Oil Extraction In Malaysia

EFFECTS OF OIL EXTRACTION ON MALAYSIA’S ECONOMY

Definition of Oil Extraction

Oil extraction can be defined as the process of removing petroleum sources from the beneath of the Earth. This process usually starts with the penetrating of wells into the underground reservoir. These oil wells will then be found by drilling a deep opening under the Earth with an oil rig. (Petroleum.co.uk, 2013) After large quantities of oil and gas are established at a drilling location, this place will be known as a field. If a field is discovered, a production facility is built and environmental, social and logistical factors are being focused on. (EconomyWatch, 2010) These are the normal procedures and steps in extracting an oil field.

History of Oil Production

The first oil well discovered was in Sarawak in 1909 and it was firstly produced in 1910. 65 years later, in 1975, the state governments granted the license called as petroleum concession to the oil companies in Malaysia. This license will give them the rights to explore and produce resources. (Malaysia, 2005) These companies will then support the country by paying royalties and taxes to the government. (Refer to Figure 1) Our national oil company manages to hold possession and administration control in investigation, advancement and creation of oil assets. An example of national oil and gas company is PETRONAS, short for Petroliam Nasional Berhad, founded on 17 August 1974. Our Government of Malaysia owns this company fully. (Malaysia, 2005) This company is responsible for developing and supporting the increase of oil and gas resources in our country. Nowadays, PETRONAS plays a major role in the country’s economy as it provides a large income for the country, with 45% of the government’s budget. They continue to maintain this role in controlling the growth of the industry through its new founding of oil wells and also help to provide new opportunity for other local companies to improve and be able to survive with the momentum of the industry’s growth. (E.T. Programme,

In fact, cashes that flow into the Malaysian treasury has been supported by the discoveries of oil wells and the recent high fuel prices. However, how long will these non-renewable sources help to support our economy? Will these sources continue to gush from our wells? The truth is the blast time for Malaysia in enhancing the oil and gas industry is over. As a matter of fact, our new discoveries are still smaller and need more concentrated capital investment. According to data from Petronas, 40 exploration wells were drilled between 1974 and 1978, resulting in the discovery of 1580 million barrels of oil equivalent, adding to our oil and gas reserves. Meanwhile, between 1999 and 2003, 62 wells were drilled, resulting in 1200 million barrels and 140 wells were drilled between 2004 and 2008 and only 1050 million barrels of oil. (Mavani,