Malaysia: the oil nation
next door

Oil seeps around Miri had been known for generations — locals skimmed it for caulking boats and lighting lamps. In 1910, Sarawak Oilfields Ltd, a Shell subsidiary, spudded Miri Well No. 1 on Canada Hill, striking oil on 10 December at a depth of about 130 metres. By modern standards it was barely a scratch — the platform well in part one goes twenty times deeper — but it was enough.

Miri boomed from fishing village into Malaysia's first oil town, and the well itself, affectionately nicknamed the Grand Old Lady, kept pumping until 1972. The Miri field ultimately gave up some 80 million barrels — and Sarawak's identity as an oil province was set for the next century.

The rig still stands on Canada Hill today as a protected monument, next to a petroleum museum — a 30-metre steel ancestor of every platform now standing off the Borneo coast.

Until 1974, foreign majors — Shell and Exxon above all — held Malaysia's oil under old-style concessions. Amid the first global oil crisis, Parliament passed the Petroleum Development Act, vesting the entire ownership of the nation's oil and gas, onshore and offshore, in a single state company: Petroliam Nasional Berhad — Petronas, incorporated in August 1974.

The majors didn't leave; the relationship changed. Under production sharing contracts they became contractors, exploring and producing at their own risk in exchange for a share of the barrels, with Petronas as owner, regulator and partner at once. It became one of the developing world's most studied models of resource nationalism done pragmatically.

The company grew into Malaysia's corporate flagship: the only Malaysian name on the Fortune Global 500 (ranked 216th in 2022), operating in dozens of countries, its dividends a pillar of the federal budget — and its headquarters, the Petronas Twin Towers, briefly the tallest buildings on Earth.

Offshore Sarawak is gas country — today the state produces close to 4 billion cubic feet per day, more than any other part of Malaysia. But gas, unlike oil, can't just be poured into a tanker. The solution was LNG: cool the gas to −162 °C until it becomes a liquid one six-hundredth of its volume, then ship it in insulated carriers to power stations in Japan, Korea, China and Taiwan.

The Petronas LNG complex at Bintulu — built in stages as MLNG Satu, Dua and Tiga from the early 1980s onward — grew into one of the largest single-site LNG operations in the world: nine processing "trains" with roughly 30 million tonnes per year of capacity, fed by a web of offshore pipelines converging on one stretch of Sarawak coast.

It reshaped the economics of the state: for four decades, most of the molecules coming out of Sarawak's seabed have left the country as super-chilled liquid from this one port — which is exactly why the question of who controls Sarawak's gas (see the final dispatch) matters so much.

Everything in Malaysian waters had been shallow-shelf drilling — jackets standing on the seabed, like the platform in part one. Kikeh, discovered by Murphy Oil in 2002 in about 1,320 m of water, changed the game. First oil came in August 2007, ramping toward 120,000 barrels per day, and the engineering was a string of firsts: the first spar platform ever installed outside the Gulf of Mexico, feeding an FPSO moored nearby.

Kikeh proved the deepwater Sabah trough worked, and the giants followed: Shell's Gumusut-Kakap, a semi-submersible production platform, and Malikai, a tension-leg platform — each one a different answer to the same problem of producing oil where no steel tower can reach the bottom.

Deepwater Sabah now anchors Malaysia's oil future: the state produces around 70,000 barrels of oil per day plus some 800 million cubic feet of gas, and redevelopments like Gumusut-Kakap's later phases are central to Petronas's plan to hold national output at two million barrels of oil equivalent a day.

Producing crude is only half an oil nation's ambition; the other half is refining it into fuels and plastics at home. The Pengerang Integrated Complex in southeastern Johor — anchored by the RAPID refinery — was Petronas's answer: a roughly $27 billion development across more than 6,000 acres, with a 300,000-barrel-per-day refinery feeding steam crackers and petrochemical plants.

Saudi Aramco bought in as a 50:50 partner in the core refinery and cracker ventures — a marriage of the world's biggest crude exporter with Southeast Asia's most strategic location, a short sail from Singapore's trading hub. In 2026, the story turned again: Petronas agreed to buy out Aramco's stakes, taking full control of the complex.

For a beginner, Pengerang is the "downstream" column of the industry made concrete: the same barrel you watched rise through the casing in part one ends its journey in a place like this, leaving as diesel, jet fuel or the raw material of plastics.

The easy, clean gas went first; what's left offshore Sarawak often comes with a heavy dose of carbon dioxide that must be stripped out before the gas can become LNG. Venting that CO₂ to the sky is increasingly unacceptable — so at Kasawari, Petronas built something new: a dedicated offshore platform that captures up to 3.3 million tonnes of CO₂ a year at the field itself.

The captured CO₂ is compressed and sent down a 138-km subsea pipeline to be injected into the depleted M1 reservoir — a spent gas trap put back to work as a vault. Over the project's life, some 71–76 million tonnes are expected to go back underground, making it the largest offshore CCS development in the world by volume captured.

It is a preview of the industry's next act everywhere: the same geology, wells and platforms you learned in part one, run in reverse — pumping carbon down instead of hydrocarbons up.

Sarawak produces most of Malaysia's gas, and its state-owned company, Petroleum Sarawak Berhad (Petros, founded 2017), wants a commensurate say. Invoking its own Distribution of Gas Ordinance, the state pushed for Petros to become the sole gas aggregator in Sarawak — the buyer and seller of gas within the state — a role that analysts estimate could shift up to RM20 billion a year in value from Petronas.

Through 2025 the dispute moved between courtrooms and leaders' meetings. A joint declaration signed by the Prime Minister and Sarawak's Premier in May 2025 affirmed Petros as sole aggregator for gas within Sarawak — while carving out LNG exports, the crown jewels of Bintulu — and declared that the federal PDA and Sarawak's ordinance can coexist. Legal skirmishes over what that means in practice have continued into 2026.

For a newcomer, it is the freshest possible reminder that petroleum is never just geology and engineering. Every barrel and every molecule of gas sits under three overlapping maps: the rocks, the contracts, and the constitution.