In a move that is raising eyebrows across the global oil industry, ConocoPhillips has quietly exited a massive deepwater oil project off the coast of Malaysia, walking away from what was supposed to be a major new production hub.
The project, called Salam-Patawali, was a 50-50 joint venture between ConocoPhillips and Malaysia’s national oil company, Petronas. It was discovered back in 2018 and expected to cost more than three billion dollars to develop. Production was projected to peak in 2028 and stretch well into the 2060s. Now it looks like those plans are crumbling.
ConocoPhillips’ withdrawal, first reported by Upstream Online earlier this month, has barely made a ripple in Malaysia’s local press. But industry insiders close to the deal confirmed the move, citing a broader internal review of the company’s strategy in Malaysia. Beneath that official explanation, however, is a deeper story about political uncertainty, regulatory battles, and rising tensions that are starting to make foreign investors very uneasy.
At the center of the drama is a power struggle between Petronas and the state government of Sarawak. Sarawak’s leaders, led by Premier Abang Johari Openg, believe the state should control its own oil and gas resources. They have created their own oil company, Petroleum Sarawak, known as Petros, and they are pushing to take back what they see as their rightful share of Malaysia’s energy wealth.
Petronas, on the other hand, has long held a national monopoly, established by the Petroleum Development Act of 1974. Under that law, Petronas was given exclusive rights to develop all of Malaysia’s hydrocarbons. For decades, the arrangement was unquestioned. But Sarawak is now arguing that a much older colonial-era law gives the state full control over any oil and gas found within 200 nautical miles of its shores.
This fight has made Malaysia’s oil and gas sector a lot less stable in the eyes of foreign companies. Industry veterans say that for firms like ConocoPhillips, the uncertainty is just too great. Rather than get tangled in political disputes, it is easier to shift focus elsewhere. Sources say the company is now putting its energy into projects in neighboring Sabah, where the political environment is more predictable.
The implications for Sarawak’s economy are serious. Losing ConocoPhillips from the Salam-Patawali field is a major setback. It could also discourage other foreign companies from investing in the state’s oil and gas future.
Thailand’s PTTEP, another big regional player, has already put its $6 billion Lang Lebah project off Sarawak’s coast on hold. While officials say they are “reengineering” the project for economic reasons, industry insiders suggest the political mess in Sarawak played a role in that decision too.
The political fight is even spilling into the courts. Earlier this month, a former Petronas manager was charged with trying to leak confidential company information, a rare case of alleged corporate espionage in Malaysia. Authorities say the leaked documents detailed sensitive upstream performance figures and that the information could have benefited Petros in its efforts to challenge Petronas.
The situation has even reached the desk of Malaysia’s Prime Minister Anwar Ibrahim. Despite closed-door meetings and attempts at negotiation, neither Petronas nor Sarawak’s leaders are backing down. Talks have stalled and both sides are holding firm.
The heart of the issue is simple. Sarawak controls nearly two-thirds of Malaysia’s proven petroleum reserves and accounts for about 90 percent of the country’s liquefied natural gas exports. With that kind of leverage, state leaders believe they deserve a bigger role in managing their own resources. But without Petronas’ technical expertise, deep pockets, and international connections, developing those resources on their own will be a steep climb.
Petros, Sarawak’s young oil company, is growing but still lacks the experience and technology that Petronas’ exploration arm, Carigali, has built up over decades. As one Kuala Lumpur-based oil executive put it, without Petronas in the mix, Sarawak’s energy companies are not seen as strong or reliable partners by major international players.
This leaves Sarawak facing a critical challenge. Can the state quickly find new partners willing to develop the Salam-Patawali field? Or will the project sit idle, a casualty of political ambitions outrunning practical realities?
Meanwhile, ongoing projects like the Bintulu gas facility remain operational, but tensions are beginning to affect business decisions across the region. In one case, Shell’s Malaysian subsidiary obtained a court order allowing it to temporarily suspend payments tied to gas supply agreements while the legal disputes between Petronas and Petros get sorted out.
For folks back here in Texas, the Sarawak story might seem like a world away, but it is a sharp reminder of how fragile energy development can be when politics get in the way. Deepwater fields like Salam-Patawali were supposed to be part of the future supply pipeline that would feed global LNG markets, including major buyers in Asia. If fields like this one fall off the map, it tightens the supply picture and can ripple all the way back to prices at home.
Energy investment thrives on certainty and stability. Without them, even the richest offshore fields can sit untouched for decades.
Malaysia now finds itself at a crossroads. If the fight between Petronas and Sarawak drags on much longer, the damage to investor confidence could be lasting. For Sarawak, winning more control over its resources could come at the cost of seeing those resources stay locked in the ground.
