SABAH: MARGINAL BENEFACTOR OR FUTURE
ACTIVE PLAYER IN OIL AND GAS INDUSTRY
CONTENTS
1.0
BACKGROUND
2.0
PAST DEVELOPMENT IN THE OIL AND GAS
3.0
CURRENT DEVELOPMENT
4.0
CHALLENGES TO JUMP START
5.0
FUTURE EXPECTATIONS
6.0
THE WAY FORWARD
1.0 BACKGROUND
 The Oil industry concentrates more capital than any other Industry.
 The global economy is more sensitive to the oil and gas development more
than to other industries.
 The stronger economies in the world such as the United States, Europe,
China, Japan, Korea and Taiwan testified that they have successfully
maximized on their available resources.
 Malaysia is one of the world’s largest natural gas and crude oil reserves and
Sabah contributes 14% of natural gas and 30% of crude oil reserves.
 Sabah reserves could increase significantly due to deepwater discovery and
development of several new offshore fields.
 Sabah will become the second largest oil producing state after Terengganu.
3
OIL & GAS RESERVES IN MALAYSIA
REGION
NATURAL GAS
Peninsular
Malaysia
Sarawak
33 % @ 33.5 tcf
40%
53% @ 41.8 tcf
30%
Sabah
14% @ 12.7 tcf
30%
88 trillion cubic feet
@14.7 b boe
CRUDE OIL
4.0 billion
barrels
As of 2009: Malaysia Ranked 14 in the Gas World Reserve.
Current reserves will last 38 years.
NEW DEEPWATER DISCOVERIES OF CRUDE OIL IN SABAH WITH PSC INTRODUCED
SINCE 1993
Field Name
Recoverable
Water
Depth
Onstream
Date
Operator
Remark
Kikeh
536 mmboe
1,300m
Q2/Q3 2007
Murphy Oil
2002
Gumusut /
Kakap
620mmboe
1,100m
Q4 2012/ Q1
2013
Shell
2003
Malikai
108mmboe
480m
Q2 2014/2015
Shell
2005
Jangas
81mmboe
>1000m
Q2 2012
Murphy Oil
2004
Ubah Crest
215mmboe
>1000m
Q2 2012
Shell
2004
Pisangan
56 mmboe
>1000m
Q3 2012
Shell
2004
NEW DEEPWATER DISCOVERIES OF NATURAL GAS IN SABAH WITH PSC INTRODUCED SINCE
1993
Kebabangan
2.2 tscf
>200m
Q3 2011
Conoco
Philips
1993
Kamunsu
2.2 tscf
>1000m
Q2 2013
Shell
1998 5
2.0
PAST DEVELOPMENT IN THE OIL AND GAS
 Oil and gas industry in Sabah has been in operation for
over 30 years and yet the local players are incapable of
supporting the oil and gas industry.
 Small players are competing with each others and the
surviving companies find it difficult to grow.
 In 2009, oil and gas is the biggest contributor for Sabah’s
GDP as compared to other sectors.
6
2.1 CONTRIBUTIONS OF OIL AND GAS
Sabah GDP by NKEA Sectors – 2009 (Current Price)
2.2 COMPARISON OF ACHIEVEMENTS IN THE OIL AND GAS
VALUE CHAIN
State/Country
Exploration &
Production
Energy
Refining
Storage Petrochemical
Brunei
Sarawak
Achievement Gap
Sabah
Marketing
3.0
CURRENT DEVELOPMENT
 Since the Third Industrial Master Plan(IMP3), Malaysia has designated four
petrochemical zones, including Kertih (Terengganu), Gebeng (Pahang),
Pasir Gudang-Tanjung Langsat (Johor) and Bintulu (Sarawak).
 The latest to be developed is Pengerang (Johor) involving CAPEX of
RM20b.
 Similar progression for an integrated petrochemical industry in Sabah
that links the entire range of the oil and gas value chain beginning from
upstream exploration and production to the final stage of manufacturing is
possible due to large reserves of oil and gas.
 Thanks to the initiatives of PETRONAS in bringing oil and gas projects
onshore with a combined investment capital of RM45 billions which
supported the desire of the State Government to further
the
development of the industry to the value-added level.
9
3.1
INITIATIVES OF PETRONAS FOR THE DEVELOPMENT OF OIL AND GAS
SECTOR IN SABAH
Kimanis PP
Investment
Jobs
RM 1b
3300
SOGT & SSGP
Invest
Jobs
RM 5.4 b
3000
SOGIP Ph1 – SAMUR and Ph2 - Mitsui
LD Re-Gas Terminal
Lahad Datu PP
Invest
Jobs
Invest
Jobs
Invest
Jobs
RM4.6 b
5,128
RM 1.2 b
3500
RM 1 b
3300
Project
Name
Investment Description of Project
(RMBillion)
SOGT/SSGP
3.8/1.6
 Sabah Oil and Gas Terminal (SOGT) receive and process
@ Total
crude oil as well as receive, compress and transport
investment :
natural gas produced from fields offshore Sabah, namely
5.4
Gumusut/Kakap, Kinabalu Deep and East, Kebabangan
and Malikai.
 Sabah-Sarawak Gas Pipeline (SSGP) handle up to 2.5
million barrels of crude oil and 1.25 billion cubic feet of
natural gas per day from Kimanis to Bintulu (500km).
Employment expected to be created : Operation 200 and
Construction 3000-5000
SAMUR
Kimanis
Power Plant
300MW
4.6
1
 Expected to produce Ammonia = 400,000 tonnes per
annum (tpa) and Urea = 1,250,000 tpa.
 Located in Sipitang Oil and Gas Industrial Park (SOGIP)
 Addressed the needs of electricity demand at the SOGT.
 Petronas Gas Berhad and Yayasan Sabah take the lead.
 On-going project and first power expected to be
generated in early 2013.
Project
Name
Investment
(RMBillion)
Lahad Datu
Power Plant
300MW
1
Lahad Datu
Re-gas
Terminal
1.2
Description of Project
 Addressed the needs of electricity demand in Seguntor,
Sandakan and Lahad Datu.
 TNB, Petronas Gas Berhad and Warisan Harta Sdn Bhd take
the lead.
 Located next to Lahad Datu RGT in POIC. Utilising 60 mmscfd
of natural gas vaporize from LNG at Lahad Datu RGT.
 Extra electricity produce to be fed into SESB grid.
 Petronas Gas Berhad and Warisan Sdn Bhd to lead.
 Located at the Palm Oil Industrial Cluster (POIC), Lahad Datu
Phase 3.
 Comprise of jetty, berth facilities, land based storage and regas terminal facilities.
 Design to receive and vaporize imported LNG with a send out
capacity of 1 MTPA.
 Planned consumption of 0.456MTPA of LNG (60 mmscfd of
natural gas).
 Targeted to produce first gas by May 2015 and first power by
November 2015.
3.2 INITIATIVES OF SABAH GOVERNMENT FOR THE DEVELOPMENT OF THE
OIL AND GAS SECTOR IN SABAH
Project Name
Description of Project
Sipitang Oil And Gas
Industrial Park (SOGIP)

SOGIP - to be developed as an integrated industrial area designated for oil and gas
related and other heavy industries through industrial clustering;

Managed by Sipitang Oil & Gas Development Corporation Sdn Bhd (SOGDC);

About 145 km South West of Kota Kinabalu, Sabah;

About 33 km From Sipitang town; and

Site coverage : 4000 acres (including 1000 acres of buffer zone or detention pond).

The State Government had identified SOGIP as the dedicated park for oil and gas
industry, therefore a Master Plan is necessary to be produced with specific focus
to SOGIP. The Master Plan will address the following factors: Targeted Industries;
Plans for Phased of Development and Implementation Schedules; Infrastructure
Requirements; Estimate of Investment Values; Design of Required Infrastructures
and Logistics, Strategic Environmental Assessment (SEA), Engineering Designs and
and Cost Estimates for implementation.

Acceleration of the completion of The Master Plan within 6 months to facilitate
marketing of the plans to investors with ready markets for the proposed products.
Formulation of Master
Plan For Petrochemical
Industry In Sabah
3.3
EXPECTED BENEFITS FROM THE INITIATIVES PETRONAS AND THE
STATE GOVERNMENT
JOBS
INVESTMENT
GROWTH OF STATE’S
GDP (RM)
5% ROYALTY +
VALUE ADDED
24,653
JOB OPPORTUNITIES
EXPECTED TO BE
CREATED FOR
SABAHANS
18.72 BILLIONSIGNIFICANT SPIN OFF
TO LOCAL ECONOMY
SABAH GOVERNMENT INITIATIVE 1:
SIPITANG OIL AND GAS INDUSTRIAL PARK (SOGIP)
SIPITANG OIL AND GAS INDUSTRIAL PARK (SOGIP)
SOGIP Ph1 – SAMUR and Ph2 - Mitsui
WHAT IS SOGIP INTENDED FOR?
 To capture the opportunities as a result of PETRONAS initiatives in
developing the SOGT, the Sabah-Sarawak Gas Pipeline (SSGP), Kimanis
Power Plant and SAMUR in line with PETRONAS Masterplan;
 To capture opportunities offered by the presence of oil and gas supplies at
the vicinity and transform these opportunities into industrial
developments and create jobs for local Sabahans;
 To gear up Sabah into a high income economy by means of high value
added activities;
 To attract Foreign Director Investments (FDI) and facilitate technology
transfer through joint venture ; and
 To bring development to the Sipitang, and other nearby district i.e.
Beaufort, Tenom, and Keningau through spillover effects.
PHASING OF SIPITANG OIL AND GAS INDUSTRIAL PARK (SOGIP)
Phase 1 - SAMUR (1.25 MT/YR UREA Production) – (Area: 620 Acres)
To provide the necessary Infrastructure (Basic Road, Drainage, Water
Supply & Compound Lighting) required for the development of SAMUR.
Phase 2 –Mitsui ( 1.0 MT/YR Ammonia Production) – (Area: 690 Acres)
To provide the necessary Infrastructure (Basic Road, Drainage, Water
Supply & Compound Lighting) required for the development of Ammonia
Plant
Phase 3 – (Area: 2450 Acres)
- Development of basic infrastructure for 2,450 Acres of Industrial
Land
SOGIP BUSINESS MODEL
 To retain the control of the State in the Park, Sipitang Oil and Gas Development
Corporation Sdn Bhd (SOGDC) will manage for the implementation plan of the required
facilities and infrastructure in SOGIP for the next two (2) years.
Manpower
Supplies
Marine Facilities
(Jetties and Berthing)
Warehousing
Warehousing
IT Infrastructure
SOGIP COMMON
FACILITIES
CUF
Waste
Management
Workers’ Camp
Security, Emergency &
Fire Fighting
KEY BENEFITS OF THE BUSINESS MODEL
 SYSTEMATIC -All the common facilities must be control by SOGDC. Therefore, it
has to be thoroughly involved in the planning, designing, building and
operating the common facilities;
 INCREASE EFFICIENCY-increase efficiency of resources and save cost to
potential investors;
 ENABLING-Enabling new companies to directly ‘plug into’ the existing
infrastructure that includes ready land, a networked community of companies,
a comprehensive set of amenities and utilities, and a pro-and –friendlybusiness environment;
 OUTSOURCE- SOGDC can outsource the management of the services to
capable and credible providers while maintaning ownership of those facilities
and services; and
 FOCUSED- The next level of facilities that SOGDC should be looking into
supporting subsea activities such as fabrication and barge landing.
EXPECTED IMPACTS OF SOGIP
Development of infrastructure (water, access road etc) will magnetize the future
investment in SOGIP.
 Create spin-off to Sabah economy and spur the support service establishments in
the region, such as:Food and beverage
Hardware suppliers
Residential and Training
Development
Hotel industry
Plant Maintenance Services
Logistic providers
EXPECTED IMPACTS OF SOGIP(CONT.)
EXPECTED IMPACTS OF SOGIP (CONT.)
CURRENT DEVELOPMENT IN SOGIP: SABAH AMMONIA UREA (SAMUR)
4.0 CHALLENGES TO JUMP START
1. Unavailability of Gas as
Feedstock to Investors
2. Instability of Power Generation
3. Inability of Manpower
4. Undeveloped Downstream
Activities of Petrochemical
Industries
5.
Undeveloped Downstream
Facilities for Petrochemical
Industries
7. Low Level of Local Contractors
Penetration Into The Industry
6. Poor Condition of Physical and
Supporting Infrastructures
CHALLENGES 1: UNAVAILABILITY OF GAS AS FEEDSTOCK TO INVESTORS
 Gas should be immediately made available for the state to prevent lost of
potential investments.
 Retaining 30 per cent of the production of urea and ammonia as feedstock
for the creation and growth of downstream activities in other related
industry in Sabah.
CHALLENGES 2: INSTABILITY OF POWER GENERATION
CHALLENGES 3: INABILITY OF MANPOWER

Oil and gas industries require specialized human resource.

Training for human capital development especially in skilled (eg. welders) and semi-skilled
workforce. This will contribute job creation during the construction and operation.
CHALLENGES 4: UNDEVELOPED DOWNSTREAM ACTIVITIES OF PETROCHEMICAL
INDUSTRIES
Natural Gas Utilisation in Sabah
9.25%
15.73%
37.96%
Flour & Feed Mills
Metal
18.53%
Plastics
18.53%
Food Processing
Others
Currently, there are only 5 industries utilising natural gas as compared to 9
industries in Peninsular Malaysia. There are more industries to be captured…
CHALLENGES 4: UNDEVELOPED DOWNSTREAM ACTIVITIES OF PETROCHEMICAL
INDUSTRIES (CONT.)
Potential Industries need to be captured
Textiles
Glass
Chemical
Non-Metal
Minerals
Paper,
Printing &
Publication
Rubber
Electronics
29
CHALLENGES 5: UNDEVELOPED DOWNSTREAM FACILITIES FOR PETROCHEMICAL
INDUSTRIES
i.
Development of Basic Infrastructure;
ii.
Supply of Skilled and Unskilled Manpower;
iii.
Training Centre/Maritime Academy for Oil & Gas Industry
(Extension of Universiti Teknologi PETRONAS in Sabah);
iv.
Marine Vessels and Support Services;
v.
Fabrication Yards;
vi.
Equipment and Machinery Supply and Services;
vii.
Oil & Gas Supply Base and Storage Facilities;
viii.
Food and Catering Services;
ix.
Shipbuilding & Repair Service; and
x.
Transportation & Logistics Services.
CHALLENGES 6:

POOR CONDITION OF PHYSICAL AND SUPPORTING
INFRASTRUCTURES
Cooperation from the relevant authorities is needed to ensure the smooth sailing
project execution especially in land acquisition matters for Right of Ways (ROW) and
other related matters.
Need financial support from the Federal Government for the provision of basic facilities
and infrastructures.

CHALLENGES 7.
LOW LEVEL OF LOCAL CONTRACTORS PENETRATION INTO THE
INDUSTRY

Lack of exposure among the small players due to the absence of petrochemical centre
such as Bintulu and Miri in Sarawak.

Absence of Specific VDP for Sabah that will ensure fair distribution on works/contracts.

Serious development of the oil and gas industry is needed to develop Sabah local
players from upstream to downstream industries.
5.0 FUTURE EXPECTATIONS
1. Availability of Gas as Feedstock
to Investors
2. Stability of Power Generation
3. Ability of Manpower
4. Developed Downstream Activities
of Petrochemical Industries
5. Developed Downstream
Facilities for Petrochemical
Industries
6. Excellent Condition of Physical
and Supporting Infrastructures
7. Low Level of Local Contractors
Penetration Into The Industry
FUTURE EXPECTATION 1: AVAILABILITY OF GAS AS FEEDSTOCK TO INVESTORS
 Ensure the security of oil and gas supply to Kimanis Power Plant,
SOGIP, SAMUR and Bintulu. This also make the plan to supply gas to
KKIP possible.
 Connecting the gas supply to KKIP will give a competitive advantage
and attract more investors to KKIP.
 Open up the possibility for secondary oil recovery in ERB west and
surrounding fields to support the depleting oil production.
 Open up huge opportunities to the hydrocarbon market and
production of end products.
FUTURE EXPECTATION 2: STABILITY OF POWER GENERATION
Extension of Sabah – Sarawak Gas Pipeline to Kota Kinabalu Industrial Park to Supply Gas
to Power Plant
 The objective of extending the Sabah-Sarawak Gas Pipeline is to make
available natural gas to the Independent Power Producers power
plants and the existing and potential industrial users in the KKIP area
and the areas located in the vicinity of the proposed pipeline e.g.
Papar, Lok Kawi, Penampang and Kota Kinabalu.
Key Outcomes
 Back Up Power Supply
The estimated volume required is 135 mmscfd. With the completion of the extension
pipeline to the existing source of supply would act as a back-up i.e. it would only
supply natural gas whenever there is a shutdown in the Sabah Oil and Gas Terminal.
 Boost of businesses confidence among investors.
FUTURE EXPECTATION 2: STABILITY OF POWER GENERATION (CONT.)
SOGIP Power Plant (200MW)
SOGIP Power Plant will address the immediate needs of electricity
demand in Sabah (especially in Sipitang Oil and Gas Industrial Park
(SOGIP)
Key Outcomes
 Additional 200 MW of cleaner and stable energy supply to the state;
 Reduce the yearly lost from industrial losses RM4.59billion/per year due to
power interruption and boost business confidence of investors to SOGIP;
 Stable power supply;
 Creation of more 300 jobs for Sabahans from top management to supporting
staff during operations and 2,418 jobs during construction; and
 Transfer of technology and knowledge will take place to local manpower and
contractors.
FUTURE EXPECTATION 2: STABILITY OF POWER GENERATION (CONT.)

The Kimanis Power Plants (300 MW ) and Lahad Datu Power Plants (300 MW )
are needed to support the electricity supply to industrial parks and end
consumers in Sabah.
•
Reduced power interruptions in the state with additional 600 MW to the
grid.
•
Address immediate demand and growing needs of electricity.
•
Operations and construction create job opportunities.
FUTURE EXPECTATION 3: ABILITY OF MANPOWER
 Training Centre/Maritime Academy for Oil & Gas Industry (Extension of Universiti
Teknologi PETRONAS in Sabah).
 Human resource development in oil and gas industries is needed to ensure
continuous manpower supply to the oil and gas industries.
 Opportunities for Sabah human capital development especially in skilled (eg.
welders) and semi-skilled workforce. This will contribute job creation during the
construction and job creations for operation.
FUTURE EXPECTATION 4: DEVELOPED DOWNSTREAM ACTIVITIES OF
PETROCHEMICAL INDUSTRIES


Natural Gas is a catalyst to spur the Petrochemical and downstream industries.
PETRONAS’ experiences in Peninsular Malaysia on how natural gas creates
economic spin off in a period of 10 years.
Area
Total investment
Kertih
Gebeng
RM 70 billion
Revenue generated
RM 9.4
billion/year
# direct employees
5000
2000
DEVELOPED OIL PRODUCTS AND USES IN SABAH
LPG & Fuel Gas
Chemicals :
Benzene
Toulene
Jet Fuel
Kerosene
Diesel
Gasoline
Fuel
Bitumen
38
DEVELOPED NATURAL GAS END PRODUCTS IN SABAH
DEVELOPED DOWNSTREAM INDUSTRIES FROM NATURAL GAS
DEVELOPED PETROCHEMICAL DOWNSTREAM INDUSTRIES
DEVELOPED OTHER RELATED INDUSTRIES
Rubber Related Industries
Plastic Industries
Manufacturing Industries
Agriculture Processing Industries
FUTURE EXPECTATION 5: DEVELOPED DOWNSTREAM FACILITIES FOR
PETROCHEMICAL INDUSTRIES
Gas Separation Plant
What is Kimanis GSP?
▪ To design and built an LPG extraction plant
and its export facilities to enhance the value
of Sabah gas at SOGT.
▪ GSP will extract components of natural gas
(i.e. propane and butane) into LPG which
SOGT is not designed for.
▪ Hence, GSP will increase value of the
hydrocarbon resources produced from SOGT
▪ With the growing demand of LPG in Sabah,
GSP will capture the potential GDP.
▪ Current Sabah’s LPG demand : 352 MT/d
which is expected to grow at least 2%
annually
▪ GSP will transmit the LPG via pipeline.
However, other means of transmission will be
considered during the detail feasibility
studies.
FUTURE EXPECTATION 6:
EXCELLENT CONDITION OF PHYSICAL AND
SUPPORTING INFRASTRUCTURES
Worker’s Quarters
Barge Landing
Offshore Oil Platform
Fabrication Yard
Jetty
Port
FUTURE EXPECTATION 6:
EXCELLENT CONDITION OF PHYSICAL AND
SUPPORTING INFRASTRUCTURES (CONT.)
Freight Forwarding
Tank farm
Containers
Storage
Transportation
Warehousing and storage facility
FUTURE EXPECTATION 6: EXCELLENT CONDITION OF PHYSICAL AND
SUPPORTING INFRASTRUCTURES (CONT.)
Freight Forwarding
Tank farm
Containers
Storage
Transportation
Warehousing and storage facility
FUTURE EXPECTATION 6: EXCELLENT CONDITION OF PHYSICAL AND
SUPPORTING INFRASTRUCTURES (CONT.)
Custom clearance
Procurement
Immigration Clearance
FUTURE EXPECTATION 7:
2.0
LOW LEVEL OF LOCAL CONTRACTORS
PENETRATION INTO THE INDUSTRY
PAST DEVELOPMENT
 Local players need Vendor Development Program
specifically for Sabah to develop local players.
 IDS to get assistance from PETRONAS VDP Division to
develop the customised VDP program for Sabah.
PETRONAS leadership and direction for Sabah to
progress into the oil and gas industries.
48
STATE GOVERNMENT INITIATIVE 2:
FORMULATION OF MASTER PLAN FOR PETROCHEMICAL INDUSTRY IN SABAH


The state needs support from PETRONAS to include the State’s Master Plan for Petrochemical Industry in
Sabah be included in the Petronas’ Master Plan.
The Master Plan will include the following: Study, identify and propose downstream development opportunities for gas related, heavy and other
supporting industries suitable for implementation;
 Identify and determine the infrastructure requirements for the selected industrial developments
including utilities and road connections to the current systems outside the boundaries of the Industrial
Park;
 Study the current and future land use of SOGIP;
 Submit engineering design concepts and proposal based on the findings of land use study and soil
investigation works carried out during the study;
 Carry out Strategic Environmental Assessment (SEA) of SOGIP and the adjacent environmental receptors;
 Carry out logistics study for SOGIP;
 Carry out traffic assessment;
 Carry out preliminary topographical site survey;
 Carry out nominal amount of soil investigation for the design of the Park;
 Propose plans and strategies, policies and incentives for the development and implementation of the oil
and gas industries in Sabah; and
 Propose that The state’s need, policy and direction for the industry should be included in the PETRONAS’
master plan.
6.0 THE WAY FORWARD
 The state need greater supports from Petronas (such as the supports
received by Pengerang, Johor or Bintulu, Sarawak.
• Industry experts are forecasting that the real focus of oil and gas
industry is in the southern part of Malaysia (Pengerang, Johor) that
will result in the creation of “Greater Singapore” trading hub
with20 billion plan for Refinery and Petrochemicals Integrated
Development Project (RAPID) to be the biggest oil storage hub.
 The State to aggressively engaging in negotiations with preferred
investors oversea to be partners in equity participation in the upstream
and downstream activities.
 The need a very strong political stand so that the oil and gas industry
will not repeat the history of logging industries and the palm oil
plantations.
 Upstream and downstream activities in the oil and gas should not be
by passing Sabah.
50
Malikai/Ubah Crest
Kebabangan
Gumusut/Kakap
Kimanis
SOGT
Kinabalu
SSGP
Bintulu
51
THANK YOU