Production Sharing Contract Malaysia: Everything You Need to Know

Malaysia is one of the fastest-growing economies in Southeast Asia, with a booming oil and gas industry that has attracted many foreign investors. One of the ways foreign companies can participate in the Malaysian oil and gas industry is through a production sharing contract (PSC).

What is a Production Sharing Contract?

A production sharing contract (PSC) is a type of agreement between a government and an oil and gas company. The government grants the company the right to explore and produce oil and gas from a specified area, known as a block. In return, the company agrees to share a portion of the revenue generated from the sale of oil and gas with the government.

How Does a Production Sharing Contract Work in Malaysia?

Malaysia has a well-established system of PSCs, with several rounds of bidding conducted by the government to award exploration and production rights to companies. In Malaysia, PSCs are typically awarded for a period of 30 years, divided into exploration and production phases.

During the exploration phase, the company is responsible for conducting seismic surveys, drilling wells and identifying any potential oil and gas reserves. If a commercial discovery is made, the company can proceed to the production phase, where it will extract the oil and gas and sell it on the market.

Under the terms of the PSC, the company is required to pay royalties and taxes to the Malaysian government. The exact percentage of revenue that the government receives will depend on the terms of the PSC, but it can range from 10% to 30%.

Benefits of Production Sharing Contracts in Malaysia

PSCs are a critical component of Malaysia`s oil and gas industry, providing a significant source of revenue for the government and creating jobs for the local population. They also play an essential role in attracting foreign investment to the country, as they offer a stable legal framework for companies to operate.

Moreover, Malaysia has a relatively stable political environment, which is conducive to foreign investment. The country has a well-developed infrastructure, including ports, pipelines, and refineries, making it an attractive destination for oil and gas production.


Production sharing contracts are a vital part of Malaysia`s oil and gas sector, providing a stable legal framework for foreign companies to explore and produce oil and gas. With a well-developed system of PSCs and stable political environment, Malaysia is an attractive destination for foreign investment in the oil and gas industry. If you are interested in investing in Malaysia`s oil and gas sector, a production sharing contract could be the ideal option for you.