Malaysia’s petroleum-sector risk increases post-election, though regional attractiveness remains
The surprising victory by Hope's Pact (Pakatan Harapan: PH) in Malaysia's May 2018 general election represents a deepening trend of contested and fractured political power in the country, a transformation that is likely to be sustained well into the 2020s. This increased national influence has allowed Sabah and Sarawak, Malaysia's foremost oil and gas producing states, to push for a larger share of revenues from, and greater control of, their upstream sectors, adding risk to investments in Malaysia's petroleum sector.
IHS Markit's Oil & Gas Risk team has therefore reduced Malaysia's ranking for petroleum-sector investment in 2019. However, we continue to believe in Malaysia's relative regional attractiveness for petroleum-sector investment.
Figure 1: Changes to Malaysia's Oil and Gas Risk Score in 2018
Malaysia's increased risk comes in response to our expectations that the new government will seek to find a balance between policies that grow its crucial political support base in Sabah and Sarawak via policies that encourage upstream investment, an important source of revenue. Rebalancing government priorities is likely to be a lengthy process. It is the uncertainty - rather than known policies that discourage E&P investment - that add to Malaysia's risk profile.
Indeed, the complexity of the issues in question, combined with the desire of all major parties to win seats in Sabah and Sarawak in future elections, suggest that these considerations are likely to stretch beyond the term of the new government, extending upstream policy uncertainty in these states, regardless of who is in power.
Figure 2: Select Oil and Gas Risk Scores: Far East and Australasia.
Rachel Calvert is a Research & Analysis Associate Director in IHS Energy's Petroleum Sector Risk team, which specializes in forecasting and benchmarking above-ground risks to the upstream sector.
David Gates is a consultant to IHS Energy, primarily the Petroleum Sector Risk team, where the focus is forecasting and benchmarking above-ground risks to the upstream sector.
- Understanding oil and gas opportunities in the North Sea
- India’s southwest monsoon: A fuel interplay attracting trading opportunities
- Managing Physical Records during Upstream Mergers and Acquisitions
- Widening Chinese transport fuel surplus to pressure Asian region
- Permian drillers are likely approaching the limits of well-productivity growth - at least with the current set of technologies
- Record strong propane builds following the shift in the summer curve. Will it continue?
- Gas supply growth in North America driven by Appalachia
- Gas Storage in China: When will the bottleneck be resolved?
Population growth, less arable land, and sustainability driving demand for controlled-release fertilizers. China a… https://t.co/UyZcz0nUEZ
Our Second Quarter and Year-to-Date 2018 Financial Performance saw broad-based organic revenue growth across… https://t.co/KyAhvE2AvL