National Petroleum Reserve Establishment Timely Amid Recurring Geopolitical Tensions - Analysts

By Siti Radziah Hamzah

KUALA LUMPUR, July 23 (Bernama) -- Malaysia’s move to study the establishment of a national petroleum reserve (NPR) is timely as recurring geopolitical tensions around key global shipping routes underscore the need to strengthen the country’s long-term energy resilience, said analysts.

The Strait of Hormuz, through which around 20 million barrels per day of petroleum liquids -- about one-fifth of global supply -- pass, is increasingly seen as a recurring source of disruption rather than an isolated geopolitical flashpoint.

SPI Asset Management managing partner Stephen Innes said the Strait of Hormuz should no longer be treated as a one-off shock, as repeated threats, shipping delays, higher insurance costs and tighter tanker availability continue to keep a risk premium in global energy markets.

“I think this is becoming more structural. The pressure may rise and fall, but it is unlikely to disappear until a broader network of pipelines, alternative export routes and other bypasses is built.

“That will take years, so the Strait of Hormuz is likely to remain a recurring source of volatility,” he told Bernama.

Recently, Prime Minister Datuk Seri Anwar Ibrahim said the government will study the need and strategies for creating an NPR stock as a measure to ensure energy security and strengthen the country’s resilience in the face of geopolitical uncertainties and global supply crises.

On another development, Iran’s Houthi allies in Yemen have reportedly completed preparations to attack ships transiting the southern entrance to the Red Sea and later claimed responsibility for attacks on two Saudi oil tankers following a fresh wave of US strikes on Iranian military targets.

Innes said the reported attacks reinforce the urgency for Southeast Asian governments to strengthen energy resilience as the risks are no longer confined to the Strait of Hormuz.

He warned that simultaneous disruptions across the Gulf and Red Sea shipping routes could expose the region to higher oil prices, freight costs and supply delays.

“The immediate priorities should be to review strategic fuel inventories, diversify crude, refined-product and liquefied natural gas suppliers, and strengthen ASEAN coordination on stock levels, shipping disruptions and emergency supply arrangements,” said Innes.

At the time of writing, Brent crude rose 2.97 per cent to US$96.86 per barrel while West Texas Intermediate went up 1.93 per cent to US$88.76 per barrel.

Innes also urged governments to reassess broad fuel subsidies, saying targeted assistance for lower-income households and critical industries would be more sustainable if oil prices remain elevated.

He said energy security focuses on ensuring access to energy supplies, while energy resilience is about ensuring energy systems continue functioning when normal supplies or transport routes are disrupted.

Innes said this requires backup inventories, diversified suppliers, alternative shipping routes, stronger electricity grids and the ability to switch between fuels before a crisis occurs.

Turning to Malaysia, Innes described a national petroleum reserve as “emergency insurance” that should complement rather than replace commercial inventories.

“It cannot solve every supply problem, but it can buy policymakers valuable time during a crisis,” he said, adding that the reserve should form part of a broader strategy that includes diversified suppliers, improved storage infrastructure and clear rules governing when reserves are released and replenished.

Innes also called for Malaysia to diversify fuel suppliers and transport routes, support commercially viable domestic gas production, strengthen regional power connectivity and accelerate renewable energy backed by battery storage and reliable backup generation.

Meanwhile, BMI oil and gas analyst Tariro Chiweza said the Malaysian government’s study on establishing an NPR is timely as commercial petroleum inventories are designed for operational continuity but may not be sufficient to withstand prolonged external supply disruptions.

She noted that although Malaysia produces around 570,000 barrels of oil per day, it remains a net importer of refined fuels and sourced 69.2 per cent of its crude oil imports from Strait of Hormuz-related suppliers in 2025.

“In our view, the case for an NPR is now more compelling as part of a broader resilience strategy,” she said.

Chiweza said Malaysia should continue expanding domestic gas production, renewable energy, battery storage, regional interconnectors, electrification and nuclear power, noting that existing initiatives such as Solar@PETRA, the Corporate Renewable Energy Supply Scheme (CRESS) for corporates, B15 biodiesel and electric public transport support broader resilience objectives.

She added that BMI forecasts Malaysia’s dry gas production to reach 82.3 billion cubic metres in 2026, strengthening the country’s domestic supply base alongside its energy transition efforts.

-- BERNAMA

 

 

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