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 divergent paths taken by Sarawak and Sabah in managing their oil and gas resources are not merely strategic choices made in isolation, but rather logical outcomes rooted in decades of distinct historical experiences, industrial development patterns, and accumulated human capital.
Understanding these historical foundations reveals why Sabah’s collaborative approach with PETRONAS is not only pragmatic but necessary and why attempting to replicate Sarawak’s autonomous model would be both unrealistic and potentially counterproductive.
Sarawak’s Historical Advantage:
The Foundation of Confidence
The Miri Legacy: Century-Long Oil Heritage
Sarawak’s assertive approach to oil and gas autonomy stems from over a century of continuous involvement in the petroleum industry. When Shell struck oil at “The Grand Old Lady” well in Miri in 1910, it marked the beginning of Malaysia’s commercial oil production and Sarawak’s uninterrupted association with the industry.
This early start provided Sarawak with several critical advantages that would compound over the decades.
The continuous industrial presence in Sarawak created what economists call “agglomeration effects” – the clustering of related industries, skilled workers, and supporting infrastructure that becomes self-reinforcing over time.
Unlike regions that experienced intermittent oil activity, Sarawak developed an industrial ecosystem that persisted through colonial periods, World War II, independence, and the formation of Malaysia.
The Bintulu LNG Complex: Building World-Class Expertise
The establishment of the Bintulu LNG Complex in 1983 represents perhaps the most significant milestone in Sarawak’s oil and gas development. Operating one of the world’s largest single-site LNG facilities with nine trains and 29.3 million tonnes per annum capacity required Sarawak to develop sophisticated technical capabilities across the entire LNG value chain.
This 40-year operational experience created several unique advantages: deep technical expertise in complex petrochemical processes, from basic separation to advanced catalyst management; institutional memory spanning multiple technology generations and operational philosophies; industrial infrastructure including specialized ports, storage facilities, and marine terminals; and a mature supply chain with hundreds of specialized service providers and contractors.
The Bintulu complex also attracted major international partners like JGC, Shell, and other global players, creating continuous technology transfer and exposure to best international practices. This collaborative environment produced generations of Sarawakian engineers, technicians, and managers who gained experience equivalent to their counterparts in Houston, Aberdeen, or other global oil centers.
Building Human Capital Through Generations
Sarawak’s long industrial history created what development economists’ term “embodied knowledge” – expertise that exists within people and organizations rather than in textbooks or manuals. Multiple generations of Sarawakian families have worked in oil and gas, creating informal knowledge transfer networks and cultural familiarity with complex industrial operations.
Key examples of this generational expertise include technical training institutions like INSTEP and CENTEXS that have operated for decades, producing thousands of certified technicians; engineering programs at local institutions aligned with industry needs; and management expertise developed through decades of running large-scale facilities.
This human capital foundation enabled prominent Sarawakians like Tan Sri Idris Jala to rise to global leadership positions, becoming Managing Director of Shell operations and later applying this expertise across multiple sectors. Such internationally proven leadership provides credibility and confidence for Sarawak’s autonomous aspirations.
Financial Strength Built on Experience
Sarawak’s RM18.3 billion in consolidated reserves by 2024 reflects not just resource wealth, but decades of successfully managing complex industrial operations. The state’s financial position enables it to take calculated risks and invest in new technologies like carbon capture, utilization, and storage (CCUS).
Importantly, Sarawak’s financial strength comes partially from successfully extracting value from its resources through active participation rather than passive royalty collection. This experience with value capture provides both the means and knowledge necessary for autonomous operations.
Sabah’s Historical Reality:
Different Starting Points
Late Industrial Development
While Sabah has significant oil and gas reserves – approximately 12% of Malaysia’s gas reserves and 25% of oil reserves – its industrial development began much later and under different circumstances. Unlike Sarawak’s continuous industrial presence since 1910, Sabah’s major oil and gas development largely commenced after the formation of Malaysia in 1963 and the establishment of PETRONAS in 1974.
This later start created several structural challenges: limited local industrial base when major development began; dependence on external expertise from the outset; and fewer opportunities for generational knowledge transfer compared to Sarawak.
Historical accounts note that “people from Sabah had worked in the industry in Sarawak or Brunei in the past but when they returned, the industry was limited”. This suggests that while individual Sabahans gained expertise elsewhere, there was insufficient local industrial activity to create the agglomeration effects that benefited Sarawak.
Different Resource Development Patterns
Sabah’s oil and gas resources are primarily offshore and technically challenging to develop, requiring sophisticated deepwater technology and substantial capital investment. Unlike Sarawak’s onshore Miri fields and later nearshore developments, Sabah’s resources demanded advanced international expertise from the beginning.
The Sabah Oil and Gas Terminal (SOGT), built in the 1980s, represented a major infrastructure achievement but required extensive foreign participation in construction and operation. While this provided some technology transfer, it did not create the same depth of local capability development seen in Sarawak’s decades-long LNG operations.
Limited Training Infrastructure
Unlike Sarawak’s multiple training institutions built around existing industrial operations, Sabah’s technical education infrastructure developed more recently. While programs exist, they lack the decades-long institutional memory and industry integration seen in Sarawak.
The difference is significant: Sarawak’s training institutions evolved alongside operational facilities, creating tight industry-academia linkages, while Sabah’s training programs developed to meet projected needs rather than existing operations.
Human Capital Challenges and the 40-Year Myth
Research reveals that Sabah faces ongoing challenges in developing local expertise. Despite recent progress, analyses note that “Sabah lacked the technical expertise and financial resources to manage complex oil and gas operations independently”.
Key indicators of this challenge include limited numbers of Sabahan executives in senior PETRONAS or international oil company positions compared to Sarawak; recent recognition that Sabah needs to “dismantle the 40-year myth” about lacking expertise; and ongoing dependence on external partners for major technical decisions.
The “40-year myth” refers to the longstanding belief that Sabah lacked the technical expertise and capital necessary to manage its own oil and gas operations independently. This myth became commonly cited as the primary reason for Sabah’s historically limited participation in, and benefits from, its own petroleum resources. For decades, this narrative constrained broader institutional development in the sector, with the state being perceived as lacking the experience, skilled manpower, and financial muscle needed to operate complex, capital-intensive petroleum projects.
Recent reforms have challenged and begun to dismantle this narrative. The formation and rapid success of SMJ Energy, professionalization of state-linked companies, and appointment of technically experienced leadership teams have proven that qualified Sabahan professionals exist and can compete when given the opportunity. Actions and results post-2021 are proving that as opportunities are opened, Sabahan talent and enterprise are rapidly rising to the challenge, invalidating a narrative that had long restricted the state’s industrial ambitions and economic returns.
The most prominent Sabahan oil and gas executive, Datuk Seri Panglima Lim Haw Kuang, gained his 23-year Shell experience primarily outside Sabah, working in Malaysia LNG (Bintulu), China, and global Shell positions. While his expertise is valuable, it represents individual achievement rather than systematic local capability development.
Why Sabah Cannot Simply Follow Sarawak’s Path
Missing Industrial Foundation
Sarawak’s autonomous strategy builds on more than 100 years of industrial experience. Attempting to replicate this without the underlying foundation would be equivalent to constructing a building without proper foundations. Sabah lacks institutional memory from decades of complex operations; depth of technical expertise across all value chain segments; mature supply chain ecosystem of specialized service providers; and cultural familiarity with managing large-scale industrial facilities.
Different Risk Profiles
Sarawak can afford to take autonomous risks because it has proven capability to manage complex operations independently. The Bintulu LNG complex demonstrates this capability daily through its successful operations.
Sabah, attempting autonomous operations without this proven capability, would face significantly higher technical and financial risks. The state’s RM6 billion reserves, while substantial, are insufficient to cover potential losses from failed autonomous ventures that might easily cost billions.
Time and Development Constraints
Building the expertise level that underpins Sarawak’s confidence requires decades of sustained industrial activity. Sarawak had the luxury of developing this capability over a century, with each generation building on previous experience.
Sabah cannot accelerate this process artificially. Attempting to shortcut the development timeline by hiring external expertise or rapid technology transfer would essentially recreate the existing partnership model with PETRONAS, but at higher cost and risk.
Economic Efficiency Considerations
The partnership model allows Sabah to capture significant value while leveraging PETRONAS’s proven expertise. SMJ Energy’s RM5.1 billion valuation from RM50 million initial capital demonstrates that the collaborative approach can generate substantial returns.
Attempting autonomous operations prematurely could result in higher operational costs due to inexperience and inefficiencies; technical failures requiring expensive remediation; lost opportunities while building capabilities internally; and reduced overall returns compared to the partnership model.
The Wisdom of Different Paths
Sabah’s Pragmatic Strategy
Sabah’s collaborative approach represents sophisticated strategic thinking rather than acceptance of limitations. The state has chosen to maximize current returns through proven partnerships; build capabilities systematically through the Local Content Council and training programs; reduce risk exposure while developing local expertise; and create sustainable long-term development rather than pursuing immediate autonomy.
This approach allows Sabah to “earn while learning” – generating substantial revenues while building the foundation for potentially greater autonomy in the future.
Sarawak’s Earned Autonomy
Sarawak’s autonomous strategy represents the natural evolution of a century-long development process. The state has proven its technical capabilities through decades of successful operations; built financial strength through effective resource management; developed institutional expertise capable of independent decision-making; and earned the right to greater autonomy through demonstrated competence.
Conclusion: Historical Context Determines Strategic Options
The different strategies pursued by Sarawak and Sabah reflect their distinct historical experiences and current capabilities rather than different levels of ambition or political will. Sarawak’s autonomous approach is possible because of its unique century-long industrial development. Sabah’s collaborative strategy is optimal given its different starting point and current capabilities.
Attempting to force Sabah into Sarawak’s model would ignore these fundamental historical differences and likely result in suboptimal outcomes for both the state and its communities. Instead, Sabah’s partnership approach provides a sustainable path for building capabilities while generating immediate benefits, potentially creating the foundation for greater autonomy in future decades.
The lesson is not that one approach is superior to another, but that successful resource management strategies must be grounded in historical realities and current capabilities. Both states have chosen paths appropriate to their circumstances, and both can achieve their ultimate goals of greater prosperity and community benefit through their respective strategies.
Historical experience demonstrates that sustainable resource management requires matching ambitions with capabilities – a principle that both Sarawak and Sabah have wisely embraced in their different but equally valid approaches to oil and gas development.
