By Datuk Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: The Sipitang Oil and Gas Industrial Park (SOGIP) stands as a transformative industrial initiative and a cornerstone of Sabah’s economic development strategy.
With a remarkable RM66.38 billion in committed investments and the potential to generate up to 30,000 jobs, SOGIP represents significant promise for catalysing regional industrial growth. It is important to recognise, however, that its impact is concentrated within the energy and heavy industry sectors rather than serving as a blanket solution for broader economic diversification.
Strategic Infrastructure and Industrial Capacity
Encompassing 5,539 acres—including 3,068 acres of reclaimed land and 2,471 acres of designated sea area—SOGIP is established as Southeast Asia’s largest integrated maritime industrial complex. Its advanced infrastructure features deep-water berths with depths of 16 to 25 metres, specifically engineered to accommodate Very Large Crude Carriers and other substantial vessels.
This capability positions SOGIP as a critical node in regional energy logistics, connecting Sabah’s natural resources to international markets whilst supporting downstream processing activities.
Situated some 140 kilometres from Kota Kinabalu in the Sipitang district, the park benefits from a strategic location along major shipping lanes and proximity to the Pan Borneo Highway, substantially reducing transportation costs and enhancing connectivity. Its position within the naturally sheltered Brunei Bay further offers protection for maritime operations while maintaining easy access to regional markets.
Development Through International Partnerships and Key Projects
SOGIP has successfully attracted collaborations with major international energy corporations, including ConocoPhillips, Pertamina, INPEX Malaysia, TotalEnergies, Shell Malaysia, and PTTEP Malaysia. These partnerships underscore the facility’s integration into global energy value chains and affirm its potential to elevate Sabah’s role from a mere resource provider to a recognised industrial processor.
A prime example is the partnership with Gibson Shipbrokers Limited on the RM8.88 billion Energy Hub project. This venture combines Malaysian strategic assets with British maritime expertise to develop cutting-edge port facilities that will bolster energy transportation and regional trade activities.
The Hub will include refinery capacity of 150,000 barrels per day and storage for 3 million cubic metres of crude oil and petroleum products, emphasising local workforce development with an 80% local employment target.
The Esteel green steel project represents the largest single investment within SOGIP, amounting to RM31 billion across three phases. Utilising natural gas as a reducing agent instead of traditional coke and coal, the project aims to achieve a 70% reduction in carbon emissions whilst maintaining commercial viability. Construction accelerated noticeably in 2025, with China Communications Construction Company (CCCC) appointed as the joint tender contractor.
In the petrochemical sector, the RM4.6 billion SAMUR project, operated by Petronas Chemical Fertilizer Sabah Sdn Bhd, is the largest single-train granular urea facility in Southeast Asia. SMJ Energy holds a 25% equity stake in the complex, exemplifying successful state participation in downstream processing activities that add significant value beyond basic resource extraction.
Further enhancing its logistics capability, the Petroventure oil storage project involves a RM3.5 billion investment for a facility designed to store 1.5 million cubic metres of crude and petroleum products. This venture strengthens SOGIP’s role as a key trading and blending hub for the region.
Enabling Infrastructure: The Integrated Power Plant
A critical enabling component is the dedicated power generation facility being developed to meet the immense energy demands of SOGIP’s tenants. This RM2 billion plant, developed by a consortium led by Sabah International Petroleum in partnership with Ranhill Utilities Berhad, is planned for a capacity of 400-450 MW using efficient Combined-Cycle Gas Turbine technology fuelled by natural gas.
By providing reliable and cost-effective electricity exclusively for the park, the power plant eliminates the risk of power shortages that could hamper operations of energy-intensive tenants. Its location within the complex eliminates the need for long-distance transmission lines, ensuring reliability and reducing energy losses. This strategic infrastructure enhances Sabah’s attractiveness against other industrial locations in the region and relieves pressure on the state’s main grid.
Alignment with Sabah’s Broader Economic Strategy
SOGIP’s development aligns with the implementation period of the Sabah New Economic Model (SNEM), which spans from 2025 to 2030. The model was introduced to address fundamental structural challenges during a period of modest economic performance—including GDP growth of just 1.1% in 2024 and an unemployment rate of 7.7%. The model’s strategic approach focuses on securing an equitable revenue settlement under the Malaysia Agreement 1963 (MA63), accelerating infrastructure development, and building a digitally connected, industrially diverse economy.
SOGIP contributes directly to SNEM’s objectives through industrial diversification within the energy sector, foreign investment attraction, and the development of local technical expertise. Supporting this strategy is SMJ Energy, the state’s energy arm, which reported a profit after tax of RM362 million in 2024, a 40% increase from 2023. The company holds significant stakes in multiple energy ventures and continues to expand its portfolio.
The ongoing MA63 revenue settlement negotiations represent a crucial element of Sabah’s economic strategy. The state’s pursuit of its constitutional claim to 40% of federal revenue collected in Sabah, suspended since 1974, could significantly enhance its fiscal capacity for development programmes.
Workforce Development and Regional Integration
SOGIP’s employment impact extends beyond immediate job creation to encompass comprehensive human capital development. Skills development initiatives include structured training programmes designed to meet the technical and vocational demands of advanced industrial operations.
The establishment of the Sabah Local Content Council through SMJ Energy represents a transformative approach to local participation in Malaysia’s oil and gas sector. Following extensive research and verification, the council’s ambitious workforce development targets reflect a comprehensive strategy designed to ensure Sabahans benefit directly from the state’s abundant hydrocarbon resources whilst building sustainable technical capabilities for long-term industrial growth.
The Sabah Local Content Council, launched on 18th May 2024, operates under a clear policy framework targeting 100 per cent of non-technical positions and at least 80 per cent of technical roles in the oil and gas services and equipment sector to be filled by Sabahans. Alongside workforce targets, the policy establishes 30 per cent of all OGSE spending within Sabah to be awarded to qualified Sabahan companies.
This represents a significant departure from the initially referenced “80:30 ratio” – the verified targets are 100 per cent non-technical and 80 per cent technical positions alongside 30 per cent contract allocation. These ambitious targets reflect the state government’s commitment to ensuring local participation extends beyond peripheral activities to encompass core technical operations within the industry.
The framework builds upon remarkable growth in local participation, with contracts awarded to Sabahan companies surging from RM341 million in 2021 to over RM2 billion by 2024. This six-fold increase demonstrates existing momentum whilst establishing foundations for more structured local content development through the council’s coordinated approach.
The council operates under the chairmanship of Terry Biusing, SMJ Energy’s OGSE and Corporate executive director, with comprehensive stakeholder representation from government bodies, Petronas and its group companies, prominent oil and gas operators including PTTEP Sabah, Hibiscus Petroleum Berhad, Shell Malaysia, Kebabangan Petroleum Operating Company, and local OGSE associations such as the Sabah Oil and Gas Services Council and Persatuan Kontraktor Petroleum Bumiputera Sabah.
This collaborative structure ensures industry requirements align with local capacity building initiatives whilst maintaining operational standards essential for international competitiveness. The council’s coordination role extends beyond policy implementation to encompass practical support for local companies seeking to meet stringent industry standards through strategic partnerships and capability development programmes.
Key initiatives include the Joint Task Force for Mandatory Partnerships and the Kinabalu Activity Outlook, providing three-year forecasts of upstream, downstream, gas, and maritime activities to enable local companies to prepare strategically for emerging opportunities. These systematic approaches demonstrate commitment to sustainable capacity building rather than ad hoc development programmes.
This focus is yielding results: the oil and gas services sector achieved a 143% revenue growth from 2021 to 2023, with contract values awarded to Sabahan companies rising from RM613 million in 2021 to RM2 billion in 2024.
Environmental Sustainability and Concluding Assessment
SOGIP’s development incorporates a focus on environmental sustainability through cleaner energy technologies and advanced processes. The Esteel project’s use of natural gas exemplifies industrial decarbonisation, achieving a 70% reduction in emissions. Environmental management systems within the park utilise advanced technology for waste processing, underscoring a commitment to sustainable industrial practices.
In conclusion, SOGIP represents a monumental leap in Sabah’s industrial development, demonstrably succeeding in attracting major international investment and establishing advanced processing capabilities. Its contributions to investment, employment, and technical capacity make it a crucial component of the state’s economic transformation.
Strategically located within the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), SOGIP is positioned to serve regional markets with a combined GDP of USD 401.6 billion. The subregion recorded merchandise trade exceeding USD 166 billion in 2023, with cumulative foreign direct investment inflows of USD 93.4 billion from 2017 to 2023.
However, stakeholders should maintain realistic expectations regarding its scope. SOGIP’s value lies not in broad-based diversification, but in concentrated industrial excellence within the global energy economy. Its success underscores the necessity for complementary initiatives that address the broader economic development objectives outlined in the Sabah New Economic Model and the MA63 negotiations, ensuring that its gains contribute to a balanced and sustainable future for all of Sabah.
