PETRONAS overseas expansion is strategic hedge against uncertainty in Sarawak

Friday 02 Oct 2026

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KUALA LUMPUR (Nov 26): The expansion of Petroliam Nasional Bhd's (PETRONAS) overseas liquefied natural gas (LNG) investment is seen as safeguarding Malaysia's supply amid its challenges with Sarawak over control of the resource, said BMI, a unit of Fitch Solutions.

"This shift appears driven by ongoing disputes over ownership and operational control. While Malaysian assets remain central to PETRONAS’ operations, its dominant role as regulator and natural gas aggregator in Sarawak is likely to diminish, even if an agreement is reached on rights to the state’s oil and gas reserves," said the research unit in a note on Wednesday.

PETRONAS, by losing its position in Sarawak — which holds about 40% of Malaysia’s oil and 60% of its gas reserves — would significantly affect PETRONAS’ future upstream and downstream activities, added BMI.

Against this backdrop of growing uncertainty, PETRONAS is stepping up collaboration with regional and international energy companies to expand its global footprint.

In October, PETRONAS Carigali International Ventures Sdn Bhd, a PETRONAS subsidiary, signed a memorandum of understanding (MOU) with Dragon Oil (International) Ltd to collaborate in the international upstream sector.

Joint upstream activities are likely in Egypt and Turkmenistan, where both companies already hold assets.

"Domestically, prior to this MOU, PETRONAS signed technical evaluation agreements with BP, Eni, INPEX, Pertamina, PTTEP, and TotalEnergies suggesting that it intends to expand upstream investments in frontier basins of Peninsular Malaysia," it said.

BMI also noted PETRONAS' investment in Australia’s Gladstone LNG and LNG Canada.

Its most recent overseas LNG investment is a 15% stake in the Masela production sharing contract, which includes the 9.5mtpa Abadi LNG project in Indonesia.

"The Indonesian government approved the Masela plan of development in December 2023, and PETRONAS and its partners have yet to reach a final investment decision on Abadi."

BMI noted that Indonesia remains attractive to Malaysian firms given its proximity to Malaysian demand centres, which can support lower-cost supply for domestic customers.

Meanwhile, PETRONAS has exited the Argentina LNG project with YPF.

Earlier this month, PETRONAS signed an agreement with Pembina Pipeline Corporation for equity rights to 1.0mtpa of liquefaction capacity at the Cedar LNG facility for 20 years, with project completion targeted for 2028.

This marks PETRONAS’ second major LNG investment in Canada.

PETRONAS also holds a 25% equity interest in LNG Canada, from which it shipped its first LNG cargo in July. PETRONAS’ overseas equity LNG volumes are expected to rise with subsequent investments, though much of this volume may be directed to consumer markets rather than shipped to Malaysia.

"These investments suggest PETRONAS aims to expand its global LNG portfolio and safeguard supply for Malaysian customers in case access to LNG from the Bintulu complex in Sarawak is curtailed," said BMI.

In February, Prime Minister Datuk Seri Anwar Ibrahim appeared to acknowledge Petroleum Sarawak Bhd (PETROS) as the state's aggregator though he did not explicitly mention it was the “sole aggregator”.

However, it remains unclear whether PETRONAS — which owns and operates the Bintulu LNG complex — will cede its position as the sole LNG producer and exporter.

"Despite reports of negotiations for PETROS and PETRONAS to act as joint aggregators, the outcome is uncertain, and Sarawak appears resolute in managing natural gas within its territory," said BMI.

Edited ByIsabelle Francis

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