Political stability may be behind Shell’s recent shift to Sarawak, says analyst

KOTA KINABALU: An analyst believes Shell’s decision to downsize its operations in Sabah and move its personnel into Sarawak was partly driven by the political stability in the latter.

Sociopolitical analyst Awang Azman Pawi said the stability of the state government under the leadership of Chief Minister Abang Johari Openg has managed to instill foreign and local investors’ confidence in Sarawak.

“This has (particularly) attracted foreign investors to pump more investments into Sarawak and this can also be attributed to this latest move by Shell (in Sabah),” he told FMT.

“The repositioning of Shell’s focus (back) to Miri is because Sarawak is seen to be having a clearer state policy as well as better facilities. This exudes confidence that the state is prepared to further develop and move forward in the oil and gas industry.”Powered by Streamlyn

According to Awang Azman, Sarawak’s determination in defending its rights by being bold enough to stand up to Putrajaya on issues pertaining to oil and gas was also another consideration.

On Jan 1 last year, Sarawak imposed a 5% sales tax on Petronas’ petroleum products under the state’s Sales Tax Ordinance 1998.

However, Petronas had initially refused to pay the tax, saying it was unconstitutional, resulting in the state government taking legal action against it.

On March 13 this year, the Kuching High Court ruled that Sabah and Sarawak had the right under the Federal Constitution to impose sales tax on petroleum products, dismissing Petronas’ bid to declare the Sarawak sales tax null and void.

“This showed Sarawak was serious in fighting for its interest and the welfare of investors in the state,” Awang Azman said.

“The move by Shell to trim its operations in Kota Kinabalu will surely be a blow to the oil and gas industry in Sabah.”

FMT had reported that Shell would be trimming its operations in Sabah and moving its upstream staff from Plaza Shell here to Miri, Sarawak, the company’s upstream headquarters.

Sources said staff were told at an internal meeting last week that the company was downsizing its presence in the state capital and moving to Sarawak.

Shell Malaysia later confirmed that it would reduce its office footprint in Kota Kinabalu but that the company would continue to be committed to its upstream deepwater and downstream operations as they contribute to the development of communities in Sabah.

Political economist Firdausi Suffian, however, does not believe politics has anything to do with the energy giant’s decision.

“In terms of oil and gas infrastructure, Sarawak has more to offer compared with Sabah.

“And relocating their (upstream) office to Sarawak does not really impact the company’s core activities such as resource extraction,” he said, adding Shell would still be able to operate their upstream business from there.

But he agreed that the move would open up more job opportunities for people in Sarawak, particularly in Miri.

Political activist Zainnal Ajamain also thinks Shell’s decision was influenced purely by business factors rather than the state’s political stability.

“I think Shell is moving some of its people to Miri because there is talk of resources to be found in the Baram area,” he said.

He suggested that by moving its upstream staff from Sabah to the headquarters in Miri, Shell’s chances will be brighter when it came to bidding for potential contracts from Petronas, which oversees all oil and gas matters in the country.

[Source: “Political stability may be behind Shell’s recent shift to Sarawak, says analyst” published by Free Malaysia Today]