Oil & Gas Contractor Insurance Malaysia: PETRONAS Requirements & Coverage Guide 2026

Disclaimer: This article provides general guidance based on PETRONAS Licensing and Registration General Guidelines, the Petroleum Development Act 1974, and Occupational Safety and Health Act 1994 as of January 2026. Requirements may be amended. Always verify current requirements with PETRONAS, DOSH, or qualified insurance professionals before making compliance decisions. ---

Winning a PETRONAS contract is a milestone. Losing it because your insurance doesn't meet specifications is preventable. Oil and gas contractors in Malaysia face some of the most stringent insurance requirements in any industry, driven by the high-risk nature of offshore and onshore petroleum operations.

This guide breaks down exactly what insurance coverage PETRONAS and Petroleum Arrangement Contractors (PACs) expect, the HSE training compliance that affects your insurability, and how to structure your coverage to win tenders and protect your business.

This guide covers:

• PETRONAS licensing requirements and how insurance fits in
• Mandatory insurance types for oil and gas contractors
• HSE compliance requirements that impact coverage
• Coverage limits and specifications by contractor type
• Common gaps that get contractors rejected from tenders
• How to structure your insurance program for PETRONAS compliance

PETRONAS Licensing and Insurance Requirements Overview

Any company wanting to supply goods or services to Malaysia's oil and gas industry needs a valid PETRONAS License or Registration. The Petroleum Development Act 1974 and Petroleum Regulations 1974 give PETRONAS authority to regulate all upstream and downstream petroleum activities in Malaysia.

The licensing framework divides into two categories based on the sector you're serving. Insurance requirements vary significantly between these categories.

Requirement	PETRONAS License (Upstream + Downstream)	PETRONAS Registration (Downstream Only)
Minimum Paid-Up Capital	RM100,000	RM10,000
Sector Access	Upstream and Downstream	Downstream only
Client Base	PETRONAS Group, PACs, Offshore Fabrication Contractors, MISC	PETRONAS subsidiaries only (PETRONAS Chemicals, Gas Berhad, Dagangan)
Validity Period	3 years	3 years
Insurance Documentation	Required for SWEC application	Required for SWEC application

What is SWEC and Why Insurance Matters

Standardised Work and Equipment Categories (SWEC) is the classification system PETRONAS uses to categorize products and services in the oil and gas sector. Your company must be licensed or registered for specific SWEC codes to bid on contracts in those categories.

Strategic SWEC codes have Minimum Technical Requirements (MTR) that may include specific insurance obligations. General SWEC codes don't have MTR but contract-specific insurance requirements still apply.

The SWEC system covers categories including:

• Civil, Marine, Infrastructure and Building Maintenance
• Drilling and Well Services
• Engineering, Construction and Projects (EC&P)
• Electrical Equipment and Services
• Inspection, Certification and Testing
• Digital and ICT Solutions
• Transportation and Logistics
• Environmental and Waste Management

Mandatory Insurance Types for Oil & Gas Contractors

Oil and gas operations carry substantial risks that standard commercial insurance policies don't adequately cover. PETRONAS and PACs specify insurance requirements in contract documents, and failing to meet these specifications can disqualify your tender or void your contract.

Workmen's Compensation and Employer's Liability

Workmen's Compensation is required under Malaysia's Workmen's Compensation Act 1952 for employees earning below RM4,000 monthly. SOCSO (Social Security Organisation) contributions are mandatory for all employees. But contract requirements typically exceed statutory minimums.

Coverage Component	Typical PETRONAS Contract Requirement	Notes
Death Benefit	24-60 months salary or fixed sum (varies by contract)	Offshore contracts typically require higher limits
Permanent Total Disability	60-100 months salary or equivalent lump sum	Must cover offshore and onshore locations
Medical Expenses	RM50,000 - RM200,000 per occurrence	Should include medical evacuation for offshore
Temporary Disability	Weekly benefit during recovery period	Duration varies by contract terms
Employer's Liability	RM5 million - RM25 million per occurrence	Covers common law claims beyond statutory compensation

The gap between statutory SOCSO coverage and contractual requirements is significant. SOCSO provides limited benefits that won't satisfy PETRONAS contract specifications. You need a separate workmen's compensation policy to top up the coverage.

General Liability / Third Party Liability

Third Party Liability covers your legal liability for bodily injury or property damage to third parties arising from your operations. In oil and gas contexts, third parties include other contractors on site, platform personnel not in your employ, and any adjacent property.

Operation Type	Typical Limit Required	Aggregate Limit
Offshore Platform Work	USD 5 million - USD 25 million per occurrence	USD 50 million annual aggregate
Drilling Operations	USD 10 million - USD 50 million per occurrence	Higher aggregates required
Onshore Refinery/Plant Work	RM10 million - RM50 million per occurrence	RM100 million annual aggregate
Support Services (catering, cleaning, security)	RM5 million - RM10 million per occurrence	RM20 million annual aggregate

Standard commercial general liability policies often exclude offshore operations, work on floating structures, and pollution-related claims. You need specific oil and gas liability coverage.

Environmental and Pollution Liability

Pollution incidents in oil and gas operations can result in catastrophic cleanup costs and third party claims. Standard liability policies typically exclude pollution coverage or provide only sudden and accidental pollution cover.

Environmental liability insurance for oil and gas typically covers:

• Cleanup costs for pollution incidents
• Third party bodily injury from pollution
• Third party property damage from contamination
• Legal defense costs for pollution claims
• Government-mandated remediation expenses

The Deepwater Horizon disaster in 2010 demonstrated how pollution incidents can generate claims exceeding USD 65 billion. Malaysian operations face similar exposure risks, particularly for offshore drilling and production activities.

Contractor's All Risks (CAR) / Erection All Risks (EAR)

Construction and installation projects in oil and gas require Contractor's All Risks or Erection All Risks coverage. These policies protect the contract works, materials, and temporary structures during the construction or erection period.

Coverage Section	What It Covers	Oil & Gas Considerations
Section I: Material Damage	Physical loss or damage to contract works	Must include offshore transit and installation perils
Section II: Third Party Liability	Bodily injury and property damage to third parties	Cross liability clause essential for joint ventures
Existing Property	Damage to principal's existing facilities	High values on operating platforms require adequate limits
Maintenance Period	Extended cover during defects liability period	12-24 months typical for oil and gas projects

For offshore construction, you may need specialized marine coverage in addition to CAR/EAR. This includes load-out, towage, and installation coverage for platform modules, subsea equipment, and pipelines. Learn more about construction risk management specific to Malaysian projects.

HSE Compliance and Its Impact on Insurance

PETRONAS takes Health, Safety and Environment (HSE) seriously. Your company's HSE track record directly affects your ability to secure insurance and win contracts. The HSE Training Guideline for Contractors published by PETRONAS outlines training requirements that affect insurability.

PETRONAS HSE Training Requirements

PETRONAS expects contractors to ensure personnel possess necessary HSE competencies before deploying to work sites. The training requirements vary based on job function and work scope.

Training Category	Target Personnel	Insurance Relevance
Basic Offshore Safety Induction (BOSIET)	All offshore personnel	Mandatory for offshore work coverage
Tropical BOSIET with EBS	Helicopter transport personnel	Required for helicopter emergency egress cover
H2S Safety Training	Personnel in H2S risk areas	Affects coverage for sour gas operations
Confined Space Entry (AESP)	Entry and standby personnel	DOSH-approved training required for coverage
Working at Height	Personnel working above 2 meters	Training certification affects claim validity
Permit to Work (PTW)	Supervisors and permit holders	PTW compliance critical for claims

Insurers may deny claims if personnel weren't properly trained for the work being performed. Keep training records and ensure certifications remain valid throughout the contract period.

HSE Performance and Insurance Premiums

Your company's safety record directly impacts insurance costs. Insurers look at:

• Lost Time Injury Frequency Rate (LTIFR)
• Total Recordable Injury Rate (TRIR)
• Near-miss reporting statistics
• HSE audit findings and closure rates
• Previous claims history

A strong HSE track record can reduce premiums by 10-25%. Conversely, poor performance or serious incidents can make insurance difficult to obtain at any price. The August 2024 explosion on Icon Amara near Sapar Alpha platform demonstrates how incidents affect contractor reputations and future insurability.

HIRARC Requirements

Hazard Identification, Risk Assessment and Risk Control (HIRARC) documentation is mandatory under OSHA 1994 and is a key requirement for PETRONAS projects. Proper HIRARC demonstrates your risk management capability and supports insurance applications.

For oil and gas operations, HIRARC must address:

• Process hazards (fire, explosion, toxic release)
• Physical hazards (working at height, confined space, lifting operations)
• Chemical hazards (H2S, hydrocarbons, drilling fluids)
• Environmental hazards (weather, sea conditions for offshore)
• Occupational health hazards (noise, radiation, ergonomics)

Specific Coverage for Oil & Gas Contractor Types

Insurance requirements vary based on your specific service category. Here's what different contractor types typically need.

Drilling Contractors

Coverage Type	Typical Requirement	Key Considerations
Rig Physical Damage	Full replacement value	Include mobilization and positioning
Control of Well	USD 25 million - USD 100 million	Blowout, cratering, seepage coverage
Re-drilling Expenses	USD 10 million - USD 50 million	Cost to restore well to previous depth
Third Party Liability	USD 50 million - USD 100 million	Must include pollution liability
Employers Liability	USD 10 million per occurrence	All personnel on drilling unit

Offshore Support Vessel (OSV) Operators

Coverage Type	Typical Requirement	Key Considerations
Hull and Machinery	Full vessel value	Include crew negligence clause
Protection & Indemnity (P&I)	USD 500 million - USD 1 billion	P&I Club membership typical
Charterer's Liability	Per contract specification	Cover damage to charterer's cargo
Crew Coverage	As per contract/maritime law	Include repatriation costs

Maintenance and Engineering Services

Coverage Type	Typical Requirement	Key Considerations
Third Party Liability	RM10 million - RM25 million	Include existing property coverage
Professional Indemnity	RM5 million - RM20 million	For design and engineering services
Workmen's Compensation	As per contract specification	Must cover offshore and onshore
Tools and Equipment	Replacement value	Include offshore transit

Catering, Cleaning and Support Services

Coverage Type	Typical Requirement	Key Considerations
Third Party Liability	RM5 million - RM10 million	Food poisoning coverage essential
Product Liability	RM5 million	For catering services
Workmen's Compensation	As per contract specification	Include offshore personnel

Common Insurance Gaps That Disqualify Contractors

Tender rejections and contract terminations often stem from insurance documentation issues rather than coverage gaps. Understanding common problems helps you avoid them.

Documentation Issues

Common Problem	Why It Matters	Solution
Policy not naming PETRONAS/Principal as additional insured	Contract requirement not met	Obtain endorsement before tender submission
Coverage dates don't align with contract period	Gaps in coverage create liability	Extend policy or provide undertaking letter
Geographical limits exclude project location	Offshore locations not covered	Specify Malaysian waters and territorial limits
Deductibles exceed contract specification	Non-compliant with tender terms	Negotiate lower deductibles or buy-down coverage
Waiver of subrogation not included	Standard contract requirement	Request endorsement from insurer

Coverage Gaps

Gap	Risk Exposure	Resolution
Offshore exclusion in standard policy	No coverage for platform work	Purchase specific oil and gas coverage
Pollution liability excluded	Cleanup costs uninsured	Add environmental liability extension
Cross liability not included	Joint venture partners not covered	Include cross liability clause
Care, custody and control excluded	Damage to equipment under your care	Add extension or separate policy

Insurance Program Structure for PETRONAS Compliance

Building an effective insurance program requires understanding how different policies interact and ensuring no gaps exist between coverages.

Annual vs Project-Specific Coverage

Approach	Best For	Considerations
Annual Open Cover	Contractors with multiple ongoing projects	Simpler administration, consistent coverage, volume discounts
Project-Specific Policy	Large individual contracts, unusual risks	Tailored to specific requirements, principal-arranged policies
Hybrid Approach	Mix of standard and specialized work	Annual base cover with project-specific top-ups

Recommended Insurance Stack for PETRONAS Contractors

Priority	Coverage Type	Purpose
1	Workmen's Compensation + Employer's Liability	Protect employees, meet legal and contract requirements
2	Third Party/General Liability	Cover bodily injury and property damage to others
3	CAR/EAR (if applicable)	Construction and installation project protection
4	Environmental Liability	Pollution incident coverage
5	Professional Indemnity (if applicable)	Design and engineering services protection
6	Equipment All Risks	Tools, plant and machinery protection

Cost Factors and Premium Considerations

Oil and gas insurance premiums are significantly higher than standard commercial insurance due to the hazardous nature of operations. Understanding what drives costs helps you budget appropriately and identify ways to optimize premiums.

Key Premium Factors

Factor	Impact on Premium	How to Optimize
Type of operations	Drilling higher than support services	Accurate scope description
Location (offshore vs onshore)	Offshore premiums 2-5x higher	Separate policies if mixed operations
Claims history	Poor history increases premiums 25-100%	Invest in safety programs
Contract value/turnover	Base for premium calculation	Accurate declarations
Number of employees/personnel	Affects workmen's compensation	Accurate headcount by category
Deductible levels	Higher deductibles reduce premiums	Balance risk retention vs premium savings

Typical Premium Ranges (Indicative)

Coverage Type	Typical Annual Premium Range	Basis
Workmen's Compensation (Offshore)	3-8% of payroll	Total annual wages
Third Party Liability	0.5-2% of turnover	Annual revenue
CAR/EAR	0.15-0.5% of contract value	Total contract sum
Environmental Liability	Varies significantly	Risk assessment required

These ranges are indicative only. Actual premiums depend on specific risk profiles, insurer appetite, and market conditions. Premium rates have hardened in recent years due to increased claim frequency and severity in the energy sector globally.

Compliance Checklist for PETRONAS Contractors

Use this checklist to verify your insurance program meets PETRONAS and PAC requirements before tendering.

Requirement	Check	Notes
Valid PETRONAS License/Registration	☐	Check expiry date, renew 4 months before
Correct SWEC codes for work scope	☐	Multiple codes may be needed
Workmen's Compensation meets contract limits	☐	Check death, disability, medical limits
Employer's Liability meets contract limits	☐	Per occurrence and aggregate
Third Party Liability meets contract limits	☐	Confirm offshore coverage included
Principal named as additional insured	☐	Endorsement required
Waiver of subrogation included	☐	Standard contract requirement
Policy period covers contract duration	☐	Include maintenance period if applicable
Geographical limits include project location	☐	Malaysian waters, specific fields if required
Deductibles within contract specification	☐	Check per occurrence deductibles
Cross liability clause included	☐	For joint venture contracts
Pollution coverage confirmed	☐	Check if sudden/accidental or full coverage
HSE training records current	☐	BOSIET, H2S, confined space certifications
HIRARC documentation complete	☐	Site-specific risk assessments

FAQ

What insurance do I need to get PETRONAS licensed?

PETRONAS licensing itself doesn't specify minimum insurance requirements. Insurance requirements come from individual contracts with PETRONAS, PACs, or other clients. You need to demonstrate capability to obtain required insurance when applying for Strategic SWEC codes with Minimum Technical Requirements.

Does SOCSO coverage satisfy PETRONAS contract requirements?

No. SOCSO provides statutory minimum benefits that are significantly lower than what PETRONAS contracts typically require. You need a separate workmen's compensation policy with higher limits for death, permanent disability, and medical expenses. SOCSO remains mandatory as a baseline.

Can I use a standard general liability policy for PETRONAS work?

Standard commercial general liability policies typically exclude offshore operations, oil and gas activities, and pollution coverage. You need specific oil and gas liability coverage designed for these risks. Products like AIG's OSCAR (Oil and Gas Service Contractors in the ASEAN Region) are purpose-built for this sector.

What happens if my insurance doesn't meet contract specifications?

Your tender will be rejected, or your contract may be terminated for non-compliance. Even if work proceeds, claims may be denied if coverage wasn't in place as specified. Contract insurance requirements aren't negotiable once you've signed.

How do I name PETRONAS or PACs as additional insured?

Request an additional insured endorsement from your insurer. Provide the full legal name and details of the entity to be added. Most insurers have standard forms for this. Process this before contract signing, not after.

What limits should I carry for offshore work?

Limits vary by contract, but typical ranges for offshore services are USD 5-25 million per occurrence for third party liability, with annual aggregates of USD 25-50 million. Drilling operations often require USD 50-100 million limits. Always verify specific contract requirements.

How does my safety record affect insurance?

Insurers base premiums partly on your LTIFR, TRIR, and claims history. A poor safety record can increase premiums by 25-100% or make insurance difficult to obtain. Strong HSE performance can reduce premiums by 10-25% through experience rating adjustments.

Do I need separate insurance for each PETRONAS contract?

Not necessarily. Annual open cover policies can protect multiple contracts if the policy limits are adequate and coverage terms meet all contract specifications. Large or unusual contracts may need project-specific policies. Discuss with your broker to determine the most efficient structure.

What's the difference between upstream and downstream insurance requirements?

Upstream activities (exploration, drilling, production) carry higher risks and require higher limits. Offshore work adds marine perils. Downstream activities (refining, processing, distribution) are typically onshore with different risk profiles. Coverage requirements, exclusions, and premiums differ significantly between sectors.

How long does it take to arrange oil and gas contractor insurance?

Standard coverage for low-risk services can be arranged in 1-2 weeks. Complex offshore or drilling coverage may take 4-8 weeks due to underwriting requirements, surveys, and reinsurance placement. Start the insurance process as soon as you identify a tender opportunity.

Foundation Conclusion

PETRONAS contractor insurance requirements are demanding because oil and gas operations carry real risks. The August 2024 explosion on Icon Amara near Bintulu is a reminder that incidents happen even to experienced operators. Your insurance program needs to meet contract specifications, cover actual exposures, and remain valid throughout the project lifecycle.

Getting the insurance wrong doesn't just risk tender rejection. It puts your business, your employees, and your subcontractors at financial risk when incidents occur. An insurance broker with specific oil and gas experience can help you navigate PETRONAS requirements, identify coverage gaps, and structure a program that protects your business while meeting contract obligations.

Talk to our energy sector specialists about your PETRONAS contractor insurance needs