Is Malaysia risking its world-class coral reefs for offshore oil?

Every booking inquiry that lands in dive operator Richard Swann’s inbox these days carries the same undertow of anxiety. Before his clients commit to a dive trip off Kota Kinabalu, they want reassurance: are Sabah’s reefs still worth the journey?
It is a question that would have seemed strange a generation ago, when the waters off Malaysian Borneo were simply assumed to be among the finest on Earth. Now it is one of the first things visitors ask and the answer, according to a new environmental report, has never been more uncertain.
“Visitors increasingly ask about reef health, coral bleaching, marine protection and sustainability before they even make a booking,” the director of marine tour agency Downbelow said.
Sabah sits at the heart of the Coral Triangle, the most biodiverse marine region on the planet, hosting more than 76 per cent of the world’s coral species and supporting fisheries that feed millions across Southeast Asia.
Yet a first-of-its-kind report by environmental watchdog RimbaWatch has found that 86.8 per cent of Malaysia’s sensitive marine environments are in oil production areas.
The report, released on June 8, maps active and proposed offshore oil and gas blocks against coral reefs, marine protected areas and the wider Sulu-Sulawesi Ecoregion.

“There is no provision in any protected area or environmental legislation across Peninsular Malaysia, Sabah and Sarawak that restricts or prohibits oil and gas activities in marine protected areas or totally protected areas,” RimbaWatch co-founder Adam Farhan said.
Nearly 20 million hectares (50 million acres), or 38.5 per cent, of Malaysia’s exclusive economic zone falls within what the report calls sensitive marine environments, but only 5.3 per cent of the country’s waters are formal marine protected areas.
Oil and gas blocks overlap with 40 per cent of Malaysia’s mapped shallow coral reefs, raising risks from seismic exploration, drilling, oil spills, vessel traffic, sedimentation and offshore infrastructure, according to the report.
RimbaWatch also identified existing fossil fuel infrastructure in sensitive marine areas, including 305 wells, 64 offshore platforms and 822km (390 miles) of pipelines.
“This leads us to believe that many of our marine protected areas are ‘paper parks’, where industrial-scale extractive activities can occur freely,” Farhan said.
No reefs, no fish
The concern went beyond biodiversity, said Julian Hyde, general manager of Reef Check Malaysia.
Coral reefs, mangroves and seagrass provided nursery grounds for coastal fisheries, supporting more than 100,000 small-scale fishers in Malaysia’s coastal zone, he said.
“So no reefs, and seagrass and mangroves, no fish,” Hyde said, adding that while offshore drilling often took place in deeper waters, pipelines, shallow-water vessels and coastal infrastructure could still damage reefs and other habitats.

The findings cut into a larger national dilemma: Malaysia is trying to shore up domestic energy supplies while presenting itself as serious about climate and conservation commitments.
Petronas has framed continued development as central to Malaysia’s energy security. In February, the national oil company launched Malaysia Bid Round 2026, offering nine exploration blocks and six discovered resource opportunities.
“To fuel Malaysia’s upstream engine with a steady flow of opportunities, we require upstream investment of 50 billion ringgit to 60 billion ringgit, or about US$12.1 billion to US$14.5 billion, each year,” it said in a statement.
Energy analysts said gas remained important to Malaysia’s power supply, providing stability and a domestic energy source, but warned that new development could only buy time.
“New gas development may provide breathing room in the near term, but energy security will ultimately depend on how quickly it can expand renewables, storage and grid infrastructure alongside it,” said Alnie Demoral, Asia energy analyst at Ember.
Credibility at stake
The question is whether offshore expansion in sensitive areas could undermine the transition story Malaysia is trying to tell.
“The main risk is around credibility and investor perception,” Demoral said. “Energy security concerns may justify continued offshore development, but projects that overlap with sensitive marine ecosystems could face greater scrutiny from investors and financiers, particularly as ESG considerations become more important.”

Projects near areas such as Sabah’s Tun Mustapha Park threaten ecosystems that coastal communities depend on, according to Anj Dacanay, lead campaigner at Energy Shift Southeast Asia at the Centre for Energy, Ecology and Development.
“It is one of the most climate-vulnerable regions in the world; the degradation translates into the loss of fisheries, food security, livelihoods, and ultimately human lives,” Dacanay said, adding that the region should be treated as a no-go zone for new energy expansion.
The debate in Malaysia comes as ocean protection gains greater prominence on the international agenda.
Some 3,000 delegates, including government officials and business representatives, gathered at the 11th Our Ocean Conference in Mombasa, Kenya, last week.
At the Commonwealth Ocean Ministers Roundtable on June 16, conference founder and former US secretary of state John Kerry said the ocean could no longer be an afterthought and had to become central to climate solutions.
“The challenge before us is not a lack of knowledge. We know exactly what has happened,” Kerry said. “The challenge is whether political will can finally catch up with science.”

RimbaWatch’s report recommends excluding all oil and gas activity from marine protected areas and their buffer zones.
For operators such as Swann, however, the issue is not only environmental, but economic.
Sabah’s marine features are among the state’s most valuable natural assets, supporting jobs, education, repeat visitors and its international reputation as a world-class marine tourism destination.
These ecosystems were far easier to damage than to restore, Swann said. “Healthy marine environments can support communities, fisheries and tourism economies for generations, but once degraded, recovery can take many years and, in some cases, losses may not be fully reversible within human timescales.”
This story was produced as part of the 2026 Our Ocean Conference Fellowship organised by Internews’ Earth Journalism Network.