, told Reuters.
He said the increase would come through corporate taxes and dividends to the government, but discussions are still ongoing.
Petronas said it was unable to comment on the matter.
Petronas paid 17.4 billion ringgit in taxes and 16 billion ringgit in dividends to the government in 2017.
Its contribution to government revenue typically increases with the company's profitability. Last year, Petronas paid 5.8 billion ringgit more to federal and state governments as profits and oil prices rose.
A higher contribution from Petronas this year will help narrow the government's revenue shortfall from effectively scrapping the goods and services tax, Ong told BFM radio station on Wednesday.
Aside from Petronas, the government was also looking at higher dividends from the central bank and sovereign fund Khazanah Nasional, Ong told BFM.
"These are all the options on the table," he said.
Petronas said its January-March quarter profit totalled 13 billion ringgit ($3.26 billion), up from 10.3 billion ringgit in the same period last year. Revenue rose 2.5 percent to 57.9 billion ringgit.
Petronas said it expected overall year-end performance to be "satisfactory" subject to the volatility of oil prices and foreign exchange rates. The company is known to be conservative with its outlook.
Petronas had said it was budgeting for an oil price of $52 per barrel in 2018. Brent crude was trading at around $75 per barrel on Wednesday.
Petronas, like other oil majors, has taken a hit from lower oil prices, but sharp cost cuts - along with some recent stability in oil prices - helped the company's profits and margins.
The company said in 2016 that it would reduce expenses by $12 billion over a four-year period, and has cut thousands of jobs to save costs amid low oil prices.
Its total production volume for the quarter rose to 2,461 thousand barrels of oil equivalent (boe) per day compared to 2,387 tboe/day in the same period last year.
Petronas also said its Refinery and Petrochemical Integrated Development (RAPID) project in the southern Malaysian state of Johor is on track for a 2019 start up.
The company said that the development was 90 percent completed at the end of April. ($1 = 3.9900 ringgit) - Reuters