Sabah firm denies hand in oil and gas works at protected marine park

A Sabah-owned energy company said it is not involved in any oil and gas exploration activities within a protected marine park in the state.

In a statement, SMJ Energy stressed that it currently has no equity stake in the production sharing contract (PSC) and is not a party to the agreement to conduct oil and gas activities at Block SB-403 - an offshore oil exploration area in northern Sabah that covers about 10,256sq km.

“However, SMJ Energy has a ‘back-in right’ that allows it to decide whether to join as a partner in the future in the event of exploration success, taking also into account commercial, technical, environmental and other factors.

“SMJ Energy acts as a prudent financial investor and works with reputable oil and gas companies with proven ESG (Environmental, Social & Governance) track records,” the company said briefly.

In the oil and gas industry, back-in right refers to a type of agreement where the original owner of a lease can regain a share of the profits after the new owner recovers their costs from production.

Yesterday, environmental watchdog RimbaWatch urged the Sabah government not to approve any oil and gas exploration activities within Block SB-403, situated within the Tun Mustapha Marine Park.

According to the group, the park is listed as an International Union for Conservation of Nature’s (IUCN) Category VI marine protected area, which only permits low-impact activities.

“Oil and gas activities risk damaging the marine environment of the park, including risks to 45,000ha of reefs, 17,000ha of mangroves and over 180 vulnerable and endangered species.

“These activities also threaten the fishing-dependent livelihoods of over 85,000 villagers, including from the Bajau Laut and Ubian communities,” RimbaWatch said in a statement.

Petronas had reportedly awarded Block SB-403 to Petronas Carigali Sdn Bhd and E&P Malaysia Venture (EPMV) during the 2023 Malaysia Bidding Round. The two companies later signed a PSC with SMJ Energy, where they allowed it to take a stake of up to 20 percent participating interest in the area.

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