KUALA LUMPUR (Feb 9): The Sabah state government has completed yet another major upstream oil and gas investment. Sabah state-owned SMJ Energy Sdn Bhd is acquiring a 20% non-operating interest in an oil production-sharing contract (PSC) covering four fields off its coast.

SMJ Energy Sdn Bhd acquired the stake via a farm-out agreement with PETRONAS Carigali Sdn Bhd, PETRONAS’ exploration and production arm, according to the national oil firm’s statement on Monday.

PETRONAS Carigali’s non-operating stake in the North Sabah Enhanced Oil Recovery Production Sharing Contract (NSEOR PSC) will be reduced to 30%, while operator SEA-Hibiscus Sdn Bhd — which manages production’s day-to-day operations — will retain 50%.

The value of the 20% non-operating stake acquired in the PSC was not disclosed in the statement.

The NSEOR PSC comprises the Barton, South Furious, SF30, and St Joseph fields, located in shallow waters off the coast of Sabah. It includes 20 offshore platforms connected by a 143km pipeline that transports crude oil to the Labuan Crude Oil Terminal.

Sabah’s modus operandi of acquiring non-operating interest in PSCs is anchored on its commercial collaboration agreement with PETRONAS that was signed in December 2021.

Sabah, which produces the most crude oil in the country, has chosen a different path from its neighbouring state Sarawak in terms of managing the state’s hydrocarbon resources. Sabah agreed to allow PETRONAS to undertake exploration and development works. The state will later buy a non-operating stake once PETRONAS strikes oil. SMJ Energy is only keen on producing assets.

Meanwhile, Sarawak, via state-owned entity Petros, intends to claim full control and operatorship of targeted projects under its commercial settlement agreement with PETRONAS.

Prior to the latest deal, SMJ Energy acquired a 50% non-operating interest from PETRONAS Carigali in the Samarang PSC in April 2023.

SMJ Energy and PETRONAS Carigali are also partners for several other PSCs in the state’s waters. According to SMJ Energy’s website, the company has “back-in options” to acquire participating interests in the contracts.

Beyond upstream operations, SMJ Energy’s partnership with PETRONAS also extends to its 25% stake in PETRONAS Chemicals Fertiliser Sabah and a 25% stake in floating liquefied natural gas facility project, PFLNG 3.