Sabah sets RM1bil target for local oil and gas contract awards, says Hajiji

KOTA KINABALU: Sabah has set a RM1bil target for oil and gas local contract awards this year, says Chief Minister Datuk Seri Hajiji Noor.

He said this is 20% of the total oil and gas contracts awarded this year and the target will increase to 30% in 2024.

He said to date, local contract awards have reached RM564mil - equivalent to 11% of the total spent in 2022.

“We are equally serious in the recruitment and development of local talent in this sector. It is a key priority for Sabah,” said Hajiji at the 10th Sabah Oil, Gas and Energy Conference and Exhibition (SOGCE) at the Sabah International Convention Centre (SICC) here on Thursday (June 8).

The requirements for local content are aimed at creating jobs, promoting local enterprise development and accelerating the transfer of skills and technologies, particularly for the oil and gas sector, he added.

The Chief Minister said under the state’s investor-friendly Sabah Maju Jaya (SMJ) initiatives, Sabah is targeting to get additional upstream and liquified natural gas (LNG)-producing assets and will consider suitable green energy opportunities at the same time.

“While oil and gas will provide an important revenue stream for the state, we also welcome investors to explore renewables such as solar and storage technologies, hydro, geothermal, and also carbon market opportunities in Sabah,” said Hajiji.

He said Sabah had set a clear direction when it set out the key priorities in the five-year development roadmap, the Hala Tuju Sabah Maju Jaya (SMJ), that outlined a new strategic direction for Sabah’s economic development.

“Today, I am proud to say we have done well and are on the right track seeing the progress we have achieved. In spite of the economic challenges faced not only by the state but globally,” he said.

Hajiji said Sabah achieved RM6.960bil in revenue at the end of December 2022, adding that this is the highest recorded thus far.

He said this represents a 28% increase from the previous year’s achievement of RM5.449bil.

“We will not rest on our laurels but will continue to implement a robust policy to bring in more investments to the state, create more economic spin-offs and double our efforts to generate more revenue through new and innovative means and resources,” he said.

Hajiji added that Sabah is expected to collect additional revenue of RM2.45bil annually in Sales and Services Tax (SST) from the oil and gas sector due to the signing of the Commercial Collaboration Agreement with Petronas in Dec 2021 and the launch of the Sabah Gas Masterplan in January 2022.

He added that as of May 31, 2023, RM715mil has already been collected and since 2022, Sabah’s 10% equity in LNG has earned the state RM337mil to date.

Hajiji said Sabah’s 25% equity acquisition in Sabah Ammonia Urea (SAMUR) and its 50% stake in Samarang is also expected to generate good returns.

He said Sabah has vast potential with good oil and gas resources in place, producing about 40%of the oil and just under 20% of the gas in Malaysia.

“The state works in partnerships with Petronas, international oil and gas companies and local companies to create a favourable Foreign direct investment (FDI) environment from Upstream to LNG to domestic downstream developments and oil and gas services,” Hajiji said.

“This includes the US$2bil Esteel investment to produce HBI (Hot Briquette Iron) and flat steel at the Sabah Oil and Gas Industrial Park (SOGIP) for Phase 1 to be followed by multi-billion dollar investments to produce green steel products in subsequent phases,” he added.

He said Phase 1 is expected to be in commercial production by 2026-2027, providing some 2,800 direct employment opportunities during the peak construction period.

Another Petronas-Sabah state collaboration that will create multiple spin-offs for the state is the multi-billion ringgit ZLNG floating LNG facility also to be built at nearshore SOGIP.