KUALA LUMPUR — Is all well between Petroleum Sarawak Bhd (Petros) and national oil and gas giant Petroliam Nasional Bhd (Petronas) as state and country leaders claim it to be?
While officials, including Prime Minister Datuk Seri Anwar Ibrahim and Sarawak Premier Tan Sri Abang Johari Openg, have repeatedly assured that the talks between Petros and Petronas regarding Sarawak’s gas distribution rights are aimed at an amicable resolution, the David versus Goliath court battle between the two imply otherwise.
Petros, which has yet to reach its 10-year incorporation mark, is taking Petronas to court over the latter’s call on a RM7.05 million bank guarantee. Petronas demanded the sum in October last year due to Petros’ alleged non-payment under the Sarawak Gas Sales Agreement (SGSA). Petros deems the SGSA with Petronas as illegal.
The dispute stemming from Petronas’ call on the bank guarantee might seem part of routine business affairs – especially considering the relatively small amount demanded in comparison with both companies’ respective annual revenue.
However, Petronas’ demand came at a time when discussions were said to be ongoing to finalise Petros’ takeover as the East Malaysian state’s sole gas aggregator.
The transition is understood to also include a reconciliation of all outstanding amounts owed by both parties – so why did Petronas act with impatience by calling on the bank guarantee when it did, without giving Petros any indication that it intends to turn up its nose at such negotiations?
It leaves observers questioning Anwar and Abang Johari’s assurances that everything is alright and amicable, bearing in mind that the ongoing court case is to be heard before Kuching High Court Judge Leonard David Shim on February 19.
Is the upcoming hearing a reason why the public has yet to be informed on the outcome and impacts of the discussions?
It must be considered that the court’s eventual verdict in the case favouring either part could significantly influence the negotiations, despite its supposedly “resolved” status as asserted by Anwar on Jan 14.
Impact from the court verdict is not far-fetched as arguments from both sides are linked to several commercial agreements as well as state and federal legislations, including the SGA, Sarawak’s Distribution of Gas Ordinance 2016 (DGO 2016) and the Petroleum Development Act (PDA) 1974.
Court documents thus far also show that still waters might run deeper than perceived by ordinary laymen. In fact, details laid bare in the case hint at how Petronas could be asserting its dominant position to challenge Petros, which is standing firm and resisting any attempts to overshadow its position.
Besides employing coercive methods to prevent upstream gas producers from inking agreements with Petros, Petronas is also said to have continuously refused to secure the necessary retail gas distribution licence under the SGSA.
Petronas’ refusal to comply with Sarawak state requirements, supposedly due to such rules contradicting the PDA and other federal laws, could form the basis for deeper legal scrutiny, which could slow down Sarawak’s bid for greater self-rule over its gas resources.
Speaking of contradictions, Petronas taking issue with Petros’ appointment as the sole authority for gas distribution in Sarawak, which came into effect on February 1 last year following amendments to the DGO 2016, appears to be in conflict with officials’ stance on the matter.
Anwar has reiterated time and again that it is necessary for Petronas to work with Petros, adding that while Petronas retains its authority nationwide, it will allow Sarawak control over gas distribution for domestic purposes.
Yet, Petronas has insisted in its affidavit that its rights under the PDA make it the legitimate aggregator of natural gas supply, including domestic distribution.
With even Abang Johari commending the prime minister for his recognition of Petros as the state gas aggregator, one is left wondering if Petronas is risking it all in a high-stakes game of roulette by picking at details in an attempt to prevent the toppling of its long-held dominance.
Besides an estimated 30% revenue loss once the agreed formula for the distribution of natural gas in Sarawak is implemented, could Petronas’ actions be driven by factors beyond just financial losses?
As it stands, Petronas may be motivated by fear and desperation as the once-small David in Petros threatens to disrupt the industry balance, forcing Goliath into a defensive stance. – January 28, 2025
Qistina Nadia Dzulqarnain is a reporter at Scoop
