When The Wells Fade What Will Fuel Malaysia S Future

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Letter to Editor
FOR decades, the story of Malaysia’s economic development has been written in oil and gas. Petronas, the national oil company, has been more than an enterprise; it has been a sovereign wealth fund, a nation-builder, and a symbol of national pride.
Its dividends have paved our roads, built our schools, and fuelled our ambitions. But what happens when the well, if not running dry, becomes far less generous?
This is the critical question posed by the insightful work of Pritish Bhattacharya and Francis E. Hutchinson in their paper, “Malaysia’s Oil and Gas Sector: Constant Expectations despite Diminishing Returns.”
Their findings are a stark warning: Malaysia’s fiscal and economic model is dangerously addicted to a resource in decline, and we are in collective denial.
The central, and most alarming, finding is the yawning gap between diminishing returns and constant expectations. On one hand, the easy oil is gone. Our major basins are mature, production costs are rising, and new discoveries are smaller and harder to reach.
The shift towards less lucrative gas and the need for complex Enhanced Oil Recovery (EOR) techniques mean the state earns less for every barrel extracted. Compounding this, the global energy transition threatens to strand these assets altogether, diminishing their long-term value.
On the other hand, the expectation that Petronas will forever be the government’s ATM remains utterly unchanged. The paper highlights how the company is routinely called upon to cover fiscal shortfalls, bail out struggling state-owned enterprises, and fund massive development projects.
This is not a sustainable strategy; it is a form of national consumption of our capital, eating the seed corn needed for future harvests.
This leads to the second major finding: the governance paradox. Petronas is a commercial giant caught in a political web. The paper argues that the constant demand for dividends discourages the very investment needed to ensure its future—both in exploring new fields and, crucially, in pivoting towards renewables and new energy.
The company is being squeezed between its mandate to be profitable and its duty to fund the national budget. This stifles innovation and long-term planning, locking Malaysia into a sunset industry.
So, what is to be done? Bhattacharya and Hutchinson’s work is not just a diagnosis; it is a prescription for a sobering intervention.
First, we must break the fiscal addiction. The government must wean itself off oil revenues through urgent, credible fiscal reforms. This means expanding the tax base, such as through the proposed Capital Gains Tax, and cutting wasteful expenditure.
The political will for this has always been weak because the Petronas cheque was an easy way out. That cheque is getting smaller, and the time for courage is now. Second, we must liberate Petronas to become a future-proof energy company.
Instead of milking it for cash, we must empower it to invest aggressively in the energy transition—in hydrogen, carbon capture, and renewables. It has the capital and the expertise; what it needs is a political mandate to reinvest its profits into securing Malaysia’s place in the new energy economy, not just the old one.
Finally, there is a broader economic imperative. We have had decades to use oil wealth to build a diversified, resilient economy powered by high-tech industries and services. The success is partial. The paper serves as the final alarm bell: the grace period is over.
We must double down on education, innovation, and creating a business environment that thrives on ideas, not just hydrocarbons. The message from Bhattacharya and Hutchinson is clear: the age of easy oil is over. Our expectations, however, have not changed.
This disconnect is our greatest national risk. It is time to listen to the data, manage our expectations, and finally build an economy that can thrive even after the last drop of oil is pumped. 
Our future prosperity depends on it. The authors are right. It’s time for a new national story. Some have suggested looking at the country’s rare earths deposits to take over the role of oil and gas. Many see the deployment of a similar Petronas model is worth investigating. It would be a big mistake if each state ventures on their own! 
Professor Dato Dr Ahmad Ibrahim is an Adjunct Professor at the Ungku Aziz Centre for Development Studies, Universiti Malaya. 
The views expressed are solely of the author and do not necessarily reflect those of  MMKtT.
- Focus Malaysia.

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