Sabah, Shell firm extend agreement
Published on: Tuesday, May 21, 2024
By: Larry Ralon
Masidi (rear, second left) witnessing the signing of the SPA extension.
Kota Kinabalu: Sabah, through SMJ Energy Sdn Bhd (SMJE), has extended the ongoing sales and purchase agreement (SPA) with Shell International Eastern Trading Company (SIETCO) for another three years, starting next month.
The SPA extension covers Sabah’s crude oil cargo at the Labuan Crude Oil Terminal (LCOT), derived from its 50 per cent interest in the Samarang PSC.
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The long-term collaboration was marked by a signing ceremony for the SPA extension at the Sabah International Convention Centre (SICC), here, Monday.
SMJE Vice President (Business Development) Faisal Abdul Rahman and SIETCO Business Manager Terence Yuen signed the documents, witnessed by State Finance Minister Datuk Seri Masidi Manjun, who is also SMJE Chairman.
Also present were representatives from SMJE, Sietco and Shell Malaysia.
The SPA extension is significant as it represents a major part of SMJE’s continuous revenue generation initiative going forward.
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To illustrate the significance of this extension, SMJE has to date achieved a revenue of just under RM580 million through sales of four cargoes of crude oil alone.
This is a major milestone pursuant to SMJE being an upstream oil and gas PSC company since May 31, 2023.
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This success highlights the ongoing importance of SMJE as a source of revenue for Sabah through crude oil sales.
Sabah continues to benefit from its entry into the oil and gas sector in Sabah through the signing of the Commercial Collaboration Agreement (CCA) with Petronas on Dec 7, 2021.
The CCA gives Sabah greater revenue sharing, greater say and greater participation in the oil and gas value chain in the State.
On April 25, 2023, SMJE signed an SPA with Petronas Chemicals Group Berhad (PCGB) for the acquisition of a 25pc participating interest in the Sabah Ammonia Urea (Samur) petrochemical plant.
On Feb 15, 2023, SMJE signed a Letter of Understanding (LoU) on the back-in option arrangement for Block SB409 PSC giving SMJE the right to acquire up to 20pc participating interest upon completion of the work commitment or commercial discovery, whichever is earlier.
On May 31, 2023, SMJE completed the acquisition of 50pc participating interest in the Samarang PSC and on Oct 25, 2023, SMJE acquired 10pc participating interest in Petronas LNG9 through the acquisition of Sabah International Petroleum (SIP), while on Jan 23, 2024, SMJE signed a LoU for another back-in option arrangement for Block SB403.
Describing the signing as momentous for the State Government, Masidi said through the collaboration, Sabah would continue to monetise its crude oil entitlement from the 50pc interest in the Samarang PSC.
“It has been a fruitful collaboration with smooth and incident-free technical operations as well as regular and prompt monthly revenue.
“In addition to the 50pc interest in the Samarang PSC, SMJE also has a stake of 25pc in Petronas’ Sabah Ammonia Urea petrochemical plant, two back-in options to acquire up to 20pc participating interest for Block SB409 PSC and Block SB403 PSC as well as 10pc stake in Petronas LNG9 Sdn Bhd that operates a LNG plant within the Bintulu LNG Complex via Sabah International Petroleum Sdn Bhd.
The operating assets are profitable and generate healthy cash flow for the State Government.
“It is with these cash flows that enables the State Government to diversify its funding sources, optimise the capital structure and support our growth strategy where SMJE continues to acquire profitable and producing oil and gas assets.”
Masidi said today’s incredible achievement proves that Sabah is on a clear upward trajectory and has the strong support of the oil and gas community, adding by upholding best practices, corporate governance principles and sound financial management, the State is increasingly becoming an attractive investment destination for the future.
“Looking ahead, SMJE will continue its prudent acquisition effort with a focus on profitable oil and gas-producing assets across the Upstream, LNG and Downstream/Petrochemicals sectors with healthy cash flows operated by reputable operators with proven ESG track records.
“There are a lot more untapped oil and gas resources in Sabah and I believe that through concerted efforts of the State Government, facilitated by SMJE and the robust support from industry Stakeholders, Sabah will achieve greater revenue sharing, greater say and greater participation in oil and gas development in the State.
“Sabah is not lacking in learned and experienced people. Those talents who are still outside Sabah are welcome to come back and contribute to the growing demands for experts in the oil and gas industry,” he said.
Shell Malaysia Country Chair Siti Sulaiman was also present.
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