Oil was discovered in Malaysia more than a century ago, starting from a small production of 83 barrels per day. Now the petroleum industry in Malaysia has grown into a multi-billion dollar business with oil production of 594,900 barrels per day in 2000 while gas is being produced at 5.5 bscf per day.
            Prior to 1976, oil companies in Malaysia operated under a concession system. PETRONAS was formed as a result of the Petroleum Development Act (PDA) in 1974, and took over as the sole custodian of all petroleum resources in Malaysia. Production Sharing Contract (PSC) terms were introduced in 1976. In 1985, new PSC Terms were introduced primarily to attract more foreign investments to explore for oil and gas resources. The 1985 PSC terms offered a better profit split for the contractor. With the push towards deepwater exploration, PETRONAS introduced a Deepwater PSC in 1992 specifically designed to accelerate exploration in deeper waters (beyond 200 m). In 1997, a more liberal petroleum arrangement was introduced. The 1997 R/C PSC is a self-adjusting formula of cumulative revenue/cumulative cost designed to provide incentives to develop smaller oil and gas discoveries.

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