Transboundary Implications of Fossil Fuel Demand Reduction for Malaysia

Malaysia faces significant fiscal and energy security risks due to its heavy reliance on oil and gas exports, particularly LNG shipments to Japan, South Korea, and China. The document highlights a growing crude oil trade deficit and the threat of stranded assets as global demand shifts. To mitigate these risks, the report recommends diversifying into green manufacturing, hydrogen, and carbon capture services, while establishing a Sustainable Energy Transition Fund and a Just Transition Commission to support displaced workers in resource-dependent regions like Sabah and Sarawak.

• Malaysia's fiscal stability is highly dependent on the oil and gas sector, which contributed 3.2% to GDP and nearly 20% of federal government revenue in 2024. PETRONAS provided RM40 billion to the federal treasury in 2023.
• The country's LNG export market is highly concentrated, with over 91.7% of exports going to Japan, South Korea, and China. This creates acute exposure to external shocks as these markets tighten climate policies, contributing to a 7% decline in LNG export volumes in 2023.
• Malaysia is experiencing an emerging energy security vulnerability, shifting from a net-exporter to a net-importer of crude oil. In Q4 2024, the country recorded a net trade deficit of RM9.1 billion in crude oil, importing RM15.1 billion while exporting only RM6.0 billion.
• The energy transition poses significant social and equity risks, particularly in Sabah and Sarawak, where 61% of national reserves are located. Declining upstream activity threatens the OGSE sector, which employed approximately 123,000 workers nationally in 2022–2023.
• Malaysia faces substantial environmental and fiscal liabilities from decommissioning, with over 380 offshore platforms and thousands of kilometres of pipelines. Potential spending on abandonment was flagged at USD 25 billion between 2018 and 2022.
• The government is pursuing diversification through the National Energy Transition Roadmap (NETR), targeting 70% installed renewable energy capacity by 2050. Key initiatives include the Kasawari CCS project (3.3 MtCO₂/year) and Sarawak's hydrogen development corridor.
• To ensure a just transition, the report recommends creating a Just Transition Commission and establishing a Malaysia Sustainable Energy Transition Fund (MSETF) with a target capitalization of RM100 billion by 2040.

APA

Yusoff, N. Y. M. (2025). Transboundary Implications of Fossil Fuel Demand Reduction for Malaysia. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2025/10/PPFF-2.0-Case-Study-Malaysia-final.pdf

Chicago

Yusoff, Nora Yusma Mohamed. Transboundary Implications of Fossil Fuel Demand Reduction for Malaysia. Climate Strategies, 2025. https://climatestrategies.org/wp-content/uploads/2025/10/PPFF-2.0-Case-Study-Malaysia-final.pdf.

Wikipedia

{{cite report |last1=Yusoff |first1=Nora Yusma Mohamed |title=Transboundary Implications of Fossil Fuel Demand Reduction for Malaysia |publisher=Climate Strategies |date=October 2025 |url=https://climatestrategies.org/wp-content/uploads/2025/10/PPFF-2.0-Case-Study-Malaysia-final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{yusoff2025transboundary, author = {Yusoff, Nora Yusma Mohamed}, title = {{Transboundary Implications of Fossil Fuel Demand Reduction for Malaysia}}, institution = {Climate Strategies}, year = {2025}, month = oct, url = {https://climatestrategies.org/wp-content/uploads/2025/10/PPFF-2.0-Case-Study-Malaysia-final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }