PETALING JAYA: Any prolonged disruption to flows through the Strait of Hormuz could tighten crude oil supply to domestic refineries, potentially forcing operators to adjust processing rates over time.
Malaysia’s exposure stems from its reliance on imported crude, with about 38% of supply estimated to pass through the chokepoint, which is now facing heightened security risks.
Domestic fuel consumption stands at about 700,000 barrels per day, according to the Finance Ministry, compared with production of roughly 350,000 barrels per day.
Of total supply, about 48% is met by domestic production, while 38% comes via the Strait of Hormuz and the remaining 14% from Asia and other sources.
Industry experts said the situation remains manageable for now, but caution that risks could build if disruptions persist.
When asked whether refineries would have to trim operations if supply constraints continue, an oil and gas executive said: “Yes, they will have to. For now we are okay. But after that the answer would be yeah, we have to.”
An analyst, who declined to be named, echoed similar concerns, saying it is “likely” that refinery operators could face pressure, although limited visibility on supply flows makes it difficult to assess the full impact.
For now, the government has assured that supply remains sufficient. Prime Minister Datuk Seri Anwar Ibrahim said Malaysia has enough fuel stocks to meet domestic demand through April and May.
“Beyond this, there is enforcement in place to oversee the overall situation. The Cabinet monitors developments every day to ensure things are better managed, given the present economic conditions,” he said, while reaffirming fuel subsidies.
Malaysia continues to maintain among the lowest retail fuel prices globally, with the “Budi95” programme setting the price of RON95 petrol at RM1.99 (US$0.50) per litre for Malaysian citizens, but non-citizens pay market-based rates of about RM4.27 (US$1.07) per litre now.
While the country is an oil producing country, structural constraints limit the country’s ability to significantly ramp up supply, the oil and gas executive said.
“We can go and maybe do additional work here and there, maybe increase by 50,000 barrels, but not to the tune of 200,000 barrels per day,” he told StarBiz.
Malaysia has been a net importer of crude oil since 2022, as maturing fields have reduced domestic output from a peak of about 800,000 barrels per day in the early 2000s.
Despite this, the country remains a net exporter of energy overall, supported by its natural gas exports. For perspective, Petroliam Nasional Bhd (PETRONAS) aims to sustain domestic oil and gas production at around two million barrels of oil equivalent per day between 2026 and 2028.
Excluding natural gas, crude oil production still remains a key component of output, although refining and downstream dynamics add complexity to the overall value chain.
Brent crude is not only refined into fuels such as petrol and diesel, but also produces intermediate products such as naphtha, which are used as feedstock in petrochemical plants to manufacture plastics, fertilisers and other industrial materials.
According to PETRONAS, more than 90% of refineries globally, including those in Malaysia, are configured to process medium to heavy sour crude, which is typically imported.
While lighter sweet crude is available domestically, it is less compatible with existing refinery configurations and produces a different range of by-products.
On this, the oil and gas executive said sour crude is more suitable for petrochemical production as it produces a wider range of intermediate products compared with sweet crude.
He added that petrochemical markets, which had previously been in a period of oversupply, are now seeing some tightening in certain segments amid global disruptions.
Against this backdrop, the executive said Petronas Chemicals Group Bhd
(PetChem), is able to draw down inventories in the near term amid current market conditions.
“They can use up all their inventory,” the executive said.
Separately, the analyst noted that PetChem is relatively insulated in the near term, given long-term and fixed-price feedstock arrangements with their parent company PETRONAS.
“PetChem is a net beneficiary of this Middle East conflict,” he said, for the short term at least.
However, he cautioned that this does not fully apply across all integrated assets.
At the Pengerang Integrated Complex in Johor, he said operations are structured under two 50:50 joint ventures between PETRONAS and Saudi Aramco, namely Pengerang Refining Company Sdn Bhd (PRC) and Pengerang Petrochemical Company Sdn Bhd (PPC), yet refining and petrochemical facilities are closely integrated.
Under the arrangement, Aramco supplies 50% of the refinery’s crude feedstock requirement, with the option to increase to 70%, while PETRONAS provides natural gas, power and other utilities.
The refinery has a capacity of 300,000 barrels per day and produces refined fuels, including Euro 5-compliant gasoline and diesel, as well as feedstock for PPC’s downstream petrochemical production of about 3.3 million tonnes per year.
The petrochemical complex produces polymers, glycols and C4 derivatives such as polypropylene, polyethylene, ethylene glycols and C4 isononanol used in a wide range of everyday consumer products.
The analyst said the integration means downstream operations could be indirectly affected if upstream crude supply to the refinery is constrained.
“PPC may not be able to get naphtha from PRC because PRC is not able to get enough crude,” he said.
Yesterday, US President Donald Trump raised the prospect of a “blockade” in the Strait of Hormuz, adding concerns over potential disruptions in the key global oil shipping route.
This effectively adds another checkpoint for vessels transiting the key oil route, given that Iran’s Islamic Revolutionary Guard Corps (IRGC) is reported to charge fees on vessels, at roughly US$1 per barrel of oil passing through.
Brent crude oil rose above the US$100 per barrel mark, climbing to about US$102 yesterday, up 7% within a day, after renewed tensions following failed negotiations between Iran and the United States.
The rebound follows a brief pullback below US$100 last week, when a temporary ceasefire had eased supply concerns.
In an interview with Fox News, Trump said he wanted “everything” and would not settle even for “95%,” signalling a hardline stance that dampened hopes for de-escalation.
Sustained higher prices could translate into broader cost pressures across the economy, affecting a wide range of goods and industries.
According to BMI, a unit of Fitch Solutions, under scenarios where oil prices rise to about US$85, US$95, and US$110 per barrel, Malaysia’s economic growth would be hit by about 0.2 to 0.7 percentage points lower, while inflation would rise about 0.3 to 1.3 percentage points higher, depending on the severity of the shock.
