Economy of Malaysia - Natural Resources

Natural Resources

Malaysia is well-endowed with natural resources in areas such as agriculture, forestry and minerals. It is an exporter of natural and agricultural resources, the most valuable exported resource being petroleum. At one time, it was the largest producer of tin, rubber and palm oil in the world. In terms of agriculture, Malaysia is one of the top exporters of natural rubber and palm oil, which together with sawn logs and sawn timber, cocoa, pepper, pineapple and tobacco dominate the growth of the sector. Palm oil is also a major generator of foreign exchange.

Regarding forestry resources, it is noted that logging only began to make a substantial contribution to the economy during the nineteenth century. Today, an estimated 59% of Malaysia remains forested. The rapid expansion of the timber industry, particularly after the 1960s, has brought about a serious erosion problem in the country's forest resources. However, in line with the Government's commitment to protect the environment and the ecological system, forestry resources are being managed on a sustainable basis and accordingly the rate of tree felling has been on the decline.

In addition, substantial areas are being silviculturally treated and reforestation of degraded forest land is also being carried out. The Malaysian government provide plans for the enrichment of some 312.30 square kilometres (120.5 sq mi) of land with rattan under natural forest conditions and in rubber plantations as an inter crop. To further enrich forest resources, fast-growing timber species such as meranti tembaga, merawan and sesenduk are also being planted. At the same time, the cultivation of high-value trees like teak and other trees for pulp and paper are also encouraged. Rubber, once the mainstay of the Malaysian economy, has been largely replaced by oil palm as Malaysia's leading agricultural export.

Tin and petroleum are the two main mineral resources that are of major significance in the Malaysian economy. Malaysia was once the world's largest producer of tin until the collapse of the tin market in the early 1980s. In the 19th and 20th century, tin played a predominant role in the Malaysian economy. It was only in 1972 that petroleum and natural gas took over from tin as the mainstay of the mineral extraction sector. Meanwhile, the contribution by tin has declined. Petroleum and natural gas discoveries in oil fields off Sabah, Sarawak and Terengganu have contributed much to the Malaysian economy. Oil and gas resources are managed by Petronas, the state controlled oil company which forms production sharing contracts with other players like Exxon-Mobil and Royal Dutch Shell to explore oil fields in Malaysia. Other minerals of some importance or significance include copper, bauxite, iron-ore and coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimension stones such as granite as well as marble blocks and slabs. Small quantities of gold are produced.

Malaysia's broad and shallow continental shelf consists of several deep water prospective areas. Malaysia has 500,000 km2 available for oil and gas exploration. 51 of the 70 producing fields in Malaysia are oil fields. In January 2004, Malaysia's oil reserves were estimated to be 4.84 billion barrels (769,000,000 m3), while natural gas reserves stood at 87 trillion standard cubic feet (2,460 km3). The country produces about 0.00075 billion barrels (119,000 m3) barrels of crude oil every day and 2.20 trillion standard cubic feet (60 km3) of natural gas condensates per year. In 2004, Minister in the Prime Minister's Department, Mustapa Mohamed, revealed that Malaysia's oil reserves stood at 4.84 billion barrels (769,000,000 m3) while natural gas reserves increased to 89 trillion cubic feet (2,500 km³). This was an increase of 7.2%. As of January 1, 2007, Petronas reported that oil and gas reserve in Malaysia amounted to 20.18 billion barrels (3.208×109 m3) equivalent. In January 2008, the Malaysian natural gas reserves holds up to 14,670,000,000 barrels (2.332×109 m3) of oil equivalent. As of January 2009, Malaysia has proven oil reserves of up to 4 billion barrels (640×10^6 m3).

The government estimates that at current production rates Malaysia will be able to produce oil up to 18 years and gas for 35 years. In 2004, Malaysia is ranked 24th in terms of world oil reserves and 13th for gas. 56% of the oil reserves exist in the Peninsula while 19% exist in East Malaysia. The government collects oil royalties of which 5% are passed to the states and the rest retained by the federal government.

Other minerals of some importance or significance include copper, bauxite, iron-ore and coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimension stones such as granite as well as marble blocks and slabs. Small quantities of gold are produced.