Petronas has awarded a production sharing contract (PSC) to Talisman Malaysia and Petronas Carigali to carry out development works on the Kinabalu fields, located offshore Sabah, in East Malaysia.

Under the terms of the contract, Talisman and Petronas Carigali will invest over $1bn to continue production, further development and improved recovery of crude oil from the fields.

The work includes achieving early production gains, improving operational efficiency and addressing subsurface issues.

"The contract also provides profit sharing as an incentive to contractors to improve oil recovery and increase production."

The PSC is the first to be awarded under the new, progressive volume-based (PVB) fiscal terms, designed by Petronas to offer incentives for the development and production of matured oil fields in Malaysia.

Petronas vice president of petroleum management Encik Ramlan Abdul Malek explained: "With the new PVB fiscal terms, we expect to see the PSC contractors to aggressively enhance their efforts and commitments in revitalising and maximising potential from the Kinabalu oil fields."

The contract also provides profit sharing as an incentive to contractors to improve oil recovery and increase production, as the risks of developing and producing from matured fields become progressively higher over the lifetime of the fields, the company said.