Greenfield venture grants prone to disillusion
From "Prone to Disillusion" to a New Wave: Malaysia's Greenfield O&G Revival (2019‑2026)
In May 2019, a sobering research note from UOB KayHian captured the mood of Malaysia's oil and gas services (OGSE) sector. Mega greenfield venture grants in the oil and gas space were "prone to disillusion" because local capital expenditure (capex) was "generally centered around upkeep and brownfield works." The Kasawari and Limbayong projects—two of the most anticipated greenfield developments in Malaysian waters—faced "extreme deferrals." The note did hold out a sliver of hope: "the general flood in capex for decommissioning and new greenfield activities will probably be from 2020." But the immediate outlook was bleak, with many O&G stocks remaining "excessively locally needy" and unlikely to benefit from Petronas' growing overseas focus.
Seven years later, that prediction of a 2020‑onwards capex flood has been partially vindicated—but with crucial twists. Kasawari is finally producing gas, Limbayong has been resurrected from the dead, and a new wave of greenfield projects from PTTEP, Shell, and others is breaking across Malaysian waters. Yet the optimism is tempered by Petronas' cautious capex discipline, the industry's pivot toward decarbonisation, and the national oil company's explicit shift toward international growth over domestic spending. This is the story of what actually happened to Malaysia's greenfield O&G aspirations.
📉 The 2019 Starting Point: "Prone to Disillusion"
The original 2019 article on this site was essentially a digest of UOB KayHian's sector outlook. The key takeaways were stark: mega greenfield grants would "frustrate," capex was stuck in maintenance and brownfield work, and the Kasawari and Limbayong projects faced serious delays. Petronas' domestic upstream capex was expected to improve from RM12 billion in 2018 to RM15 billion in 2019, but the bulk of that spending was on "upkeep and brownfield works."
UOB KayHian also flagged a crucial financial metric: debt/EBITDA ratios. Companies with leverage below 5x—including Yinson, MISC, Deleum, and Dayang—were positioned to benefit from any eventual upcycle. Those with higher ratios, including Bumi Armada and Sapura Energy, were "key washouts." The note maintained a "market weight" position on the sector, a cautious stance that reflected the uncertain timing of greenfield approvals.
The backdrop was a Petronas that was increasingly looking abroad. The exploration house noted that Petronas was expected to "help its abroad capex," meaning that even if global spending rose, local Malaysian players might not capture the full benefit. The domestic OGSE sector, heavily reliant on Petronas contracts, faced a structural headwind.
💡 Analyst Perspective: The Debt/EBITDA Screen
UOB KayHian's focus on debt/EBITDA in 2019 was prescient. The companies that survived the 2020 oil price crash and subsequent project delays were precisely those with the leanest balance sheets. Yinson, flagged as "altogether less fatty" at under 4x net debt/EBITDA, went on to secure major FPSO contracts and is now a regional heavyweight. Sapura Energy, noted with a "high at 10x" ratio, spent years in restructuring and remains a cautionary tale. The 2019 screen was a roadmap for who would survive the coming turbulence.
🛢️ Kasawari: From Delay to CCS Frontier
In 2019, Kasawari was the poster child for greenfield frustration. UOB KayHian warned that an "extreme deferral in the thumbs up for the Kasawari task" was a major concern. The project, a massive gas field development offshore Sarawak, was mired in commercial and technical uncertainty.
Seven years later, Kasawari has not only been approved—it is producing gas. The field commenced operations in August 2024 at about 200 million cubic feet per day, with plans to ramp up output to support Malaysia's liquefied natural gas (LNG) supply. Petronas has also made Kasawari the centrepiece of its carbon capture and storage (CCS) ambitions, integrating one of the world's largest offshore CCS projects to manage the field's high CO₂ content.[reference:0]
In early 2026, Petronas announced it was seeking to accelerate the CCS timeline, aiming to bring forward the first CO₂ injection from 2029 to 2027.[reference:1] The company acknowledged a "planning gap": Kasawari was developed before Petronas formally committed to net‑zero emissions, meaning production began without a fully integrated carbon management plan. The push to accelerate CCS is an effort to close that gap and align the project with Petronas' sustainability goals.
On the contracting side, Malaysia Marine and Heavy Engineering (MMHE)—a company flagged in the 2019 note for negative EBITDA—secured a major fabrication contract for Kasawari in early 2026, covering a 47,000‑tonne central processing platform, an 8,600‑tonne wellhead platform, and associated infrastructure.[reference:2] The project that was once "prone to disillusion" is now generating real work for the domestic supply chain.
🌊 Limbayong: Resurrected From the Grave
If Kasawari was delayed, Limbayong was left for dead. The 2019 article noted that an "extreme deferral" in Kasawari could push Limbayong to "year‑end"—a prediction that proved wildly optimistic. Limbayong, an ultra‑deepwater development offshore Sabah, faced a cascade of setbacks. Petronas retendered the FPSO contract after abruptly cancelling the first contest. The project's economics, already challenging, were battered by post‑COVID cost inflation. By 2023‑2024, Limbayong appeared to be in deep freeze.
Then, in March 2026, Petronas restarted work on the Limbayong field development. Upstream reported that the "difficult Malaysian ultra‑deepwater project returns to the fray," with MISC emerging as the preferred supplier for the FPSO.[reference:3] The restart signals Petronas' renewed appetite for deepwater projects as it seeks to offset declining production from mature shallow‑water fields.
Limbayong is a flagship project strategically positioned to become a deepwater hub for East Malaysia, particularly Sabah. The first phase of development is expected to produce approximately 39,800 barrels per day of crude oil and condensate and 150 million cubic feet per day of natural gas at peak in 2027.[reference:4] The project's revival is a powerful signal that Petronas is willing to tackle technically complex, capital‑intensive developments when the strategic case is compelling.
💰 Petronas Capex: Cautious, But Steady at ~RM50 Billion
The 2019 article forecast that Petronas' domestic upstream capex would rise from RM12 billion in 2018 to RM15 billion in 2019, with the "general flood" of greenfield spending coming from 2020 onwards. The reality has been more restrained. Petronas has maintained a stable capital expenditure of around RM50 billion annually for 2025, with roughly 60% allocated to Malaysia.[reference:5] That translates to domestic spending of approximately RM25‑30 billion per year—a significant increase from the 2018‑2019 levels, but not the explosive growth some had hoped for.
In fact, 2025 saw Petronas and other petroleum arrangement contractors undertake fewer upstream capex activities than initially projected. CGS International reported that Petronas guided for nine drilling rigs in 2026, down from 11 projected previously and below the 14 rigs used in 2024.[reference:6] The company's total capital investment for 2025 reached RM41.6 billion, with allocation "prioritising high‑value and advantaged projects, early monetisation, and continued portfolio high grading."[reference:7]
Petronas' financial performance has also moderated. For the financial year ended December 2025, the company recorded lower revenue of RM266.1 billion and a profit decline of 18% to RM45.4 billion, primarily due to weaker average realised prices and lower sales volumes.[reference:8] This more sober financial backdrop explains the company's cautious approach to new greenfield commitments.
💡 Analyst Perspective: The International Pivot
Perhaps the most consequential shift since 2019 is Petronas' explicit commitment to international growth. In February 2026, Petronas COO Adif Zulkifli stated that the company aims to expand its international upstream activity by 60% over the next decade.[reference:9] This is not a new trend—the 2019 article already noted Petronas' "abroad upstream core interest"—but it has now become official strategy. For Malaysia's domestic OGSE sector, this means the growth opportunities will increasingly be found outside Malaysian waters.
🚀 The New Wave: PTTEP, Shell, and the Next Generation of Greenfields
If Petronas is being cautious with its own greenfield spending, other players are stepping into the breach. The most significant development is PTTEP's first greenfield oil project in Malaysia. In February 2026, the Thai national oil company took final investment decision (FID) on the SK405B project offshore Sarawak, covering the Chenda and Sirung oil fields.[reference:10] The development will feature a new central processing platform and wellhead platform, with production expected to commence by 2028‑2029.
Sarawak Shell is also pushing forward with greenfield work. In April 2026, Malaysia Marine and Heavy Engineering (MMHE) clinched an engineering, procurement, and construction (EPC) services contract for a solar‑powered offshore platform from Sarawak Shell, designed to handle up to 800 million standard cubic feet of gas per day.[reference:11] The project, targeted for start‑up in 2026, will supply natural gas to the Petronas LNG Complex in Bintulu.
Beyond traditional oil and gas, a new category of greenfield investment is emerging: sustainable aviation fuel (SAF). In April 2026, Oiltek International announced a US$350 million deal to co‑develop a SAF facility in Sabah, part of a broader integrated ecosystem spanning production, blending, and export.[reference:12] UOB KayHian raised its target price for Oiltek by 166% following the announcement, a sign that the market is beginning to price in the value of energy transition projects.[reference:13]
BIMB Securities expects the next wave of FPSO and mid‑sized production facility projects to materialise from 2026 onwards, improving earnings visibility for selected Malaysian OGSE players.[reference:14] The "flood" of greenfield capex that UOB KayHian predicted for 2020 may have been delayed, but it appears to be arriving—finally—in 2026.
📊 UOB KayHian in 2026: Still Bullish on Select Stocks
The research house that authored the original 2019 note remains active in covering Malaysia's O&G sector. In March 2026, UOB KayHian predicted that Petronas would ramp up local and overseas investments in the second half of the year, having spent only RM16 billion of its RM50 billion annual capex target as of mid‑year.[reference:15] The note maintained a positive outlook on companies positioned to capture this spending.
UOB KayHian has also identified Gas Malaysia as a beneficiary of prolonged Middle East turmoil, arguing that sustained high natural gas prices would translate into growing profitability for the utility.[reference:16] The firm's analysts continue to use the same fundamental metrics—debt levels, EBITDA trajectories, and contract win momentum—that they emphasised in 2019.
The continuity is striking. Seven years ago, UOB KayHian was cautiously optimistic that a capex upcycle was coming, and it identified the companies with the financial strength to survive until it arrived. Those companies—Yinson, MISC, Deleum, Dayang—have largely validated the thesis. The challenge for investors in 2026 is identifying the next cohort of winners as the greenfield wave finally breaks.
🌱 The Energy Transition Overlay: CCS, SAF, and Beyond
One element that was entirely absent from the 2019 discussion was the energy transition. Kasawari's CCS component, the Sabah SAF facility, and Petronas' net‑zero commitments are all products of a fundamentally different investment environment. Greenfield O&G projects in 2026 are not judged solely on their hydrocarbon economics; they must also demonstrate alignment with decarbonisation goals.
Petronas has been explicit about this shift. The company is accelerating CCS at Kasawari, exploring green hydrogen opportunities, and integrating sustainability criteria into its project approval processes. The Malaysian government is also using fiscal policy to incentivise green investments, with the 2025‑2026 budget including duty exemptions on solar panel components and tax incentives for renewable energy projects.[reference:17]
This creates both opportunities and challenges for the OGSE sector. Companies that can pivot to support CCS, hydrogen, and renewable energy projects will find new revenue streams. Those that remain exclusively tied to traditional hydrocarbon extraction may find their addressable market shrinking over time.
📊 Malaysia Greenfield O&G: 2019 vs. 2026
| Metric | 2019 (UOB KayHian Note) | 2026 (Current Reality) |
|---|---|---|
| Kasawari Status | "Extreme deferral"; awaiting thumbs‑up | Producing 200 mmscfd; CCS acceleration to 2027 |
| Limbayong Status | Facing delays; potentially pushed to year‑end | Restarted March 2026; MISC preferred FPSO supplier |
| Petronas Domestic Capex | RM12bn (2018) → RM15bn (2019 target) | ~RM25‑30bn/year (60% of RM50bn total) |
| Petronas International Focus | "Abroad upstream core interest" | Official target: +60% international growth over 10 years |
| Key Beneficiaries (2019 Screen) | Yinson, MISC, Deleum, Dayang (＜5x debt/EBITDA) | Yinson (global FPSO player); MISC (Limbayong); Dayang (steady) |
| Key Losers (2019 Screen) | Bumi Armada (7‑10x), Sapura Energy (10x) | Bumi Armada restructured; Sapura Energy ongoing turnaround |
| New Greenfield Entrants | Petronas dominated; limited foreign greenfields | PTTEP SK405B FID; Shell solar platform; Oiltek SAF facility |
| Energy Transition Integration | Not discussed | Kasawari CCS; SAF facility; net‑zero commitments |
| UOB KayHian Stance | "Market weight"; cautious optimism | Bullish on select stocks; predicts 2H26 capex ramp‑up |
📋 The Bottom Line: Key Takeaways for 2026
🛢️ Kasawari Delivered—With a CCS Twist: The project that was "prone to disillusion" in 2019 is now producing 200 mmscfd of gas and pioneering one of the world's largest offshore CCS projects. Petronas aims to accelerate first CO₂ injection from 2029 to 2027.
🌊 Limbayong Is Back From the Dead: After years in limbo, Petronas restarted the ultra‑deepwater development in March 2026, with MISC emerging as the preferred FPSO supplier. Peak production is targeted at ~40,000 bpd of oil and 150 mmscfd of gas.
💰 Petronas Capex Is Stable, Not Explosive: The "flood" of greenfield spending predicted for 2020 has been more of a steady stream. Petronas maintains ~RM50 billion annual capex, with ~60% allocated to Malaysia. However, drilling activity has moderated, with only nine rigs guided for 2026.
🌍 Petronas Is Going Global: The national oil company has explicitly committed to expanding its international upstream activity by 60% over the next decade. For Malaysia's domestic OGSE sector, the growth opportunities will increasingly be found abroad.
🚀 A New Wave of Greenfields Is Breaking: PTTEP has taken FID on its first Malaysian greenfield (SK405B). Sarawak Shell is building a solar‑powered offshore platform. And Oiltek is co‑developing a US$350 million SAF facility in Sabah.
🌱 The Energy Transition Is Now Embedded: CCS at Kasawari, SAF in Sabah, and net‑zero commitments across the industry are reshaping how greenfield projects are evaluated and financed.
📊 UOB KayHian's 2019 Screen Aged Well: The companies identified with lean balance sheets (Yinson, MISC, Deleum, Dayang) largely survived and thrived. The highly leveraged players (Bumi Armada, Sapura Energy) faced restructuring. The lesson: in a cyclical industry, balance sheet strength is destiny.
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