Malaysia's Oil & Gas Industry: Market Outlook 2025

Maturing fields and global competition may challenge the historical stability of Malaysia’s oil and gas industry, but pivoting towards digitalisation, sustainability and partnerships can offer a path to resilience and even growth.

Introduction | Malaysia’s Oil & Gas industry in transition

The Malaysian oil & gas industry remains a significant economic engine, contributing roughly 20% to the national GDP. However, it faces various challenges like maturing oil fields leading to declining production, environmental concerns demanding sustainable practices, and a looming talent gap. This analysis explores the current landscape, key trends, and challenges in this sector, highlighting potential opportunities for telco companies to support the industry’s growth, sustainability, and resilience.

Current Market Landscape (2025) | Robust foundations sustaining steady growth

Market Size and Growth: The Malaysian oil and gas market is expected to grow from 679.38 thousand barrels per day in 2025 to 728.29 thousand barrels per day by 2029, at a compound annual growth rate (CAGR) of 1.40%
Production and Reserves: In 2025, Malaysia’s oil and gas industry is projected to produce approximately 2 million barrels of oil equivalent per day (BOE/d), marking an increase from the 1.79 million BOE/d produced in 2024. The Malaysian oil and gas sector holds Proven Oil Reserves of 3.9 billion barrels, with the majority of the reserves found offshore.
ICT and Related Spending: Malaysia’s oil and gas sector is expected to invest USD 150 million in cybersecurity by 2026. The growth of Malaysia’s oil and gas market is fueled by significant investments in downstream infrastructure, such as Petronas’s USD 16 billion RAPID project in Johor. This facility, with an additional USD 11 billion for associated infrastructure, boosts Malaysia’s status as a key oil refining and storage hub. RAPID, the country’s first refinery to produce Euro V diesel and gasoline, highlights its commitment to environmental sustainability and meeting rising domestic demand. With plans for expanding or building new refineries, the sector is set for continued growth.

Key Trends and Influences | Indicators of an industry on the brink of transformation

Enhanced Exploration and Production
Consolidation and Strategic Mergers
Security and Cyber Risk Management
International Trade and Export Market Growth

Enhanced Exploration and Production:

Malaysia’s oil and gas sector remains heavily reliant on offshore exploration, particularly in the South China Sea and Strait of Malacca. New offshore fields and deeper water exploration are central to boosting reserves and production.
Malaysia has seen a 5-10% increase in oil recovery rates from mature fields due to the adoption of EOR techniques, which has helped prolong the life of existing oil fields.
There is an increasing trend of joint ventures and partnerships between Malaysian National Oil Corporation (PETRONAS) and global players in offshore exploration, particularly with those experienced in deepwater drilling.
Telco Opportunity: Telcos in Malaysia can support the oil and gas sector by providing reliable communication infrastructure for offshore exploration, including satellite, 5G, and IoT connectivity for real-time data transmission and equipment monitoring. They can enhance oil recovery by enabling high-speed data transfer for EOR (Enhanced Oil Recovery) techniques, offering cloud-based analytics, and deploying secure networks for joint ventures. Additionally, telcos can offer telemedicine, remote expert support, environmental monitoring, and AI-driven predictive maintenance to improve operational efficiency and safety. These services align with Malaysia’s trend toward deeper offshore exploration, joint ventures, and technology adoption in the oil and gas industry.

Consolidation and Strategic Mergers:

In recent years, Malaysia’s oil and gas sector has seen over USD 5 billion worth of mergers and acquisitions, with key deals involving Petronas and international players like ExxonMobil and Shell to strengthen offshore capabilities and diversify operations.
Malaysia’s oil and gas sector has seen a steady increase in foreign direct investment (FDI), with USD 1.7 billion in FDI inflows recorded for the year 2023 alone, largely driven by joint ventures and strategic collaborations.
Telco Opportunity: Telcos can facilitate seamless communication and collaboration between domestic and international players, including secure, high-bandwidth connectivity for cross-border operations. They can provide cloud-based solutions to support the integration of acquired assets, data sharing, and joint venture management. For foreign investors, telcos can offer dedicated, secure networks, real-time monitoring, and data analytics platforms to ensure smooth operations and transparency. Additionally, they can enable remote collaboration tools, digital transformation, and secure, scalable infrastructure to accommodate the sector’s increasing demand for advanced technology integration, especially in offshore operations.

Security and Cyber Risk Management:

As the oil and gas industry becomes more digitized, it faces growing cybersecurity risks, including data breaches, cyberattacks on critical infrastructure, and disruptions in operations. Companies are investing in cybersecurity solutions to protect their digital assets and operations.
Malaysia’s oil and gas sector is investing heavily in cybersecurity, with spending expected to exceed USD 150 million by 2026. PETRONAS has reported that it has implemented multiple AI-driven security systems to prevent cyberattacks on critical infrastructure.
Malaysia’s energy sector has faced at least 100 reported cyberattacks over the past two years, highlighting the growing need for robust cybersecurity protocols.
Telco Opportunity: Telcos can provide managed security services (MSS), including real-time threat monitoring, intrusion detection systems (IDS), and firewalls specifically designed for the oil and gas industry’s unique needs. By deploying AI-driven cybersecurity tools, telcos can help detect and mitigate potential cyber threats before they impact operations, aligning with PETRONAS’s approach. Additionally, telcos can offer secure communication networks and private cloud infrastructure to safeguard sensitive data exchanged across various platforms, particularly in joint ventures or cross-border operations. They can also implement end-to-end encryption and multi-factor authentication (MFA) systems to prevent unauthorized access to digital assets. With the sector investing heavily in cybersecurity, telcos can partner to deliver scalable, robust, and compliant solutions that prevent disruptions and ensure business continuity amidst growing cyber risks.

International Trade and Export Market Growth:

Malaysia continues to strengthen trade agreements, especially in the Asian-Pacific region, to expand its oil and gas exports.
Malaysia is the 3rd largest LNG exporter in Asia, with LNG exports in 2024 valued at USD 22 billion, primarily driven by export agreements with China, Japan, and Korea.
Malaysia’s oil and gas industry contributes around 10% of Southeast Asia’s total oil production, with significant export volumes to regional and global markets.
Telco Opportunity: Telcos can offer high-speed, reliable communication networks to ensure smooth coordination between Malaysia and its key trading partners like China, Japan, and Korea. They can provide secure cloud platforms for real-time data exchange, allowing for efficient management of contracts, logistics, and export documentation. Additionally, telcos can offer IoT-based solutions to optimize supply chains, track shipments, and monitor the condition of LNG cargo in transit. With increased trade and export volumes, telcos can help the industry scale by offering dedicated virtual private networks (VPNs) and cybersecurity measures to protect sensitive trade data. Moreover, data analytics and AI-driven solutions can help predict demand patterns, optimize exports, and improve operational efficiency, further boosting Malaysia’s position as a leading LNG exporter in the region.

Industry Challenges | The Bumps on the Road to Transformation

Decline in Oil and Gas Production
Transition to Renewable Energy
Fluctuating Oil Prices
Workforce Shortage and Talent Drain

Decline in Oil and Gas Production:

Challenge: Malaysia’s oil and gas production has been declining in recent years, contributing to lower revenue and output. In Q3 2024, Malaysia saw a 7.3% drop in crude oil and condensate production and a 2.8% decline in natural gas output compared to the same period last year
Impact: Reduced oil revenue and energy supply impacts spending on crucial sectors like education and healthcare, spurring the need for innovation in both new explorations and to facilitate the transition to renewable sources.
Telco Opportunity: Telcos can seize opportunities by diversifying into sectors such as automation, renewable energy, and digital services. Telcos can leverage their infrastructure for cloud services, fintech, and smart cities, capitalizing on Malaysia’s push for digitalization. By facilitating remote work, telemedicine, and providing mobile financial services, telcos can drive growth in emerging markets and contribute to Malaysia’s economic diversification beyond oil and gas.

Rising Operational Costs:

Challenge: Increased operational costs, especially in upstream and downstream sectors, are impacting profitability. In 2023, the Malaysian government allocated RM14.3 billion for fuel subsidies, which was a tenfold increase from RM1.4 billion in 2019
Impact: The growing subsidy burden is unsustainable in the long term and may prompt a reevaluation of the subsidy system.
Telco Opportunity: By providing advanced communication networks, telcos can enable real-time monitoring and automation, reducing the need for manual oversight. They can also offer IoT solutions for predictive maintenance, reducing downtime and repair costs. Additionally, telcos can provide cloud-based data analytics and AI-powered tools that help oil and gas companies optimize resource management, energy consumption, and logistics, further driving cost reductions and improving operational efficiency.

Fluctuating Oil Prices:

Challenge: The volatility of global oil prices poses a challenge for Malaysia, as oil revenue is a significant part of the national income. In 2024, Brent crude prices fluctuated between USD 80 and USD 95 per barrel, and these variations impact the stability of Malaysia’s fiscal policies and revenue projections.
Impact: Dropping oil prices can lead to reduced revenue for oil and gas companies, making it harder to fund exploration, development, and maintenance projects.
Telco Opportunity: By strengthening network infrastructure and offering business intelligence, telcos can enhance resilience and adaptability, enabling oil and gas companies to navigate market volatility more effectively.

Workforce Shortage and Talent Drain:

Challenge: The Malaysian oil and gas industry faces a shortage of skilled labor, especially in specialized fields like offshore engineering and deepwater exploration. According to the Malaysian Oil & Gas Services Council (MOGSC), there is a shortage of over 10,000 skilled workers in the oil and gas sector, especially in technical roles such as subsea engineers, geoscientists, and offshore rig workers.
Impact: Malaysian oil and gas industry is facing a growing workforce shortage and talent drain, exacerbated by an aging workforce, limited STEM talent, and challenges in attracting younger professionals. This results in higher labor costs, lower productivity, and difficulty in maintaining operations at optimal levels.
Telco Opportunity: Through the implementation of AI, IoT, and automation, telcos can help oil and gas companies optimise maintenance, improve monitoring, and reduce human error, lessening the immediate reliance on skilled labor. Additionally, telcos can enable remote training platforms and virtual collaborations to bridge the knowledge gap, allowing industry workers to gain skills more efficiently without the need for extensive travel or in-person training

Key Takeaways | Collaboration Wins

Enhanced Exploration and Production: Malaysia’s oil and gas industry is focusing on offshore exploration in key regions like the South China Sea. EOR techniques have improved oil recovery rates by 5-10%, helping extend the life of mature fields.
Trade & Export Market Growth: Malaysia is the 3rd largest LNG exporter in Asia, with exports projected to reach USD 22 billion in 2024. Malaysia’s oil and gas industry contributes to 10% of Southeast Asia’s total oil production.
Cybersecurity Investment: With rising digitalization, Malaysia’s oil and gas sector is ramping up cybersecurity spending to safeguard critical infrastructure. Malaysia’s oil and gas sector is expected to invest USD 150 million in cybersecurity by 2026.
Workforce Shortage: Malaysia faces a shortage of 10,000+ skilled oil and gas workers, opening opportunities for automation, remote training, and digital solutions.

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