KUALA LUMPUR – The agreement reached between Petroliam Nasional Bhd (Petronas) and Petroleum Sarawak Bhd (Petros) provides certainty that the country’s oil and gas sector will remain sustainable while also boosting investor confidence in the industry’s competitiveness.
Geostrategist and senior fellow at the Nusantara Strategic Research Academy (NASR) Azmi Hassan said he believes that the Sarawak state government’s agreement for Petronas to maintain the pledged obligations is an important step in ensuring the stability and continuity of the oil and gas sector in the state.
“This is crucial because Petronas, as an international company, must demonstrate that it honours the agreements that have been implemented. And fortunately, the Sarawak government, through Petros, has agreed to this because it presents a positive image that they respect international law through the agreements made previously,” he told Bernama.
Prime Minister Datuk Seri Anwar Ibrahim stated today that the federal government values the aspirations of Sarawak, which intends to venture into the state’s oil industry. This aspiration is reflected through the Gas Distribution Ordinance 2016 (Amendment) (DGO), which will come into effect on March 1, 2025.
“The DGO is read together with the Petroleum Development Act 1974 (PDA), thus Petros plays the role of an aggregator in Sarawak,” he said during the Prime Minister’s Briefing Session in the Dewan Rakyat today.
Explaining further, Anwar, who is also the finance minister, said that this role still affirms previous approvals granted to Petronas and its subsidiaries.
“This means Petronas will maintain all existing domestic and international agreements (contractual obligations),” the prime minister said.
Under the ordinance, Petros is guaranteed to receive up to 1.2 billion cubic feet of natural gas per day for Sarawak’s domestic needs, with an additional guarantee based on future requirements. It also has the right to expand its activities and benefit from collaboration with Petronas.
Azmi said that with the need for substantial capital in the oil and gas industry, both parties must play important roles in contributing to the development of this sector. He noted that Petronas has successfully moved forward by allocating significant capital expenditures for exploration and future development.
“Rarely do we see a country, other than Malaysia, where the oil and gas sector is managed at the federal level because it requires large capital and the distribution of revenue is meant for everyone in the country. In Malaysia, it is for all the 11 states within the Federation of Malaysia,” he said.
However, he added that the capital cooperation needs to be implemented fairly, as Petros is responsible only for Sarawak while Petronas’s operations involve the other 10 states, including Sarawak.
He views the Petroleum Act 1974 as an effective law, in line with international legislation, ensuring that the ownership of oil and gas is regulated and that states experience the appropriate benefits.
Within the three nautical miles area, the ownership is that of the state, while beyond that distance, the ownership transfers to the federal government. – February 17, 2025