Sabah’s oil and gas industry expected to boom

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Datuk Seri Panglima Masidi Manjun

KOTA KINABALU (Feb 25): Sabah could be expecting a boom in its oil and gas industry in the coming years, said State Finance Minister Datuk Seri Masidi Manjun.

He expects the industry to expand at a rapid pace following the state government’s recent cooperation with Petronas through the signing of a heads of agreement (HoA) which allows Sabah’s SMJ Sdn Bhd to acquire a 50 per cent participation interest in the Samarang Sharing Contract (PSC).

The Samarang PSC is a producing asset encompassing key oil and gas hubs in Sabah and currently produces around 36,000 barrels of oil equivalent per day for both oil and gas, in which the gas is delivered to customers in Kota Kinabalu and Labuan.

Masidi added that he had recently met up with investors of the Sipitang Oil and Gas Industrial Park (SOGIP) who had agreed to add on another RM2 billion for the project on top of the initial RM19 billion investment.

The multi-billion dollar project which is designated for oil and gas related works is the first industrial park in Sabah for petrochemicals, with a RM900 million power plant underway which is expected to be completed in two years’ time.

“I foresee a quick growth of the oil and gas industry here, which will also open up more job opportunities for Sabahans,” said Masidi during a National Dual Skills System (SLDN) graduation ceremony at the Sabah International Convention Centre (SICC) on Saturday.

Meanwhile, he said that Sabah is still lacking the infrastructure to woo investors into putting money in the state’s manufacturing sector.

He said facts have to be accepted that the infrastructure here is not up to par for potential investors as even basic infrastructure such as water, electricity and roads are lacklustre compared to other states.

From a business standpoint, he said Sabah is situated far away from Malaysia’s main export port, Port Klang. He said if manufacturing is done in Kota Kinabalu Industrial Park (KKIP) for example, additional expenses will be incurred after factoring in transport costs from Kota Kinabalu to Klang.

“The reason it is not feasible to take the goods directly from KKIP is because we simply do not have enough volume of goods to act as an incentive for foreign cargo ships to come to Kota Kinabalu. In addition, they would need another incentive of also sending goods here instead of just coming here to procure them.

“Generally, production costs for manufacturing goods would be higher in Kota Kinabalu compared to if done in Selangor, Johor and Penang as all three of these states have big ports. If I were a businessman, I would have to take all of these factors into account.

“It is a Catch-22 situation for us. If we make no attempts, we have no job opportunities. If we do attempt, the goods may not sell or investors would not invest due to higher costs,” he said.

Masidi said the industry will eventually grow but focus should now be placed on sectors that Sabah have a higher chance to be competitive in.