The formation of Petronas, Malaysia's national petroleum corporation, in 1974 preceded the transformation of the country's oil and gas industry. Petronas has grown into a fully integrated entity engaged in the full spectrum of the oil and gas industry. The corporation is ranked among the largest and most profitable oil and gas companies in the world, and its operations span more than 30 countries.
In tandem with the transformation of the company, the exploration activities in Malaysia also underwent significant changes.

Evolution of Malaysia's PSC

Malaysia introduced its production-sharing contract (PSC) in 1976 to replace the concession arrangements previously agreed and practiced between the government and foreign exploration companies. Following the PSC's introduction, exploration activities picked up with about US $900 million in investment poured into the upstream sector. Malaysia's petroleum reserve base was raised by 2 billion bbl. About 102,465 miles (165,000 line km) of seismic data were acquired, and 317 exploration wells were drilled in the following 9 years. Still, the upstream industry was dominated by only a couple of major players, and Petronas saw the growing interest in Malaysia's exploration pie by other companies, which were proposing more aggressive exploration plans.

In 1985, Petronas introduced a new PSC, with improvements in the fiscal terms and exploration incentives. The new arrangement attracted companies from the United States, Canada, Europe, Middle East and Asia, with 28 new PSCs signed. By 1997, when the 1985 PSC was replaced by a new arrangement, 274 exploration wells were drilled and $1 billion invested. Nearly 496,800 miles (800,000 line km) of 2-D and 3-D seismic data were acquired and 1.9 billion bbl of new oil reserves were discovered. Oil production rose dramatically from around 430,000 b/d in 1985 to a maximum average production of about 660,000 b/d in 1995. Malaysia is producing about 600,000 b/d of oil and 5,600 MMscf/d of gas.

For Malaysia's deepwater areas, Petronas introduced its Deepwater PSC in 1993. Ten deepwater blocks have been awarded. This involved financial commitments of more than $100 million, work commitments of more than 38,502 miles (62,000 line km) of 2-D and 3-D seismic and 10 exploration wells. Malaysia made its first deepwater discovery earlier this year offshore Sabah, and the prospect of finding more discoveries is high. Two large multiclient 3-D seismic surveys are planned in Sarawak's deepwater open area.

In the shallowwater area, Petronas introduced the revenue over cost (ROC) PSC in 1997 to promote exploration and development of smaller fields. A new batch of independent oil companies, armed with cost-saving and accelerated development strategies, inked partnerships with Petronas to give impetus to the upstream industry. Since the introduction of the ROC PSC, 20 blocks have been awarded with a total exploration financial commitment of $189 million and 65 exploration wells.

The potential for upstream E&P business in Malaysia remains encouraging with a substantial amount of undrilled prospects involving various play types yet to be explored. Deepwater and ultradeepwater exploration, high-pressure/high-temperature drilling, elusive stratigraphic objectives, small and cluster field development and accelerated field development are some examples of new exploration and development efforts. Malaysia is also a politically stable country with well-developed infrastructures. It has adapted to the changing business environment of the oil and gas industry.

More information on exploration opportunities in Malaysia is available at or

Akbar Tajudin Abdul Wahab is the senior general manager of Petronas' Petroleum Management Unit.