Malaysia’s natural gas sector operates as several connected markets. Offshore fields near Sarawak and Sabah support one of the world’s largest liquefied natural gas export industries. Peninsular Malaysia has an extensive pipeline network serving power stations and manufacturers, but it also receives imported LNG. Sarawak is increasing its authority over gas sold within the state, while PETRONAS remains central to upstream development, LNG production and national strategy.
Malaysia can therefore be a major producer, exporter and importer at the same time. Geography explains much of this structure: large resources are located off East Malaysia, while major demand also lies across the South China Sea on the peninsula.
Bintulu Turned Sarawak’s Offshore Gas Into a Global LNG Business
The PETRONAS LNG Complex at Bintulu is the centre of Malaysia’s international gas trade. Its nine production trains have a combined capacity of about 29.3 million tonnes per year. Gas from offshore Sarawak is processed, liquefied and shipped mainly to Asian buyers.
Malaysia was the world’s fifth-largest LNG exporter in 2024, with exports averaging about 3.7 billion cubic feet per day. Japan, China and South Korea have traditionally been the main markets. PETRONAS reported that the Bintulu complex delivered 25.13 million tonnes of LNG in 2024.
Bintulu also links upstream production with gas processing, petrochemicals, power generation, shipping and supporting services. New fields off Sarawak benefit from this existing network because they can connect to established pipelines and processing facilities instead of requiring a separate export chain.
Malaysia has extended production beyond shore-based LNG. PETRONAS operates two floating LNG units, PFLNG Satu and PFLNG Dua, with combined capacity of about 2.7 million tonnes per year. These facilities can commercialize offshore resources that may be too remote for a conventional connection. A third nearshore floating LNG project planned for Sabah would expand this model.
New Offshore Fields Are Replacing Declining Supply
Malaysia had an estimated 32 trillion cubic feet of proved gas reserves at the end of 2023. Production reached a record 2.7 trillion cubic feet in 2022 after investment in new and existing fields. Maintaining that level is difficult because many producing areas are mature and newer resources may contain more carbon dioxide or lie in deeper water.
The Jerun field, around 160 kilometres offshore Sarawak, achieved first gas in July 2024 and supplies the Bintulu LNG system. It is designed to reach approximately 550 million cubic feet per day at peak. Kasawari also began supplying gas in 2024, helping PETRONAS lift force majeure on part of the Bintulu system later that year.
Shell’s Timi field started production in 2023 and supports a wider offshore hub. Larger developments including Rosmari-Marjoram and Lang Lebah are intended to add future supply. Malaysia must bring these projects forward while replacing natural decline and continuing to serve LNG contracts, domestic industry and power generation.
Some new resources contain high levels of carbon dioxide, requiring more treatment and raising development costs. Malaysia is linking selected projects with carbon capture and storage. This may make difficult resources usable, but it adds technical, regulatory and infrastructure requirements.
Peninsular Malaysia Uses Both Pipelines and Imported LNG
The Peninsular Gas Utilization network created a different gas economy from the export system in Sarawak. It extends for roughly 1,630 miles and can transport about 3.5 billion cubic feet per day. The network connects processing facilities, power plants and industrial customers and also supports pipeline exports to Singapore.
Industry overtook the power sector as Malaysia’s largest gas consumer in 2017 and remained ahead through the latest detailed data. Gas supports petrochemicals, refining, manufacturing, glass, food processing and other activities requiring reliable heat or feedstock. Power generation remains another major market.
Malaysia began importing LNG in 2013 through the Melaka regasification terminal, followed by a second terminal at Pengerang in Johor. These facilities allow seaborne gas to enter a country that is also a large LNG exporter.
This two-way trade reflects geography and supply decline. It can be more efficient to export Sarawak gas under established contracts while importing LNG directly into Peninsular Malaysia than to build a major pipeline across the South China Sea. Regasification also gives the peninsula another supply option when domestic offshore output is insufficient or disrupted.
Malaysia’s third-party access system allows licensed parties to use regasification terminals and gas pipelines under regulated arrangements. The goal is to increase competition and strengthen security of supply, although participation still depends on access terms, pricing and the ability to compete with established suppliers.
Domestic Gas Prices Are Increasingly Connected to LNG
Malaysia historically used regulated gas prices to support electricity and industrial development. That encouraged demand, but prices below international levels could discourage new supply and increase the burden on producers.
The Malaysia Reference Price now links domestic gas pricing more closely to the weighted average free-on-board value of Malaysian LNG exports. This gives the local market a clearer connection to regional gas values and means changes in LNG prices can affect Malaysian buyers.
The balance is difficult. New deepwater or high-carbon-dioxide fields cost more to develop than older resources, so producers need prices that support exploration and treatment. Industrial consumers need affordable gas to remain competitive. The pricing framework must support investment without weakening gas-intensive manufacturing.
Sarawak Is Taking a Larger Role in Its Domestic Gas Market
Gas governance in Sarawak has become a major change in Malaysia’s energy sector. The state-owned Petroleum Sarawak Berhad, or PETROS, became Sarawak’s gas aggregator under state law, with the role taking effect in March 2025. PETROS is responsible for buying, selling and supplying gas within Sarawak and supporting the state’s distribution system.
A joint federal-state declaration in May 2025 recognised PETROS in this role while maintaining PETRONAS functions under federal petroleum law. Existing PETRONAS LNG contracts were also to be honoured. The arrangement separates gas supplied to users within Sarawak from the wider upstream and export system.
Sarawak wants more local gas to support power generation and industries such as methanol and petrochemicals. The Bintulu Additional Gas Sales Facility 2 reflects this direction by supplying a new methanol plant, an existing power station and future industrial customers.
The long-term effect will depend on coordination among PETROS, PETRONAS, producers and buyers. Clear commercial rules are important because Sarawak hosts the resources and LNG infrastructure supporting much of Malaysia’s gas export business.
Malaysia Must Protect Supply and Market Position
Malaysia has a large reserve base, experienced operators, established customers, extensive pipelines, regasification capacity and one of the world’s leading LNG complexes. Its challenge is to keep those assets supplied as older fields decline and new projects become more complex.
More offshore drilling, timely development and reliable performance at Bintulu will determine whether Malaysia can maintain LNG exports. Regasification and third-party access will remain important for Peninsular Malaysia, while PETROS will shape a larger share of gas distribution and industrial policy in Sarawak.
Natural gas will continue to support Malaysian power, manufacturing and export earnings even as renewable energy expands. The sector is becoming a more integrated system of offshore production, LNG exports, domestic pipelines, imported cargoes and state-level market control.
