KUALA LUMPUR: It is D-day for Petroliam Nasional Bhd (Petronas) and the Sarawak government as both claim ownership of the oil and gas activities in Malaysia including Sabah and Sarawak.
The decision on the court proceedings will be made on whether Petronas gets the stay order for Sarawak government to regulate upstream activities in the state under the Sarawak Oil Mining Ordinance 1958 beginning July 1, 2018.
This raises the question on whether Petronas will be able to remain to have the autonomy on oil and gas resources as well as activities throughout the country and not only in Peninsular Malaysia.
Asia School of Business assistant professor Dr Renato Lima de Oliveira said if each state in the country were to renegotiate their oil and gas terms, it will be bad for the industry development.
“It will be much harder for the country to pursue national agenda issues when all states are renegotiating their terms. It is better to have one single entity to navigate the national oil and interest.
“With separate entities regulating the oil and gas resources of the country, the boundaries will not be clear. It is also unclear whether Petros can carry out their role as Petronas has excelled at.
“I think this issue is not only about the natural resources but rather finding the right and equitable revenue sharing agreement and Sarawak maximising its stake in the oil revenue,” he told NST Business.
Oliveira said this was a valid aspiration by the Sarawak government and a natural response to have revenue sharing between Petronas and the state of Sarawak.
“However, it was important that a country such as Malaysia to have a more predictable and stronger oil company such as Petronas governing the oil resources and activities.
“It will also create regulatory uncertainty when each state has their own oil and gas regulations not to mention higher costs incurred.
“Investors are more attracted to countries that have sound and stable regulatory body for them to invest in,” he added.
The Petroleum Development Act 1974 states that “The entire ownership in, and the exclusive rights, powers and liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore of offshore of Malaysia shall be vested in a Corporation to be incorporated Under the Companies Act 1965 or under the law relating to incorporation of companies.”
The Corporation, specified in the PDA 1974, was Petroleum Nasional Bhd (Petronas).
The Sarawak government argues that the PDA 1974 is not a mining lease as Parliament has no constitutional authority to pass laws relating to the issuance of mining leases.
It further argued that the PDA did not exempt Petronas from complying with the state laws such as the Oil Mining Ordinance 1958 and the Land Code of Sarawak.
Petronas however claims that the Oil and Mining Ordinance is no longer in effect and there were no objection since 1974 from the Sarawak government over its upstream activities in the state.
Oliveira, who is also a fellow at the Institute of Democracy and Economic Affairs (IDEAS) , said Malaysia is one of the most successful countries in the world where the NOC is both the regulator and operator of the oil and gas resources.
“Many countries have a National Oil Company which is known as NOC. But not all NOCs are both the regulator and the operator as in Malaysia’s case.
“Petronas is one the very few global oil companies that has created excellence in and out of Malaysia while being able to develop the supply chain, talent management and play a role in the education of the country.
“It (Petronas) is also one of the few oil companies that has sizable presence outside of its domestic market,” he added.
The new framework will require that every entity that wishes to carry out upstream activities be required to obtain licenses, permits, leases and approvals under the Oil Mining Ordinance 1958, the Sarawak Land Code or the Distribution of Gas Ordinance 2016.