REGIONALLY and locally, MIDF Research (MIDF) expects that the tariffs would reduce demand for petroleum products, particularly from China, consequently impacting the midstream and downstream divisions.
“Nevertheless, we anticipate that a trade balance would follow suit, given Malaysia’s position as a neutral trade partner,” said MIDF in the recent monthly sector report.
Upstream Oil & Gas Services and Equipment (OGSE) delivered positive financial year 2024 (FY24) financial performance, followed by midstream transportation.
However, other subsectors saw a mixed performance, due to internal changes in operations and projects, delays and impairments; fuelled by volatile oil prices and higher raw material prices.
Meanwhile in Malaysia, upstream saw a renewed interest from investors, in tandem with the recent discoveries of 1bboe of new resources which is expected to contribute to Malaysia’s production targets.
Ongoing advancements in AI tech for upstream activities and higher demand for OGSE is anticipated to support the division moving forward.
Malaysia continues to be one of the major Liquified Natural Gas (LNG) exporters, with approximately RM60.8 mil reached in calendar year 2024 (CY24) or at +127% year-on-year (yoy).
By CY26, Malaysia is anticipated to reach 7.7mTpa of LNG demand domestically by CY26, surpassing current regasification capacity.
However, the risk to LNG remains on the high LNG prices which could increase regasification and transportation cost, as well as limited new entrants in the LNG operations.
Nevertheless, the ongoing development of LNG terminals and pipelines, notably in Sabah and Sarawak, will continue to add value for the sector in the long run.
Malaysia is currently following in tandem with this growth, driven by the National Energy Transition Roadmap (NETR) and the Large-Scale Solar 5 (LSS5) programme.
These initiatives, along with the 800MW Corporate Green Power Programme (CGPP) are expected to unlock RM7.2 bil worth of engineering, procurement, construction, and commissioning (EPCC) projects, in support of Malaysia’s 70% renewables target by CY50.
“On petrochemicals, while feedstock prices remain volatile coming into CY25, we opine that the main driver to its recovery lies in the increasing demand from end-user industries, notably, construction, consumer, automotive and pharmaceuticals,” said MIDF.
However, full recovery is highly likely delayed until the end-year, given the lower polymer prices and continuous oversupply issue.
Malaysia’s upstream oil and gas industry is expected to remain steady over the next 3 years, with high activity levels in key production hubs like Sarawak and Sabah.
The sector is projected to grow from 700kbpd in CY25. Steady progress is expected for ongoing upstream and midstream projects, giving the sector a stable short-term outlook in terms of financial performances, notably for OGSE.
“We opine that there would be a stronger demand for the support industry, which includes offshore support vessels (OSVs), line pipes, and drilling,” said MIDF.
The focus on carbon capture and storage (CCS) solution, offshore wind farms and floating solar are also creating new opportunities for the energy industry.
“All in all, we maintain our optimism in the sector, particularly in the upstream division, with a more cautious outlook for midstream and downstream divisions,” said MIDF.
MIDF reiterates their expectation that Malaysia’s OGSE companies would continue to benefit from the new and ongoing upstream activities, as well as decarbonization, renewables and clean energy solutions.
In the near term, MIDF is expecting the market to keep an eye on the trade tariffs and energy policies, which would highly impact the midstream and downstream.
“We remain cautious on the possible impact of the global economic changes and its impact on the operations of the oil and gas sector, particularly within the ASEAN region and in our local front,” said MIDF. —Mar 17, 2025
Main image: crowcon
