KUALA LUMPUR (Dec 12): Malaysia’s oil and gas sector could expect muted domestic activity outlook going into 2026, amid oil price volatility, lower upstream capital spending, scaling back of offshore work scope and potential delays to new projects including marginal field developments, said CIMB Securities.

Limited job availability would also keep competition intense among service providers, it said, taking hint from national oil firm PETRONAS’ upstream capex cut of 42% in 1H2025.

“Onshore plant turnarounds remain the primary near-term catalyst, benefitting companies with established capabilities and operational footprints,” it said.

Brownfield maintenance works also “remain targeted and project specific”, it said.

CIMB Securities is “neutral” on the sector, as core earnings are projectod to be at an over-a-decade low in 2025, followed by a recovery in 2026 but still at levels during the peak of the pandemic in 2020.

The ongoing dispute between PETRONAS and Sarawak state-owned Petroleum Sarawak Bhd (PETROS) also affected sentiment, it said.

“Key matters surrounding licensing, resource rights, and revenue entitlement [are] still unresolved,” it said.

This contributed to delays in project sanctioning and dampened investor confidence, with oil producers “likely adopting a more cautious stance in committing to new developments”, it added.