Is Sabah Government Bailing Out non-performing Sabah International Petroleum (SIP) via Sabah Maju Jaya (SMJ) Energy?

A recent report sheds light on Sabah’s bold moves in the oil and gas (O&G) sector, particularly regarding the fate of state-owned Sabah International Petroleum Sdn Bhd (SIP) and the involvement of a newly created Sabah Government-Linked Company (GLC) known as Sabah Maju Jaya (SMJ) Energy. 

As a Sabah state-owned entity that was created under Hajiji’s leadership to transform the state into an Oil and Gas hub, SMJ is in a hot soup after the news of its RM 900 million capital raising exercise, led by SMJ technical advisor and chairman of Sabah Development Bank (SDB) Datuk Seri Panglima Lim Haw Kuang.

As only 10% of Sabah State Government Linked Companies (GLCs) are currently performing well in the eyes of the state Government, the remaining 90% of close to 200 state-owned GLCs are loss making companies that are seen as a heavy burden to the tax payers as the new Madani Government under the Prime Minister Datuk Seri Anwar Ibrahim continue to subsidize heavily on the state’s ambitious plan to grow the economy and help the poor Sabahans.

SMJ Energy’s acquisition spree, coupled with its recent issuance of RM900 million Islamic medium-term notes, raises eyebrows due lack of long-term vision. While the infusion of capital holds promise for SMJ Energy’s expansion plans, it also fuels speculation about the state’s role in propping up SIP and its broader agenda in the O&G sector and how it benefits Sabahan local service providers.

SMJ Energy’s ambitious plans to acquire six additional O&G assets, alongside its efforts to finalize the RM1.2 billion acquisition of Sabah International Petroleum (SIP) is seen as a bailout by Oil and gas analysts, business communities, including politicians such as YB Bung Mokhtar who recently raised this question in the recent state assembly.

The transparency of how RM 900 million is being used by SMJ was in question by Bung, prompting further scrutiny by lawmakers and opposition as reported in many news outlets.

Former CEO of Institute of Development Sabah (IDS) Datuk Dr. Johan Ariffin Samad expressed his frustration on the risks that the Sabah Government will face in the oil and gas business

He said “We presume that this money raised will be used for SMJ acquisition of existing oil and gas assets and to bail out SIP.”

He further added that “The success of SMJ will also be dependent on its management and personnel employed. Most of the announcements by SMJ only relates to acquisitions and fall short on mentioning the transfer of technology and expertise to Sabahans.”

The big picture is that newly created GLCs such as Sabah Maju Jaya (SMJ) Energy and its fund-raising activities are akin to 1MDB’s fund raising to acquire assets and such approach may not fix the fundamentals to revive its 190+ loss making state GLCs. 

SIP, originally established by the Sabah state government to bolster its presence in the energy sector, has faltered amidst the volatile O&G landscape. With valuable assets and exploration blocks under its belt, SIP’s financial woes have left it teetering on the edge, prompting concerns that taxpayer funds may 

Amidst these developments, Masidi Majun, Sabah’s Finance Minister, emerges as a pivotal figure advocating for reform within the state’s Government-Linked Companies (GLCs). His call for the appointment of credible individuals to lead these entities underscores the imperative for effective governance and responsible management, particularly in the O&G sector.

However, the appointment of former Shell veteran Datuk Seri Lim who seats also as a director in Ranhill as the technical advisor of SMJ begs the question of the perceived success by SMJ Energy from its capital raising exercises. 

As Sabah charts its course in the O&G landscape, the central question looms large: 

What are the next steps behind the state government acquisitions of SIP and other assets? 

The answer remains elusive, but what’s clear is the need for transparency, accountability, and strategic foresight in Sabah’s O&G endeavors to safeguard the interests of its citizens and ensure sustainable growth vis-à-vis the loss-making Sabah state GLCs that are causing billions of tax payers money in the last decade.

Or should the State Government approve the appointment of the credible turnaround or transformation experts to fix SMJ and other state-owned GLCs?

Clearly Hajiji and Masidi are both running out of time and plans to transform Sabah GLCs as the Federal Government’s budget is severely affected by Sabah’s demand and political power play. 

As mentioned by Datuk Dr. Johan Ariffin, he said that petroleum business observers pointed out if SMJ Energy are to go upstream, the state GLC needs to develop a company similar to Petros Sarawak, otherwise it will end up becoming a passive operator. 

Being a passive operator (or investor) may not be the best way to ensure dividend payments to Sabah are met given the loss opportunity to position SMJ Energy as a nation-builder similar to the PETROS Sarawak model.

Clearly, Sabah business communities are not getting the benefits from the existing strategy by Masidi Manjun and unemployment in high-value jobs in the Oil and Gas industry are fueling pressures for the lawmakers to make drastic transformative changes.

Indeed, the Sabah’s venture into Oil & Gas has many risks that are not handled well by the present administration. It is time for change and people are waiting.


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