Malaysia is a significant Southeast Asian producer of oil and natural gas, although proven oil reserves have declined in recent years. According to Oil & Gas Journal (OGJ), Malaysia held proven oil reserves of 3.0 billion barrels as of January 2007, down from a peak of 4.6 billion barrels in 1996. The majority of the country's oil reserves are located off the coast of peninsular Malaysia, and tend to be of high quality. According to OGJ, Malaysia held 75 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2007. While much of the country's oil reserves are found off Peninsular Malaysia, much of the country's natural gas production comes from Eastern Malaysia, especially offshore Sarawak.
Malaysia's national oil company, Petroleam Nasional Berhad (Petronas), dominates upstream and downstream activities in the country's oil sector. Petronas is the only remaining wholly state-owned enterprise in Malaysia, and is the single-largest contributor of government revenues. Petronas holds exclusive ownership rights to all exploration and production projects in Malaysia, and all foreign and private companies must operate through Production Sharing Contracts (PSCs) with the national oil company.
The earliest officially recorded oil find in Malaysia was made in July 1882 by the British Resident of the Baram district in Sarawak. The oil was used by the local residents for medicinal purposes and later for lighting lamps and waterproofing boats. Commercial exploitation only began in 1910 when the Anglo-Saxon Petroleum Company, the forerunner of the present Sarawak Shell which was granted the sole right to explore for petroleum in Sarawak, struck oil in the town of Miri, marking the start of the Malaysian petroleum industry. The Miri success encouraged further attempts to discover other onshore fields. However, only traces of petroleum were found, and these were not large enough to justify drilling activities.
Consequently, by the 1950s, attention turned to the seas. This was made possible by new improvements in offshore petroleum technology. Marine seismic surveys were carried out for the first time in Sarawak in 1954. The shift offshore began to show results in 1962 with the discovery of oil in two areas offshore Sarawak. Other finds followed in rapid succession. In Peninsular Malaysia, petroleum exploration activities began in 1968 and the first oil field was discovered in 1971.
As in many other developing countries, oil companies in Malaysia had been operating under what was known as a concession system. Under this system, large areas were made available to oil companies under very generous terms and the Government retained very little control. In return for these concessions, the oil companies paid a small royalty and taxes to the Government.
During the Israeli war in 1973, several Arab oil-producing countries decided to stop oil shipments to certain countries. As a result, there was a mad rush for oil, prices shot up overnight and the world experienced its first energy crisis. The 1973 oil embargo also made oil producing countries of the world realise the importance of controlling their own petroleum resources.
In Malaysia, it led to the promulgation of the Petroleum Development Act in 1974 and the formation of a national oil company to ensure that the nation's petroleum resources could be developed in line with the needs and aspirations of the nation. Article 2 of the Act vests the entire ownership in, and the exclusive rights, power, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia in PETRONAS.
PETRONAS, the acronym for Petroliam Nasional Berhad, was incorporated on 17 August 1974 under the Companies Act 1965. It is wholly-owned by the Malaysian government and is vested with the entire ownership and control of the petroleum resources in Malaysia through the Petroleum Development Act 1974. Over the years, PETRONAS has grown to become a fully-integrated oil and gas corporation and is ranked among FORTUNE Global 500's largest corporations in the world. PETRONAS has four subsidiaries listed on the Bursa Malaysia and has ventured globally into more than 32 countries worldwide in its aspiration to be a leading oil and gas multinational of choice.
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