As Malaysia’s Sapura Energy tumbles, Petronas’ silence is telling

[SINGAPORE] In an industry where even giants have fallen from dizzying heights, Malaysia’s home-grown oil and gas titan is on the ropes.

Once a flagship of the oil-rich nation’s ambition to build stalwarts in the upstream energy segment, Sapura Energy is teetering on the brink of collapse – buried under more than RM10 billion (S$3 billion) in debt and years of financial and strategic missteps, including a furious global expansion fuelled by debt.

At its peak in 2014 – just before the global oil slump – Sapura Energy had an order book of over RM27 billion and a market value exceeding RM30 billion. It was ranked the world’s second-largest integrated oil and gas services provider, behind only Italy’s Saipem.

Yet, the Bursa-listed company, which counts state fund Permodalan Nasional as its largest shareholder, is set to receive a RM1.1 billion government lifeline, channelled through a special purpose vehicle under the Ministry of Finance. Amid the brouhaha over the government’s controversial rescue plan – slammed by critics as a bailout – the silence from national oil giant Petronas is striking. Especially so, given its long-standing ties to Sapura Energy, the company’s once-strategic role in Malaysia’s oil and gas sector, and the scale of the fallout from its collapse.

In 2011, SapuraCrest and Kencana Petroleum – then separate entities led by corporate heavyweights Shahril Shamsuddin and Mokhzani Mahathir – snagged Petronas’ first risk service contract (RSC) for the Berantai field. It was a bold swing in Malaysia’s push to cultivate home-grown upstream champions. Just a year later, the two merged to form SapuraKencana, landed global clients and later rebranded as Sapura Energy.