Updated December 2023

Policy and Targets

Background and the Role of Reductions in Meeting Environmental and Economic Objectives

Between 2012 and 2021, oil production in Malaysia rose and peaked in 2016 before falling to the lowest level in 2022, significantly lower than that in 2012. The volume of gas flared fell to its lowest level in 2022, and due to the even more significant decline in oil production, it was accompanied by some downward movement of flaring intensity (Figure 6). There were 65 individual flare sites in the most recent flare count, conducted in 2022. 

Figure 6 Gas flaring volume and intensity in Malaysia, 2012–22


Malaysia has ratified both the Paris Agreement and the Kyoto Protocol It submitted its first Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change in 2016 and an update in 2021. Malaysia has committed to reducing its carbon intensity (greenhouse gas [GHG] emissions as a percent of gross domestic product) relative to 2005. The updated NDC increased the unconditional contribution for carbon-intensity reduction from 35 percent in the 2016 submission to 45 percent. All seven GHGs are covered, but flaring and venting are not mentioned in the NDC, even though it notes the importance of the oil and gas industry as a key sector of the Malaysian economy. Malaysia participates in the Global Methane Pledge.

Malaysia has historically taken a strategic approach to domestic energy issues, starting with the National Petroleum Policy, 1975 (efficient utilization of petroleum resources); the National Energy Policy, 1979 (efficient utilization of energy and elimination of wasteful and nonproductive use); and the National Depletion Policy, 1980 (prolonging the life span of the nation’s oil and gas reserves. It has continued adjusting and expanding these policies with follow-up initiatives. At the macroeconomic level, successive Malaysian plans have aimed to put the country, its people, and economy on a growth trajectory. These aims include sustainable growth and the reduction of GHG emissions, with tonnes of carbon dioxide equivalent a year per unit of gross domestic product as a sustainable consumption and production indicator. Aligned with these efforts, Petronas initiated the Association of Southeast Asian Nations (ASEAN) Methane Roundtable in 2021, with the aim to discuss opportunities to intensify collaboration on methane emissions management in the region, including the development of suitable regulations. 

Despite the focus on sustainable development and environmental protection across these key government initiatives, no regulations or government policies explicitly cover gas flaring and venting. Instead, these topics are treated in confidential documents, such as the production and operations procedures and guidelines, and licensing arrangements, such as production-sharing contracts (PSCs) and risk service contracts.

Targets and Limits

There is no evidence of any specific government-imposed flaring or venting-related targets or limits in the sources consulted. However, Petroleum Nasional Berhad (Petronas), the national oil company, has publicly pledged to reach net-zero carbon emissions by 2050. It will do so by deploying (among other levers) its operational strengths to reduce gas flaring and venting, capture methane emissions, and optimize production operations.

Legal, Regulatory Framework, and Contractual rights

Primary and Secondary Legislation and Regulation

The Petroleum Development Act, 1974, forms the basis for all oil- and gas-related activities in Malaysia, defining items such as hydrocarbon ownership and the role of Petronas. The Petroleum Development Act, 1974 and Petronas’ Memorandum and Articles of Association, 1983, define the rights and responsibilities of Petronas. The Petroleum Regulations, 1974, complement the Petroleum Development Act, 1974, regarding license applications and data provision. The Gas Supply Act, 1993, covers gas transport and the related metering issues. The regulator in charge of it is defined in the Energy Commission Act, 2001.

The Environmental Quality Act, 1974, established the principles of environmental protection. It is supported by the Environmental Quality (Clean Air) Regulation, 2014, and the Environmental Quality (Prescribed Activity) (Environmental Impact Assessment) Order, 2015. The limitations set on air pollutants also apply to oil and gas operations across upstream, midstream, and downstream operations.

The Malaysia-Thailand Joint Authority Procedures for Production Operations, 2009, is an intercountry agreement governing production operation procedures in shared areas. It sets ground rules for flaring and venting. The requirements for exemptions from these rules appear comparable to those stipulated in confidential arrangements with contractors and operators.

The Petronas Procedures and Guidelines for Upstream Activities (PPGUA) state detailed country-specific requirements, including the key provision that upstream activities are to be carried out in line with good and modern petroleum practices, including flaring, venting, and fugitive methane. Although not a regulation, these guidelines carry significant weight, given the influence of Petronas as the hydrocarbon resource owner with a direct reporting line to the prime minister. Connected to the PPGUA, the Minimum Environmental Standard (MES) guideline includes the Greenhouse Gas Reporting and Management Plan, and provides a detailed set of rules for existing assets and new developments on design philosophy, measuring equipment, and emission tolerances and targets.

Legislative Jurisdictions

Hydrocarbon and environmental matters are subject to national laws and jurisdiction. Flaring, venting, and fugitive methane are not publicly regulated but are governed by Petronas’ commitments.

Associated Gas Ownership

Following Section 2 of the Petroleum Development Act, 1974 , ownership and exclusive exploration and development rights over oil and gas are vested in Petronas. Subject to an approved development plan, Petronas has the option of maintaining title to the associated gas that is neither used in operations nor marketed. As with all other PSCs, title to cost oil and gas and the contractor’s share of profit oil and gas is transferred to the PSC contractor. By contrast, under risk service contracts, which are fee-based, no title to any oil and gas produced is transferred.

Regulatory Governance and Organization

Regulatory Authority

The Petroleum Development Act, 1974 , vests the powers and responsibilities over hydrocarbon resources in Petronas. Petronas is under the control and direction of the prime minister (Section 3 of the Petroleum Development Act, 1974). The prime minister also has the power to make regulations relating to the exploration and exploitation of hydrocarbons (Section 7), which he or she may delegate (Section 7A). The Malaysia Petroleum Management (MPM) within Petronas carries out the regulatory responsibilities assigned to Petronas, making it the upstream regulator in Malaysia.

Based on the Environmental Quality Act, 1974 , the minister of environment and water is responsible for managing the environment and limiting waste, emissions, and other environmentally adverse factors. In line with Section 3, he or she appoints the director-general of environmental quality, who administers the provisions of the Environmental Quality Act, 1974; the Environmental Quality (Clean Air) Regulation, 2014 ; and other laws and regulations. On issues such as emissions management, the responsible Petronas department (MPM for upstream activities and the health, safety, environment department for activities covering all business lines) typically liaises with the director-general of environmental quality.

Regulatory Mandates and Responsibilities

The MPM is in charge of production-licensing arrangements with external companies, including the terms of contracts; controls the work programs and budgets; and oversees compliance with guidelines and regulations. As flaring- and venting-related matters, as well as fugitive methane, are captured in the PPGUA (typically referred to in confidential licensing arrangements) , the MPM has significant influence over the treatment of associated gas. This element is further strengthened by the Carbon Footprint Assessment guideline mentioned in the Greenhouse Gas Reporting and Management Plan section of the MES guideline.

Based on the responsibilities vested in the minister of environment and water, according to Section 3 of the Environmental Quality Act, 1974 , its subordinate director-general of environmental quality can issue emission licenses and carry out monitoring activities and assessments across upstream, midstream, and downstream operations. Given the MPM’s authority over upstream operations, it can be assumed that any upstream-specific action will be carried out in close coordination.

Monitoring and Enforcement

By monitoring the implementation of the PPGUA , the MPM gains insights into the remaining lifecycle of upstream activities, including the use of associated gas, across the country’s portfolio. At the core, is the MES Greenhouse Gas Reporting and Management Plan, which sets stringent criteria for existing and new developments such as design of continuous flaring and venting for new projects, carbon capture, utilization, and storage for high–carbon dioxide fields, minimum equipment requirements, and mandatory measuring and reporting of emissions. The MPM can also set gas supply targets for the operator and conduct quarterly performance reviews. It also sets annual emission limits. If these limits are exceeded, the operator needs to notify the MPM and provide a mitigation plan. The MPM can then, at its sole discretion, issue an exemption. Noncompliance can lead to legal and financial consequences.

Licensing/Process Approval

Flaring or Venting without Prior Approval

Section 10 of the Malaysia-Thailand Joint Authority Procedures for Production Operations, 2009 , bans flaring and venting without prior approval except in the following circumstances:

  • during well cleaning and testing periods (not exceeding 48 hours)
  • in emergencies, such as shutdowns or pressure relief
  • during maintenance (not exceeding one week)
  • during temporary equipment failure (not exceeding 72 hours)
  • during gas release from facilities when alternative uses of gas are not economic.      
Authorized Flaring or Venting

Section 10 of the Malaysia-Thailand Joint Authority Procedures for Production Operations, 2009 , in alignment with the requirements of the PPGUA , requires prior approval of any flaring or venting other than those that occur under conditions listed in the preceding section. The PPGUA gives the MPM the authority to set gas supply targets and approve plans for associated gas. For the operations phase of an asset the MES Greenhouse Gas Reporting and Management Plan asks for zero continuous venting and reduced routine flaring where operationally and economically feasible to be considered. 

Development Plans

The PPGUA  provides guidance on the field development plan and its review and approval, including arrangements for any potential gas flaring system in the overall development process. The MES Greenhouse Gas Reporting and Management Plan requires new developments to be designed for zero continuous flaring and venting; to include carbon capture, utilization, and storage for high-carbon-dioxide fields; and to apply a design philosophy that mitigates methane emissions. New developments must also include a carbon footprint assessment to determine the expected GHG emissions over their life cycle. Specific guidance will be provided for both on-field methane emissions measurements and remote measurements capable of capturing these emissions as part of the overall GHG emissions profile. Both new and existing operations must fulfill minimum requirements for the equipment measuring emissions.

Section 34 of the Environmental Quality Act, 1974 , in conjunction with the First Schedule of the Environmental Quality (Prescribed Activity) (environmental impact assessment [EIA]) Order, 2015 , entitles the minister of environment and water to ask for an EIA for upstream oil and gas developments, including pipeline and storage construction plans (no requirements for installations specific to flaring and venting). The director-general of environmental quality reviews and approves or rejects the development plans based on the submitted report. In case of rejection, a resubmission with an improved development concept is typically allowed.

Economic Evaluation

The MES Greenhouse Gas Reporting and Management Plan requires new developments to consider near-zero or minimal methane emissions technologies and existing assets to reduce continuous flaring; these will be applicable throughout the asset life cycle where operationally and economically feasible.

Measurement and Reporting

Measurement and Reporting Requirements

The PPGUA  provides guidance regarding minimum technical requirements and the approval process for metering systems. Flaring and venting volumes need to be reported, in line with measurement requirements. The MES Greenhouse Gas Reporting and Management Plan has specific measuring equipment and methods as well as frequency requirements for existing assets, and to a reduced extent also for new developments.

In line with Section 8 of the Malaysia-Thailand Joint Authority Procedures for Production Operations, 2009 , the license holder must maintain production reports, including volumes of flared and vented gas, and submit them to the authorities. Sections 12–15 also detail metering and measurement requirements.

Measurement Frequency and Methods

The MES Greenhouse Gas Reporting and Management Plan requires existing assets to measure and report GHG emissions by source and by gas type on a monthly basis, and provide annual submissions of GHG emissions forecasts. Minimum measurement equipment requirements are set for both new developments and existing assets.

According to Section 8 of the Malaysia-Thailand Joint Authority Procedures for Production Operations, 2009 , the license holder must keep daily operations logs and measure production daily and monthly. Section 14 states that the metering system should be in accordance with the standards of the American Gas Association or the American Petroleum Institute.

Engineering Estimates

Provided the MPM approves the exemption in writing, existing assets can also use alternative emission measuring methods other than the ones requested in the MES Greenhouse Gas Reporting and Management Plan.

Record Keeping

In line with Section 8 of the Malaysia-Thailand Joint Authority Procedures for Production Operations, 2009 , the license holder must keep the records of the operations logs and production reports for at least a year.

Data Compilation and Publishing

In its annual and biannual sustainability reports, Petronas publishes flaring and venting data. In its role as Malaysia’s national oil company, it also provides countrywide data for NDC purposes.

Fines, Penalties, and Sanctions

Monetary Penalties

Following Section 7 of the Petroleum Development Act, 1974 , any violation of the act’s provisions can be sanctioned with imprisonment or fines. Section 29 of the Environmental Quality (Clean Air) Regulation, 2014 , provides for imprisonment or fines for violations of the provisions of the Environmental Quality Act, 1974 . The PPGUA  is aligned with the above provisions, in that any noncompliance with their guidelines, including the provisions on flaring and venting, can lead to legal and financial consequences. No evidence could be found in the sources consulted that these provisions have been explicitly applied to flaring- or venting-related contraventions.

Nonmonetary Penalties

Termination clauses are typically covered in the PSCs and risk service contracts, none of which is publicly available. They state that any noncompliance with the MPM requirements (including the PPGUA) can be sanctioned. Section 24 of the Environmental Quality (Clean Air) Regulation, 2014 , gives the director-general of environmental quality the right to issue a prohibition order to discontinue operations, if necessary, to safeguard public health, safety, or welfare. Section 22 allows the director-general to impose additional requirements on operations or take any other appropriate measure deemed necessary.

Enabling Framework

Performance Requirements

The Third Schedule of the Environmental Quality (Clean Air) Regulation, 2014 , on limit values and technical standards, covers the midstream and downstream oil and gas sectors but not the upstream sectors.

Fiscal and Emission Reduction Incentives

No evidence regarding fiscal and emission reduction incentives could be found in the sources consulted.

Use of Market-Based Principles

No evidence regarding the use of market-based principles to reduce flaring, venting, or associated emissions could be found in the sources consulted.

Negotiated Agreements between the Public and the Private Sector

No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted.

Interplay with Midstream and Downstream Regulatory Framework

Section 1 of the Gas Supply Act, 1993 , regulates gas supply to consumers through pipelines. The processing or refining of petroleum or manufacturing of petrochemical products from petroleum is reserved for Petronas. Any exception requires the prime minister’s approval (Section 6 of the Environmental Quality Act, 1974) . There is no evidence in the sources consulted that any exceptions or privileges for using associated gas have been granted.