Business as usual for O&G firms in Sarawak for now

O&G-related companies in the state are in the dark over future approvals

By MARK RAO / Graphic By TMR

Oil companies operating in Sarawak are expected to abide by the agreements signed with Petroliam Nasional Bhd (Petronas) for oil and gas (O&G) activities, despite the East Malaysia state’s hydrocarbon resources ownership claims.

Under the Petroleum Development Act 1974 (PDA), oil exploration and hydrocarbon related activities will require the approval from the state-owned energy company.

But resource-rich Sarawak’s announcement to assume control over its natural resources has triggered questions over the past approvals received by oil companies. Petronas is believed to have some 60 oilfields in Sarawak with an average production capacity of 850,000 barrels a day, either produced by the energy company or through production sharing contracts (PSCs).

Petronas partners exploration and production (E&P) companies like Royal Dutch Shell plc, JX Nippon Oil and Gas Exploration Corp, and Murphy Oil Corp. Shell was the first company to explore O&G in Sarawak.

Sapura Energy Bhd has a development agreement with Petronas and is sitting on approximately nine trillion cu ft in natural gas reserves in Sarawak.

The largest-listed O&G service provider is supplying natural gas to Petronas from the B15 Gas Field off the shore of Sarawak under the SK310 upstream gas sales agreement signed in June 2016. Sapura Energy has agreements in place for the production and supply of gas from the SK408 block.

JX Nippon Oil and Gas Exploration was given the approval for the Beryl gas field, offshore Sarawak, last year.

An industry source operating in the state said there is a lack of clarity on how future projects or exploration developments in Sarawak are to be handled after July this year.

The source said O&G companies with PSCs, service providers and companies with assets related to hydro- carbon activities in the state are in the dark over future approvals.

“But Sarawak taking control over O&G rights will not disrupt the current arrangements in place. These arrangements are well ahead of development and the companies involved are already selling gas to Petronas,” the industry source told The Malaysian Reserve under the conditions of anonymity.

Sarawak recently announced it was resuming control over its hydrocarbon resources, both onshore and offshore activities, by July this year.

The change would allow the state to decide the handling of licences and approvals for all related activities presently provided under the present PDA, which entrusted such powers to Petronas.

The East Malaysia state has also created its own petroleum company called Petroleum Sarawak Bhd (Petros).

Meanwhile, another industry observer said: “The question now is how E&P companies like Petronas align themselves to the new arrangement. There is also no clarity on how O&G service providers are to proceed under the arrangement.”

If Kuching’s decision to govern its hydrocarbon resources materialised, O&G companies operating in the state will be required to have the necessary licences, permits, leases and approvals under the state’s Oil Mining or Gas Distribution Ordinance, making the PDA almost redundant or enforceable.