Malaysia’s energy future is adrift in the South China Sea. Can it defend its oil wealth?

For half a century, Malaysia’s economy has been buoyed by oil and gas, the vast reserves off its shores enabling it to ride out global downturns and sustain growth. Today, these resources are throwing the nation a lifeline once more as global economic waters become ever choppier.

But smooth sailing ahead is far from guaranteed. An estimated 3.6 billion barrels of oil and more than 40 trillion cubic feet of natural gas lie under the contested waters of the South China Sea – a maritime expanse claimed in overlapping strokes by half a dozen regional governments, yet dominated by China’s growing military and economic might.

Beijing not only has superior naval power, its strategy is patient and incremental, with the steady assertion of control over reefs, fishing grounds and shipping lanes already sparking clashes with Vietnam and the Philippines.

For Malaysia, China represents both its largest trading partner – crucial for its export-reliant economy as US tariffs begin to bite – and its most potent rival claimant.

That tension was laid bare last month when Prime Minister Anwar Ibrahim warned of the need to strengthen Malaysia’s maritime defences. At the launch of the government’s 13th Malaysia Plan on July 31, he spoke of “threats to our sovereignty and security in the South China Sea” – highlighting that this was also an economic imperative.