SABAH is at a defining moment in its development journey. Under the Sabah Maju Jaya 2.0 (SMJ 2.0) framework, the state has committed to building a stronger, more resilient, and higher-value economy.
In this context, the evolving global energy landscape has introduced both challenges and strategic opportunities that require careful and forward-looking policy consideration.
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Recent global energy disruptions have reshaped how energy security is understood. Geopolitical tensions, supply chain instability, and price volatility have demonstrated that resilience depends not only on resource ownership, but also on control over refining capacity and value distribution within the energy value chain.
For Sabah, this issue is particularly significant. The state is one of Malaysia’s key oil and gas producing regions, yet a substantial portion of its crude oil is still processed outside the state.
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Refined petroleum products are then re-imported to meet domestic demand. While this arrangement has functioned under stable global conditions, it exposes Sabah to external vulnerabilities during periods of disruption.
In this context, the question of refining capacity location has become an important strategic discussion.
A notable perspective was raised by former Sabah Chief Minister Tan Sri Harris Mohd Salleh, who proposed that an oil refinery be developed in Labuan, Federal Territory, rather than within mainland Sabah.
This proposal reflects a strategic consideration of Labuan’s position as an offshore financial and logistics hub, with established maritime connectivity and proximity to regional shipping routes.
At the same time, current policy discussions within Sabah, including views expressed by Deputy Chief Minister II cum Minister of Finance Datuk Seri Panglima Masidi Manjun, indicate strong recognition that any major energy value-chain development must directly strengthen Sabah’s own economic base and long-term development objectives.
This difference in spatial focus Labuan as a federal hub versus mainland Sabah as a state development engine and highlights a fundamental policy question: where should value creation be anchored for maximum long-term benefit to Sabah?
From a state development perspective under SMJ 2.0, this question is central. Sabah’s long-term economic transformation depends not only on participation in the energy sector, but on the ability to retain and grow value within its own economic ecosystem.
If refining and downstream energy activities are anchored outside mainland Sabah, even within nearby federal territories, there is a risk that a significant portion of industrial spillover such as petrochemicals, engineering services, logistics networks, and skilled employment which may not fully accumulate within Sabah’s domestic economy.
In contrast, locating or anchoring energy value-chain development within mainland Sabah strengthens internal industrial linkages. It enables the development of integrated industrial zones, supports local supply chains, and creates higher-value employment opportunities for Sabahans.
Over time, this contributes to a more diversified and resilient state economy.
Energy security is another critical dimension. A refining structure more closely integrated with Sabah’s own economic geography enhances supply stability for essential fuels such as petrol, diesel, and aviation fuel.
This becomes particularly important during periods of global disruption, when external supply chains are under pressure.
From a fiscal perspective, retaining more downstream activities within Sabah strengthens the state’s revenue base and improves long-term financial stability. It reduces over-dependence on volatile upstream commodity cycles and supports more predictable economic planning under SMJ 2.0.
Sabah also possesses strong strategic advantages that support in-state development. These include proximity to upstream oil and gas production, existing industrial corridors such as Kimanis, and improving internal connectivity across both coastal and inland regions.
These factors collectively strengthen the case for ensuring that major energy infrastructure delivers direct and sustained benefits to Sabah’s own economy.
However, it is also important to recognise that refinery development is a highly complex and capital-intensive undertaking. It requires rigorous feasibility studies, financial structuring, environmental safeguards, and alignment with global energy transition trends.
Any future development must be designed with long-term adaptability and sustainability in mind.
Collaboration will be essential. The involvement of national energy stakeholders, particularly Petroliam Nasional Berhad (Petronas), together with both federal and state governments, is critical to ensure that any project is commercially viable, technically sound, and aligned with national energy policy frameworks.
Environmental responsibility must remain a central consideration. Sabah’s ecological richness is a national asset, and industrial development must be guided by strict environmental governance and modern low-impact technologies. Sustainable development must remain a non-negotiable principle.
Equally important is the social dimension. The success of any energy infrastructure initiative must ultimately be measured by its impact on the people of Sabah. Job creation, skills development, local business participation, and infrastructure improvements must form core outcomes of any such development strategy.
In conclusion, the global energy landscape presents Sabah with a clear strategic opportunity to strengthen its long-term resilience and economic structure.
Under SMJ 2.0, the central objective remains clear that is to ensure that Sabah not only participates in the energy sector but progressively retains and builds greater value within its own economy.
In this context, any future energy infrastructure strategy must be guided by a clear principle with maximising long-term economic benefit for Sabah itself through appropriate and well-integrated development within its own economic space.
Ultimately, sustainable energy resilience is achieved not only through production or refining capacity, but through the ability of a region to anchor, retain, and grow value within its own development ecosystem.
For Sabah, the strategic direction is clear. Energy infrastructure planning must prioritise strengthening the state’s own economic foundation for long-term resilience and inclusive growth.
