Petronas takes to the courts to claim country’s O&G rights

Under PDA, Petronas is the exclusive owner of Malaysia’s petroleum natural resources and regulator for upstream biz

By MARK RAO / Graphic By TMR

Petroliam Nasional Bhd (Petronas) is seeking the courts to confirm the existing petroleum law cements the state-owned energy company’s status as the exclusive owner of the country’s petroleum resources.

In what is seen as a move to douse efforts by any states to unilaterally declare their petroleum resources rights, Petronas yesterday filed an application at the Federal Court to declare the Petroleum Development Act 1974 (PDA) as the law that governs the country’s petroleum industry.

Under the act, Petronas is the exclusive owner of the extraction and management of the country’s petroleum natural resources, as well as the regulator for the upstream industry, including in Sarawak.

“Petronas believes that the determination by the Federal Court would help provide clarity on its rights and position under the PDA,” the company said in a statement yesterday.

The act states the entire ownership, and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia shall be vested in Petronas.

The court filing comes less than one month before Sarawak assumes full authority over the state’s upstream and downstream oil and gas (O&G) activities. The state government plans to effect the new ruling early next month.

The Sarawak state government announced in March it was assuming control of all activities related to petroleum resources in the state, including issuing of licences and leases. It also created a state-owned oil company called Petroleum Sarawak Bhd (Petros).

The state had also made other demands like employment for Sarawakians, including senior positions and board members at Petronas, and scholarships as well as placements at Petronas-owned institution of higher education.

The previous federal government did not officially confirm or deny Sarawak’s O&G right claim. Petronas had responded that it would be guided by the government’s decision.

Many see Sarawak’s unilateral claim as a concession for the state to continue to support the Barisan Nasional (BN) government. The state offers 31 parliament seats and has been a “safe deposit” for BN.

But after BN’s disastrous outing at the 14th General Election, it is not known how Sarawak’s oil right claim will pan out. Petronas’ action also came after the BN government was booted out from Putrajaya.

Petronas in the statement said it was committed “in supporting Sarawak’s aspiration to participate in the O&G industry in the state, for as long as it is within the framework of the PDA”.

Meanwhile, the Sarawak State Attorney General’s Chambers had confirmed that the state had been served the notice in relation to the Petronas suit.

“The application for leave made under Article 4(4) of the Federal Constitution will be heard next Tuesday, June 12, in Putrajaya.

“At the moment, the state has yet to receive the motion filed by Petronas related to the application.

“The state government will do everything within its powers, in accordance with the rule of law, to defend our rights in this matter,” said Law, Federal-State Relation and Project Monitoring Assistant Minister Sharifah Hasidah Sayeed Aman Ghazali.

The PDA states Petronas will pay the amount agreed with the federal and state governments. Sarawak wants more than the 5% cash payment due to the value of the petroleum extracted from the state.

Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib said the Federal Constitution places mineral rights as belonging to the state as seen in the ninth schedule of the Constitution.

“Therefore, arguably the Sarawak state ordinances will dominate the discourse,” Azrul told The Malaysian Reserve when contacted.

“However, harmony must be maintained within existing laws and the PDA should be amended to reflect this accordingly.”

He added that amendments to the PDA will not only govern mineral rights in relation to Sarawak alone, but all states in Malaysia.

A market observer said the Federal Court’s decision over the PDA will determine future ownership of the O&G resources.

“The key issue is ownership as this determines who has control over the resources extracted, even if a royalty is required to be paid to the state,” said the source, who declined to be named.

“The court hearing will also determine whether the PDA or the Federal Constitution takes precedence in these matters.”