New moves reinforce Sabah’s role as energy growth hub in Malaysian waters

February 10th, 2026

Petronas Carigali, Malaysia’s state-owned oil and gas heavyweight Petronas, has taken steps to divest a partial stake to SMJ Energy (SMJE), a company wholly-owned by the Sabah state government, in a production sharing contract (PSC) for fields in shallow waters off the coast of Sabah, offshore Malaysia. Petronas and Sabah have also strengthened their collaboration with another PSC award.

Illustration; Source: Petronas

Petronas Carigali has signed a farm out agreement (FOA) with SMJ Energy for the assignment and transfer of a 20% non-operating participating interest in the 2011 North Sabah Enhanced Oil Recovery production sharing contract (2011 NSEOR PSC).

Upon the completion of the transaction and subject to the fulfilment of conditions precedent, the Malaysian player’s non-operating participating interest will be revised to 30%, while SMJE will assume a 20% stake and SEA-Hibiscus will continue as the operator with a 50% participating interest.

The agreement was signed by Hazli Sham Kassim, Petronas Carigali’s Chief Executive Officer (CEO), and Datuk Dr Dionysia Aloysius Kibat, SMJE’s CEO, in the presence of Datuk Seri Panglima Hj Hajiji Haji Noor, Sabah’s Chief Minister, and Tan Sri Tengku Muhammad Taufik, Petronas’ President and Group CEO.

Petronas Carigali’s CEO emphasized: “This agreement reflects the continued commitment of both Petronas Carigali and SMJE to pursue win-win partnerships that accelerate value creation and strengthen Malaysia’s upstream ecosystem.

“By building on mutual trust, shared objectives and constructive collaboration, the participation of SMJE in the 2011 NSEOR PSC demonstrates how aligned partnerships can unlock sustainable value and advance local capability development in Sabah.”

The 2011 NSEOR PSC entails the Barton, South Furious, SF30, and St Joseph fields offshore Sabah. Petronas and SMJE entered into an FOA in 2023 for the Malaysian firm’s 50% non-operating participating interest in the Samarang PSC.

The two players are also partners in blocks SB403 PSC, SB306A PSC and SB306B PSC to progress the shared ambitions set out in the commercial collaboration agreement (CCA) signed between the Sabah state government and Petronas in December 2021.

The partnership with SMJE extends beyond upstream operations, where SMJE holds a 25% equity interest in Petronas Chemicals Fertiliser Sabah and a 25% equity interest in PFLNG 3.

Meanwhile, the award of the PSC for the Permata Cluster off the coast of Sabah is said to represent the conclusion of the three discovered resource opportunities (DRO) clusters and the progression of an additional exploration block offered under the Malaysia Bid Round 2025 (MBR 2025) launched early last year.

“This is a clear signal of continued investor confidence in Sabah’s upstream potential and reaffirmed its strong partnership with the Sabah State Government through a document exchange ceremony in Kuala Lumpur,” explained Petronas.

The cluster, awarded under the small field asset (SFA) PSC, which comprises the South East Collins, Lokan, Axinit, Realgar, and Manikam fields, has been given to London-headquartered Bridge Petroleum, marking the firm’s entry into Malaysia as the sole operator.

Petronas elaborates that Bridge Petroleum brings a strong track record in subsea field development and project execution, positioning the company for a meaningful role in advancing offshore capabilities in Sabah.

As a result, the award is perceived to reflect Malaysia’s growing attractiveness to international independent operators and underscore a strategic focus on innovation, diversity, and unlocking value from smaller offshore fields.

Covering an area with existing oil and gas discoveries, the Permata Cluster is expected to unlock approximately 10 million barrels of oil equivalent (boe) of untapped resources.

Bridge Petroleum plans to implement subsea tie‑back solutions to nearby facilities, with first commercial production targeted as early as 2029. The project is expected to generate economic spin‑offs, create skilled employment opportunities and support local service providers throughout its lifecycle.

Sabah’s Chief Minister underlined: “These initiatives reflect the State Government’s long-term strategy to strengthen Sabah’s energy sector through high-quality investments and close collaboration with Petronas.

“With opportunities now expanding across the state from the west to the east coast, we welcome reputable investors to partner with us in ensuring sustainable and lasting benefits for the people of Sabah.”

Petronas and Sabah Energy Corporation (SEC) exchanged the heads of agreement (HoA) for the Mutiara Cluster gas market security, which outlines key principles toward a future gas sales agreement to support the development of the cluster by Q1 2029.

Awarded to DIALOG Resources in June 2025, the Mutiara Cluster is envisaged as a pioneering upstream development on the Sabah East Coast to catalyse future gas and oil monetisation in the eastern corridor, stimulate economic activity, and reinforce Sabah’s role as a key energy growth area.

Petronas’ CEO underscored: “The milestone achieved today reflects Petronas’ continued commitment to unlocking Malaysia’s energy potential through collaborative partnerships. This development contributes to regional growth, particularly in Sabah, by creating opportunities for participation across the local energy ecosystem.”

The partnership is further reinforced through the Joint Task Force involving Petronas and Sabah state agencies, aimed at accelerating upstream and downstream developments along the Sabah East Coast.

These initiatives are interpreted to reflect a coordinated and long-term approach towards fully unlocking Sabah’s energy potential, strengthening energy security and creating lasting economic opportunities for the state and its people.

Petronas remains committed to ensuring an optimal and sustainable supply of oil and gas for energy security, with more exploration and DRO opportunities to be offered in the Malaysia Bid Round 2026.