Petronas mulls seeking court injunction in dispute with Sarawak over rights on oil and natural gas

KUALA LUMPUR: Malaysia’s national oil corporation Petronas is considering taking its fight to preserve its monopoly as the sole guardian of the country’s natural resources to the courts in the face of a determined challenge by Sarawak for greater control of the trading and extraction of gas and other oil-related products in the state.
Government officials close to the situation told CNA that Petronas is considering filing a court injunction in the coming days to head off any confrontation between Prime Minister Anwar Ibrahim’s administration and the Sarawak state government.
A court injunction would temporarily halt any action Sarawak could take against Petronas and lawyers noted that unless the state government decides to resume negotiations with the national oil corporation over the control of the natural resources, the dispute could escalate into a full-blown court battle.
Sarawak has issued an ultimatum to Petronas to finalise an agreement that would give the state complete rights over the supervision over the trading of oil and gas extracted from the state by Oct 1.
“No middle ground has been reached (between Petronas and Sarawak) and the option at this point is to turn to the courts,” said a senior government official privy to discussions on the matter between Petronas and Mr Anwar together with his economic advisory committee.
The official, who spoke to CNA on condition of anonymity given the sensitivities involved, added that Mr Anwar wants Sarawak’s demands to be managed “at the corporate level with Petronas without involving the federal Government”.
Petronas did not respond to CNA’s request for comment about the prospect of seeking redress in the Malaysian courts to counter the demand for it to surrender all rights over the distribution and sale of liquified natural gas (LNG) to the Sarawak state government’s wholly owned Petroleum Sarawak Bhd (Petros).
In responses to media queries on Thursday (Sep 5), Petronas president Tengku Muhammad Taufik said that concerns have been raised by LNG buyers and upstream players, particularly over the security of fuel supply, in light of the proposal for Petros to take over as the sole gas aggregator for Sarawak.
“We have seen ourselves become one of the primary partners of countries like Japan and South Korea and they want assurance that supply, if developed through an integrated model, will be able to be supplied reliably, cost competitively, (which is) now more important than ever,” he told reporters in the capital Kuala Lumpur.
Sarawak’s senior legal counsel at the state’s Attorney General’s Chambers Joseph Chioh Hock Hua told CNA over the phone that he was unaware of the options being considered by Petronas but declined comment on the ongoing negotiations with Petronas, citing secrecy laws that govern civil servants.
Mr Anwar, who took over the premiership in November 2022 after an inconclusive general election, faces a delicate economic and political challenge in dealing with Sarawak because of the crucial role it plays in propping up Malaysia’s unity government made up of more than a dozen parties.
In recent months, the state government led by Premier Abang Johari Openg has intensified the pressure on Putrajaya for greater autonomy under a charter when Sarawak and neighbouring Sabah joined then-Malaya to create the Federation of Malaysia in 1963, which at the time included Singapore. The island state became independent in 1965.
Sarawak also plays a critical role in the Malaysian economy. 
According to the federal government, Sarawak’s probable and proven reserves of petroleum represent 60.87 per cent of Malaysia’s total reserves, while Sabah’s make up around 18.8 per cent. Sarawak also accounts for close to 90 per cent of Malaysia’s LNG exports.
The demand for Petros to be the sole so-called aggregator of its oil and gas reserves in Sarawak is by far the biggest ask by Mr Abang Johari’s state administration, because it represents a direct challenge to the decades-old monopoly Petronas has held over the national oil and gas reserves since its incorporation in 1974.
Sarawak is insisting that oil and gas resources in its territory must be regulated under a colonial-era Oil Mining Ordinance 1958, which stipulates that oil and gas resources found within 200 nautical miles of its waters belong to the state.