Speaking to FMT, senior consultant Samirul Ariff Othman explained that a mix of local and international challenges motivated the recent ConocoPhilips exit from the Salam-Patawali project.
The US oil major’s exit from Salam-Patawali comes months after another foreign oil and gas company, Thailand’s PTTEP, shelved the Lang Lebah gas project until 2026.
Industry observers point to the ongoing regulatory uncertainty caused by the unresolved Petronas-Petros settlement as causing this two-year delay, as reported by Scoop.
“While each project has unique challenges, the back-to-back cancellations suggest a potential emerging trend influenced by economic pressures and regulatory uncertainties,” Samirul from Global Asia Consulting said.
In 2025, an ongoing trade war between the United States and various countries has triggered other economic risks. These include fears of inflation and recession, as well as falling oil prices.
“Fluctuating global energy prices and economic uncertainties can impact investment decisions in large-scale O&G projects. The combination of rising costs, global market volatility, and unresolved local disputes may lead other investors to reassess their commitments in the region.”
Jamil Ghani, a former analyst with the Malaysia Petroleum Resources Corporation, told FMT that regulatory clarity is of utmost importance to stabilise Malaysia’s business environment.
“Regulatory uncertainty—especially the unresolved role of Petros as the state’s designated gas aggregator—risks amplifying investor anxiety.
“Although Petronas has confirmed that discussions with Petros are ongoing, ambiguity around intermediary or middleman arrangements undermines confidence at a time when national cohesion is critical,” Jamil said, referring to the federal government’s insistence that Petronas’ contracts remain untouched with no middleman involved.
Amid a challenging global environment, he stressed that Malaysia cannot afford the perception of internal disunity—least of all in its strategic energy sector.
“If Petronas is to remain a bulwark of national stability, policy cohesion and operational continuity must take precedence,” Jamil added. “That means Sarawak and the federal government must urgently stabilise the current dispute for the economic resilience of an entire nation.”
Long-term regulatory clarity is crucial for attracting and retaining foreign partners in Malaysia’s upstream sector.
“Disputes like the one between Petronas and Petros over gas distribution rights create uncertainty, making it challenging for investors to make informed decisions,” Samirul told FMT.
“Clear and stable fiscal terms, along with consistent enforcement of production sharing contracts, are essential to maintain investor confidence.”
Challenges ahead
According to Upstream, the Salam-Patawali was not a large project but a pivotal one considering Malaysia’s ambitions to raise oil and gas production. The standalone development, which involved a floating vessel capable of handling over 100 million cubic feet of gas, was well-supported by Petronas.
According to Upstream Online, Petronas is keen to continue the project but cannot take it forward alone for the time being due to lack of capacity.
Pritish Bhattacharya, a research officer at Singapore’s ISEAS-Yusof Ishak Institute, told FMT that Sarawak’s push for oil and gas autonomy has put Petronas’s monopoly at risk, with broader repercussions for the national economy and local industry.
Pritish said the implications for the overall Malaysian economy are still “very hard to quantify”.
“(On the other hand), the potential loss of Petronas’s resource access will create spillover challenges for international oil companies that are accustomed to centralised dealings,” he said.
This will be a concern especially in terms of foreign investments. These investors have essentially dealt only with Petronas in their dealings in Malaysia, and it could complicate matters if they now have to work with Petros.
Jamil told FMT that the sector’s domestic value chain is wide and vulnerable. According to the statistics department, there were 2,894 establishments engaged in oil and gas services and equipment activities as of the latest census.
“Many of these firms are heavily reliant on Petronas contracts and capital expenditure,” Jamil said, besides the international O&G companies who also depend on partnerships with Petronas to realise investments.