Labuan is a town located adjacent to the major shipping route between Hong Kong and Singapore. The reasons why Labuan is able to flourish is due to a few reasons:
1) Most of the identified oil fields are located in East Malaysia region and Labuan, being at the center between both Sabah and Sarawak, it becomes the interchange point for oil & gas activities.
2) Labuan is the only Federal Territory in East Malaysia and it is the oil and gas supply base for the entire East Malaysia which constitutes 60% of the Malaysia Land size.
3) Labuan also enjoy a “Free Port” status to have duty exception, because of such status, ships are attracted to layup in Labuan especially when oil & gas activities are low, or for maintenance purpose.