More power to Sarawak 

ALL eyes are on Sarawak as Malaysia’s oil and gas sector looks poised for a transformation. The Sarawak Gas Roadmap 2030 (SGR2030) could bring huge changes with its ambitious plans.

The roadmap will emphasise energy security, expanding domestic gas use and developing carbon capture hubs.

Industry players are expected to benefit from increased upstream activities and new opportunities in carbon capture and storage (CCS) projects.

Upstream oil and gas companies are well-positioned to gain from these plans, BIMB Research believes.

“We are of the view that oil and gas upstream players will be the indirect beneficiaries of Sarawak’s growth in economic development as SGR2030 will be the key to realise it,” the brokerage says in a recent report.

Central to SGR2030 is Petroliam Sarawak Bhd (Petros), which has been recognised as the state’s official gas aggregator by the federal government and national oil and gas giant, Petroliam Nasional Bhd (PETRONAS).

Petros is entitled to up to 1.2 billion standard cubic feet per day (scf/day) of natural gas for domestic use under the Distribution of Gas Ordinance 2016.

To meet both domestic demand and existing liquefied natural gas (LNG) contracts, Sarawak will need to boost offshore gas production significantly.

This push for higher gas output is expected to increase offshore activities, benefitting upstream service providers.

“This will boost the offshore activities in the upstream segment and thus bodes well for stocks under our coverage,” BIMB Research notes.

It highlights MISC Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE), and Hibiscus Petroleum Bhd as its top picks, with target prices (TPs) of RM10.30, 94 sen and RM3.40 per share, respectively.

Booming sector

SGR2030’s ambitious projects include the Miri combined cycle gas turbine (CCGT) power plant, the Samalaju gas pipeline and CCGT project, and the Kuching virtual gas pipeline system.

These projects aim to enhance domestic gas supply and support industrial growth in Sarawak.

The Miri CCGT plant, with a capacity of 500MW, is expected to meet Northern Sarawak’s power needs by the first quarter of 2027, while the Samalaju project is anticipated to deliver first gas by the end of 2025.

Additionally, Sarawak plans to position Kuching as a low-carbon hub, with a new deep-sea port at Tanjung Embang slated for completion by 2030.

The state is also looking to tap into its estimated 20 trillion cubic feet of gas reserves off Kuching, which will be critical to maintaining long-term energy security as Bintulu’s gas supply diminishes.

On the CCS front, Sarawak aims to establish three hubs – M1, M3, and the Western Hub – by 2030. These hubs will support the storage of carbon emissions, both domestically and from foreign sources.

The M1 CCS Hub will handle carbon from the Kasawari production, while the Western Hub is being prepared for potential sour gas developments off Kuching. The M3 field is set to become a regional CCS hub.

BIMB Research views the establishment of CCS hubs as a key growth area for the oil and gas sector.

“The establishment of three CCS hubs in Sarawak will also add to the vibrancy of the oil and gas sector,” it states.

With a storage capacity of 80-90 million tonnes per annum, Sarawak is well-positioned to cater to both local and international carbon storage needs, particularly in Phase 3 of the roadmap, starting in 2035.

Good time to accumulate

Valuation-wise, BIMB Research remains optimistic about the sector’s prospects, particularly for small and mid-cap upstream service companies.

“Most of upstream service companies under our coverage are considered small and mid-cap stocks, which are trading at undemanding valuation at single digit price-earnings multiples,” it says.

The research house expects Sarawak’s growth story to provide much-needed earnings visibility and act as a re-rating catalyst for these stocks.

BIMB Research also suggests that now might be a good time to accumulate oil and gas stocks.

“We are optimistic that Sarawak’s story will provide the much-needed earnings visibility and a re-rating catalyst to these stocks. Thus, we think it is a good time to accumulate these stocks,” it explains.

Besides its top three picks of MISC, MMHE and Hibiscus, the brokerage also recommends “buy” on Dayang Enterprise Holdings Bhd, Velesto Energy Bhd and T7 Global Bhd. It rates Sapura Energy Bhd as “trading buy”.

BIMB Securities ascribes a TP of RM2.30 per share for Dayang, 34 sen for Velesto, 69 sen for T7 Global and six sen for Sapura Energy.

It notes that as Sarawak pursues its gas ambitions, the broader oil and gas sector stands to benefit from increased activities, fresh contracts and enhanced earnings visibility.

With its robust plans, the state could emerge as a critical hub for both natural gas supply and carbon management in the region.

Overall, BIMB Research is optimistic about Sarawak’s economic prospects, pointing out that the state’s strategic investments in infrastructure, renewable energy and human capital development are key drivers in its journey toward economic transformation.

“By focusing on strengthening key sectors such as manufacturing, agriculture and digital technology, the state is building a resilient and diversified economy capable of sustaining long-term growth,” it argues.

“The commitment to modernising public transport, expanding energy security and enhancing food production demonstrates a forward-thinking approach that prioritises both economic progress and environmental sustainability,” it adds.

Further, BIMB Research says with strong financial reserves, increased federal allocations, and proactive policy measures, the state is well-positioned to emerge as a regional economic powerhouse.

“By addressing challenges such as talent shortages and infrastructure gaps, Sarawak is paving the way for a prosperous and sustainable future for its people,” it says.