Sapura Energy Berhad (SEB) once stood tall as a cornerstone of Malaysia’s energy security, vital for sustaining our oil and gas capabilities.

Sapura Energy Berhad is a major part of Malaysia’s oil and gas ecosystem, with over 2,000 local vendors (mostly SMEs) in its supply chain and approximately 59,000 jobs supported in the oil and gas industry.

Its extensive vendor network underpins key upstream projects and helps maintain the integrity of Malaysia’s O&G supply chain, contributing to national revenue and energy security.

According to Anwar Ibrahim, the recent RM1.1 billion injection is meant to directly settle SEB’s debts with its vendors and “save the local oil and gas industry’s ecosystem.” He warned that if SEB were to collapse, foreign companies would step in to fill the void, leading to the loss of control over parts of Malaysia’s oil and gas supply chain and posing a threat to the nation’s energy sovereignty.

Why has it come to this? This injection symbolises the tragic consequences of indecision, delayed reactions, and the failure to act swiftly in moments of crisis.

The collapse of Sapura is a story of how dithering turned a manageable crisis into a billion-ringgit bailout.

The missed opportunities and government inaction at critical moments are evident in two major shocks to the oil and gas industry.

Shock 1 – Oil price crash in 2014

When global oil prices crashed dramatically in 2014—from a lofty US$110 per barrel to below US$40—Sapura Energy faced its first major shock. Across the globe, governments swiftly mobilised to stabilise their strategic assets.

Italy rescued Saipem with a €2 billion bailout; the United States supported McDermott through structured bankruptcy proceedings; and Seadrill restructured its debts efficiently. But Malaysia hesitated.

Shock 2 – Covid-19 in 2020

As Sapura struggled to find its footing, along came another crushing blow—the COVID-19 pandemic in 2020. Global lockdowns halted major projects overnight, driving costs sky-high and plunging revenues sharply downward.

Sapura’s financial reports from fiscal year 2020 show a staggering RM4.23 billion loss, including US$134 million (approximately RM550 million) in direct pandemic-related costs alone.

Decisive intervention from the Malaysian government then could have made a difference.

While governments elsewhere acted swiftly—supporting vital national industries with structured financial relief and interventions—Malaysia continued to watch from the sidelines.

Instead of structured support, Sapura faced silence and delay.

PNB and Maybank: Institutional missteps deepen the crisis

Amid this government indecision, major institutional stakeholders—Permodalan Nasional Berhad (PNB) and Maybank— had their own missteps into this already volatile mix.

In 2019, PNB injected RM2.7 billion through a rights issue, intended as a financial lifeline for Sapura.

However, PNB controversially directed nearly all of this fresh capital toward debt repayment (much back to their own pocket, Maybank who was the largest lander) rather than urgently needed operational liquidity.

While this might have tidied up Sapura’s balance sheets temporarily, it starved the company of essential working capital.

To make matters worse, Maybank delayed its critical RM700 million working capital funding—an inexplicable move at a time when Sapura desperately needed immediate financial support.

As weeks turned to months, Sapura’s vendors went unpaid, projects stalled, and the ripple effects spread across the entire Malaysian energy supply chain.

Sapura’s strategic moves: risks in context

To understand Sapura’s crisis fully, it’s important to recognise that its strategic decisions mirrored global industry norms.

The decision to invest US$2.9 billion in Seadrill’s drilling rigs, viewed initially as a wise investment generating substantial profits—was representative of common industry practice.

Indeed, these rigs served as a significant “cash cow,” generating consistent revenue streams before the global downturn.

However, such strategies naturally carry significant risk. Similar to Sapura, global industry giants like McDermott, Saipem, and Technip also faced serious financial distress due to similar risks.

From 2016 to 2021, industry-wide losses were commonplace, as illustrated by the billions in losses reported across the sector:

• McDermott had to restructure through bankruptcy, eliminating billions in debt.
• Seadrill undertook two rounds of Chapter 11 restructuring, removing 85% of its massive debt load.
• Saipem required a €2 billion bailout from the Italian government to maintain operations.

Clearly, Sapura wasn’t alone in its struggles. Its risks, though substantial, were not isolated decisions but aligned with prevalent global industry practices.

A management blind spot

Nevertheless, Sapura faced significant challenges in navigating the market downturn. The company struggled to anticipate the full magnitude of shifting market conditions and to maintain sufficient liquidity buffers.

Yet, these internal factors alone did not seal Sapura’s fate—rather, it was the combination of hesitant governmental responses, institutional mismanagement by key stakeholders, and challenging external market forces that ultimately doomed the company.

The costly injection: RM1.1 billion of public funds

The culmination of these compounded failures forced the government, now under a new administration, into a costly RM1.1 billion emergency injection. This necessary yet preventable bailout underscores the profound cost of earlier inaction.

Timely intervention, aligned with structured refinancing and operational liquidity support, could have significantly reduced—or even avoided—this public expenditure.

What went wrong?

Consider the sequence clearly:

• 2014 oil crash: Global peers swiftly intervene; Malaysia hesitates.
• PNB’s 2019 misstep: RM2.7 billion diverted primarily to debt repayment instead of critical operational support.
• COVID-19 pandemic 2020: International governments respond decisively; Malaysia delays.
• Maybank’s delay in 2021: RM700 million working capital arrives too late, exacerbating Sapura’s financial distress.
• The result: RM1.1 billion public bailout, massive operational disruptions, severe vendor distress.

This timeline paints a clear picture: Malaysia’s leadership and institutional stakeholders repeatedly chose hesitation over action, significantly escalating the eventual cost of intervention.

Let’s face it, SEB’s distress was obvious —it didn’t come out of nowhere, and with better coordination between GLICs, banks, and the government, this entire debacle could have been nipped in the bud.

We must implement swift, structured interventions in our strategic enterprises before they reach the brink of disaster—rather than scrambling to fix them once they’re already knee-deep in trouble.

For companies that form the backbone of our utilities ecosystem, extra vigilance is paramount. We need to keep a closer eye on their financial wellbeing, stepping in proactively to prevent potential catastrophes that would otherwise saddle taxpayers with massive bailouts. Let’s do better, Malaysia. We deserve a future where prevention takes priority over last-ditch cures.