THE government needs to plan it future revenue generation around a non-petroleum economy because Malaysian could lose its oil and gas reserves in years to come, economists have said.

However, they added that the country’s economy will not be affected in the long run because it has other sources of revenue.

The economists also believed the government needs to invest in technology outside the oil and gas industry.

University of Cambridge fellow in finance Lim Kim-Hwa said the announcement on oil and gas reserves will not affect Malaysia’s economy because ultimately it is dominated by other revenue producers.

“Oil and gas is one of the key parts, but not the only part.

“For example, look at Saudi Arabia, which is the kingmaker in oil and gas. Yet, it is trying to move away to other ventures. Malaysia also needs to think about it.

“Oil and gas is one element, but the country’s labour force is talented in other aspects as well, so there is a need to grow,” he told The Malaysian Insight.

Last week, Minister in the Prime Minister’s Department Azalina Othman Said said Malaysia’s petroleum reserves would only last for another 15 years.

She said, according to the Reserves Life Index calculation, as of January 1, 2022, Malaysia’s probable and proven reserves of petroleum were equivalent to 6.9 billion barrels of oil.

However, Azalina said the situation could be improved if there were better technology and investments in place, which could stretch reserves over 40 years.

Lim said there are other significant service sectors such as manufacturing and tourism that also contribute to the country’s income.

“We must not carry on doing the same thing, we must upgrade raw material production.

“It is about adopting a sustainable value-added model and looking into alternative sources of petroleum.”

He also agreed with Azalina in terms of using better technology, saying it is always possible to find better sources of oil and gas.

“For example, 15 years ago the United States was not a top oil producer, but now they are one of the world’s largest because of fracking technology.

“The government should also provide the right environment for local entrepreneurs and businesses to grow.”

Lim added that Malaysia is a resource rich country and, if tackled in a sustainable way, the country ought to continue to bring in income by utilising other resources available.

“One of the ways is to add value to existing resources. There must be a need to move up the value chain in terms of utilising raw materials.

“For example, we are not the dominating tin producer but we can add value by using raw materials to be made into end products with high value.”

Lim also said that Azalina’s announcement will not deter foreign investments from coming in. 

He said different companies might invest if they see that there are different pockets for exploration.

“If it is a multinational company, they are not necessarily looking at oil and gas.

“Ultimately, it is down to whether the country provides a good investment environment, because, cheap energy is only one of many determinants of the investment decision.”

Professor Chung Tin Fah of Help University said the government needs to look ahead for alternative sources of revenue, economic activity and prospects.

He said that oil and gas resources are the latest and last known source of major income for Malaysia, after rubber, tin, timber and palm oil.

“At its height, oil contributed 41.3% of government revenue in 2009. 

“Since then, this has fallen to 10-20% depending on oil prices. It is not possible to find an alternative source so quickly without building the capacity. 

“We will remain dependent on oil for some time unless conscious and sustained efforts are made to develop other government revenue contributors.”

Meanwhile, Chung said that investors in the oil and gas industry will look for other alternatives.

“Gas is still a good alternative with a longer lifespan, while petroleum reserves will have a shorter life span as mentioned by the minister of 6.9 billion barrels of oil reserves.

“FDI can be in the non-oil manufacturing industries as Malaysia has comparative advantage in infrastructure (ports and utilities) facilities.

“Other problems like shortages of foreign labour and approval process have been attended to and are slowly being ironed out.”

He also added that Petronas has invested overseas, participating in joint ventures to prospect for oil in other countries.

“It has a presence in more than 30 countries with more than 30 years of experience in oil and gas operations.

“Meanwhile, some of the marginal oil fields in Malaysia can still be profitable with better technology, investments and higher oil prices.

“This is an ongoing process of re-evaluating investments in existing oil fields and marginal fields.”

As the government looks into other prospects, he said that it needs to look into investments in education, infrastructure and technology. – AFP, April 5, 2023.