Exploration & Production

Sarawak’s proposed sales tax is a bitter pill for IOCs

The Sarawak state government’s proposed sales tax risks deterring potential developers The Sarawak state government’s proposed sales tax risks deterring potential developers.
By Damon Evans 20 December 2018 0 33760
Petronas’s PFLNG facility off the coast of Sarawak. (Petronas)

The Malaysian state of Sarawak, location of the country’s 29.3 mtpa LNG plant, intends to introduce a 5% sales tax on all petroleum product exports from 1 January 2019. The move is the latest in a political battle between Sarawak, the country’s NOC Petronas, and Malaysia’s new government. 

Aside from significantly reducing the profitability of various producing fields, the move could curtail development of potential new projects waiting to take FID and limit the growth in future hydrocarbon output. 

The proposed tax – which will cover crude...