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How Does Oil And Gas Shape The Future Of Malaysia?

Group 38

In 2011, the ‘slide’ in global crude oil value has left a trail of impairment in its wake particularly to Malaysia economy. However, the government insists on pushing the industry forward by instilling large portions of its budget to dominate the oil and gas hub in Asia Pacific Energy. Should these budgets go to other major sectors? Is it still worth it to depend on this industry? Let us embark on a journey to discovers what currently lies in Malaysia.

How does oil and gas shape the future of Malaysia?

Triggering the growing economy and potential of oil and gas industry in Malaysia

Petroliam Nasional Berhad (PETRONAS) has becoming more active in distributing contracts to smaller oil and gas companies in Malaysia, called Small Field Risk Service Contract (SFRSC). This initiative benefits the local companies to develop into competitive companies globally. It also opens opportunities for the smaller field companies to explore new horizons for hydrocarbon source, which attracts investment from external oil and gas companies from the confidence of the improving fields. In fact, in the most southern part of the peninsular, Johor Petroleum Development Corporation (JPDC) will become an important trading hub of oil and gas industry, which also opens opportunity for better technological transfer and partnerships with other international companies.

Educational integration and producing highly skilled personnel and workforce

Predictions show that the sector will continue to grow, with the trends of increasing energy consumption due to the rapid growth of industrial activities. In educational level, the focus to increase the oil production leads to research and development of field machineries and tools to become more efficient. Collaborations with the local institutions will boost the academics to implement advanced technology from other countries in addressing the solutions to increase and improve the quality of oil consumption.

The energy sector has always been an important sector to the economics growth of most of the developing country like Malaysia. This is because, in 2014 the energy sector in Malaysia had contributed about 20 percent to the total gross domestic product (GDP). To be precise, 76 percent of that value was made up only by oil and gas sector. The sector has created huge employment opportunities and skills transfer for thousands of Malaysians ever since the oil discovery in Sarawak in 1910. This shows that oil and gas sector contribute significantly to not only in economics of Malaysia but also to social impact of the country as well.

From utilitarianism perspective, the government of Malaysia has been planning macroeconomically to ensure a long-term success in the industry by becoming the top oil and gas hub in the Asian Pacific Energy. One of the initiatives by the government is through the Economic Transformation Programme (ETP) by focussing and investing more on the 12 National Key Economic Areas (NKEAs). One of the NKEAs is Oil, Gas and Energy sector. This will result in large number of foreign oil companies to start investing in Malaysia.

The Future Possible Outcome: What to expect

Environmental effects on outgoing activities

Though oil and gas industry have been a major aspect on the nation’s economic growth. Through history, several environmental disasters had occurs leaving devastating impact on the aboriginals and nature itself. However, such issues do not abstain the government to build more plants and increase production under the rhetoric slogan of “national developments”. Major oil and gas plants are located offshore around the Malaysian peninsular which have induced cases of oil spills, further development will cause a lot more damage to the marine ecology and disturb local fishermen activities. The Malaysian rainforest holds one of the world’s great centres of biodiversity in the world, in 2012, a major project to install gas pipeline stretching over 120km across the east coast of Malaysia have disrupt the natural habitat of various animal species along with deforestation, pushing aboriginals whom depends on earth’s natural resources to survive to cope with changes brought by the industry.

Evaluation of studies on the socio-economic effects of fossil fuel investments

Countries that are rich in natural resources often suffer from oil/resource curse in which the country experiences negative social and environmental impact despite an increase in wealth and revenues. One of the effects of this ‘curse’ is the Dutch Disease when an economy in the country suffers negative impact due to the sharp inflow of foreign currency, for example the small-medium enterprises (SME) in Malaysia which makes up for 36% of the country’s economy as of 2016. This issue is key as this would broaden the gap between the rich and poor in Malaysia and would affect the country in terms of social standards of the country. As such, there would be a rise in the poverty rate which leads to an incline in crime rate as public would feel pressured due to the rising cost of living. The National Bank and government should take a Black and White approach by imposing a policy that would limit the effect of Dutch Disease towards affected sectors.

The intuitivism moral doctrine states that right and wrong are often intuitive. In the cases above, the results of government investing and taking advantage of natural gas reserves prove that there are negative impacts in terms of environmental and social economy. However, these effects are not as black and white as explained in a formal doctrine such as the utilitarianism where actions such as stealing, lying etc. are discussed. However, by intuition we can see that the continuation of investment in fossil fuels will impact the country and public.

Further Remarks

It is normal for public and government to want to invest budgets in leading industries, which in this case would be the fossil fuel industry. This could be the key towards an independent economy for Malaysia as well as an opportunity to enhance the skills and technology within the country which in turn would allow for technology and intellectual exportation. However, is it worth destroying the chances of other industry surviving in this millennium? As presented, the effects of these investment could mean that there will be a threat towards other local industries as well as an endangerment towards the ecosystem. Therefore, it is the opinion of this cohort that investments made by the government should be done in modesty and diversified

48 thoughts on “How Does Oil And Gas Shape The Future Of Malaysia?

  1. This is a great topic. Why aren’t there more comments? This is a clear ethical issue. We are all well aware of the problems of continuing to use oil, but equally there are issues associated with not using it. A reall damned if you do, damned if you don’t issue. Great choice!

    Now, on to your article…

    Quote: “From utilitarianism perspective, the government of Malaysia has been planning macroeconomically to ensure a long-term success in the industry by becoming the top oil and gas hub in the Asian Pacific Energy” – how is this an example of utilitarianism? Tell your reader why. Is it because of the employment opportunities? A strong Malaysian economy benefits everyone?

    ” in 2012, a major project to install gas pipeline stretching over 120km across the east coast of Malaysia have disrupt the natural habitat of various animal species along with deforestation” – hardly virtuous!

    The Dutch Disease example is very interesting. As it suggests that other sectors of the Malaysian economy could suffer.

    Please give more ethical assessment to both sides of the argument.

  2. This is a very great and interesting topic!

    I have a question; do we need to emphasis just ‘only’ on the oil and gas to shape the future of Malaysia? We know that oil and gas is a non-renewable energy, which can end in future. If this happen, this can disrupt our economy.

    For instance, Brunei is one of the countries in this world that mainly depends on the oil and gas sector, however, their global oil reserves is believed to decrease year by year, thus, they are struggling to focus on the other sectors to replace their oil and gas sector, otherwise, their economy will face negative impact, because their economy depends mostly on that sector.

    Are we ready for that if we focus too much on the oil and gas sector like Brunei? I think we need to focus on the other sectors too, and work on the renewable energy such as Biomass, Combined Heat and Power (CHP), and so forth. Thank you.

  3. Great article. As a fellow Malaysian myself, I do not agree that the government to just focus on the oil and gas sector for the economic growth. In the end, fossil fuel will run out one day, so is that really sustainable? I know that the government is currently exposing and encouraging the citizens to start SMEs. So I agree, that Malaysian should think of other ways to enhance their economic growth. The education system has improved over the years and the most of the younger generation are really interested in starting up SMEs. So it would be great to see the Malaysian economy to depend on other sectors as well, rather than just oil and gas and they have been for so many years.

    Plus, with the heavy activities in the sea, I wouldn’t want an unfortunate event like the Deepwater Horizon to occur. An oil spill is really bad for the environment as it endangers the marine life. The marine life is really valuable to us and it is our duty to preserve the marine life, not destroy it.

    Therefore, I am strongly against the idea of the Malaysian government to just rely on the oil and gas sector as I believe that it is not sustainable and it brings more harm than good, for the time being.

  4. This is actually a great article.
    It shows clearly what is happening when a developing country is shifting to a developed country.

    Some people may actually believe that this is an unhealthy stage for the country but in order to move forward, there are prices to be paid, and this article shows some of them.

    It will interesting to read a new article that focusing on the government’s effort in making sure the people of the nation can survive throughout this period.

  5. Very interesting article!

    As a Malaysian myself, I believe that oil and gas are the key players in keeping our country on top of chain especially in Asia. Thus, the environmental effect is just something we cannot avoid as the price to change our country into one of developed country.

    For effect on socioeconomic, I think it is till can be tackled through a proper policy making by the government. At the same time, the government should not only relies on this source of non- renewable energy. Instead, they should spend their budget to other renewable energy too.

  6. Great article!

    It is true that our country was once depending heavily on oil and gas industry but recent and ongoing development such as North Corridor Economic Region (ECER), North East Economic Region (ECER), Johor’s Iskandar and multi million investments by federal government on infrastructures, renewable energy (biomass) along with Pan Borneo Highway construction in Sabah and Sarawak do help in our economic growth as a whole.

    Those projects mentioned were only planned for 15-20 years at most, next phase needed. In the meantime, oil and gas sector will continue playing its role as one of our major sources of income due to its proven sustainability but for how long? With fluctuating oil price in the global market, I agree that government should wisely invest on other potential internationally leading industries according to qualities we have at our disposal.

    I am really attracted to the Dutch Disease example because I can see it is happening. Same issue if we take a look on some of our neighbouring countries too. Another thing, can you emphasize what project in 2012 caused deforestation in east coast of Malaysia? Reference needed. Afterall, I enjoyed reading it.

    Thanks.

  7. This article is really good.

    They explained in detailed how does the oil and gas industry effect greatly the socio-economy, education and the government of Malaysia. They clearly show the involvement of goverment in this industry because of the high potential of generating income from the oil and gas industry. Currently, young graduates from Malaysia really look forward to do internships and work with the oil and gas company because of the high salary and great work experience that the company provide for them.

    In other words, oil and gas industry really have a really good impact on people of Malaysia.

  8. This is an instereting impending issue to address.

    As mentioned in your article, the oil and gas makes up for 76% of the country’s income. If we are to replace this with another industry, or choose an industry that could contribute more, which one would it be? SMEs might be an option, but due to the growth of online business, especially through social medias, the countries might need a more robust taxation framework in order to generate income via this sector.

  9. Good article. Worth reading. It tells us clearly on how the oil and gas industry play their role to shape the socio-economy and education in Malaysia.

  10. A well explained article.

    I would like to comment on the ‘future possible outcome’ part. It is important to note that the oil and gas is a non-renewable resources. If Malaysia decided to focus on this industry, you can add on how long can the industry be sustained, and what are the alternatives if there is a shock on the oil and gas industry. Take for example Brunei, a country that highly dependent on the oil and gas industry. Currently Brunei is facing a threat on running out their natural resources and struggling to look for other alternatives to sustain their economy. We would not want that happen to Malaysia and thus an insight for that point is worth to provide.

    Apart from that, this is a really good article and I think it should be included in the Malaysian newspaper!

  11. A well written article and a good read!

    In my opinion, the oil and gas industry has left a positive impact on the growth of the country for the past few years, undoubtedly. As mentioned in this article, it is an important sector for economics growth to the country and will be a key player to catapult the country into the next phase. However, what will happen when all of the crude oil fields mature? Where do we go from there?

    I also agree that focusing on this sector will encourage R&D, and the production of highly skilled workers. But, I am not sure if it is worth the sacrifice of other industries and the destruction of the ecosystem.

  12. Good article overall, however all of the effects stated are general rather than specific to certain areas because as a Malaysian, I believe that the management of environmental impacts of oil and gas sector are advanced compared to other countries. All in all, the article is eye opening and interesting.

  13. An interesting topic. Myself originating from Malaysia is somewhat aware of this issue but not everyone is familiar with it. The oil and gas sector is well known and is an important investment and thus a lot of people want to invest in it as covered by the article.
    I would like to say that the sector must be dealt with care. As much as it benefits financially, the market is always changing and it will not always be able to support the country. However, the damage done to the environment might not be reversible. I would say the benefits of education might not need to be rushed and can still be done with care to the environment. In the end mother nature maters more

  14. Reading both sides of the argument, I feel like an important thing to understand is that Malaysia is a developing country. Therefore, it’s crucial that the the budget should be allocated to the sectors that would bring in the most benefit to Malaysia. In this case, the oil and gas industry would do just that, unless you can point out other major sectors that should be invested in but has less negative impact.

    I understand that the environmental effects is a big issue when developing this sector but as I’ve said above, what other major sectors would bring in as much advancement without deteriorating the environment. In that, I believe that there are always measures/ new technology that should and could be implemented in order to reduce the impact this industry has to the environment and the socio-economic effects – perhaps, this could stimulate a whole new sector in Malaysia.

  15. A very good article and have lots of information in it. Worth of my time to go through this article. There will always be “yes” and “no” answer to this.

    In my point of view, oil and gas sector has been one of the main income for the people of Malaysia for the last 40 or 50 years ago and until now this sector propelled the nation towards a high-income nation. Based on the article, the energy sector has contributed about 20% to the total gross domestic product (GDP) of Malaysia. In relation to this, in 2017, the contribution of the sector to the total GDP has increase to about 40%, which is very substantial to the economy growth of the country. The oil and gas from Malaysia is known for its high quality because of its light-weight and low-Sulphur content, thus, priced at a premium in its export market to more than offset its imports of heavy oils for manufacturing petroleum products for domestic use. Plus, with current higher oil prices will likely generate positive spillovers to its economy, current account and government coffers.

    However, there will be some consequences to the people and mainly to the environment. Hence, everything need to be well planned and any problems that can impact to the environment need to be tackle and reduce as low as possible. As a conclusion, extensive corporation from single individuals, company and government is vital to make the best out of the natural resources while conserving the ecosystem.

  16. Great article and it shows clearly what is happening in Malaysia. There are both advantage and disadvantage for the government to focus on this leading sector. we can take example of many developing country which generally focuses on their main sector only. However, in this generation, i think a country should invest on all sectors equally if possible. The fact that fossil fuel is a non-renewable energy and the side-effects of it is an obvious reason on why Malaysia should start investing on other sectors and industry. This will also help the country to become well balanced socially and economically.

  17. Great article! I believe that it is a good practise for government to equally invest in all sectors. However, it is understandable as to why they focus on only a few as it could be heir country’s main source of income. In the case of Malaysia, I believe that they should be aware that oil and gas is not a sustainable future income and they need to somehow shift their focus on a renewable solutions. It is frustrating as demographics and politics often take over the decision at the end. Perhaps, its time to educate the ethics to the leaders? What do you think?

    p/s: My comment is spicy but I love Petronas <3

  18. good article, for me, I agree for the government to focus on the oil and gas sector as the industry was proven to bring huge benefits to the country such as Qatar and Dubai. I agree that it will cause the environment effect, but the technologies and method are getting better and better to reduce the environment effect. unfortunately, the resource is decreasing. Thus, the country need to have backup plan regarding this problem.

    SMEs might be good option, but do the country gets the benefits from this sector used online transaction? the government need to set up new law and taxation framework so that the sector can help in developing the country.

  19. Good article!

    It is true that Malaysia is depending on oil and gas industry but to only focusing on that particular sector is quite unfair.

    This is due to the oil price varies to the national crude oil which will give a big impact to the country if Malaysia continue to depend on O&G sector. But maintaning our own oil & gas company (PETRONAS) is equally important since it will affect the market itself and PETRONAS is also one of the stakeholders in the industry as a whole.

    However, in my point of view, Malaysia should start to diversify their source of income in order to maintain the sustainability in world economy. Noted in the article about the SMEs part, but is it enough? It’s good that SMEs gives lots of job opportunity but diversifying into another sector other than O&G is important too.

  20. A great article indeed!

    The article has concisely discussed the role of oil and gas towards enhancing the economic growth in Malaysia. I strongly agree that oil and gas business has helped to raise the economic growth of Malaysia by providing more job opportunities and highly skilled workforce.

    However, the demand for energy keeps on growing each day due to several factors which include expanding world population, developing world economy and increasing urbanisation rate. The number of homes, factories and shopping centres are increasing, hence more energy is required for supporting the demand for power.

    The question is, how do we really meet the demands? Increase demand for energy means more fossil fuel will be burnt to generate electricity which leads to a long-term negative impact on people health, global warming and air pollution.

    Therefore, the government in Malaysia should focus more on a using a renewable energy as the natural fossil fuel will soon deplete.

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