The fight for oil rights expected to drag on

Federal Court’s ruling effectively paves the way for Sarawak’s OMO to take effect on July 1, 2018


PETROLIAM Nasional Bhd (Petronas) will have to look to the High Court to contest Sarawak assuming control over the state’s petroleum resources after the Federal Court dismissed its case last Friday.

The national energy company filed for an application of leave to Malaysia’s highest court where it sought a declaration of the Petroleum Development Act 1974 (PDA) being the law applicable in the country.

Under the PDA, Petronas is the exclusive owner of Malaysia’s petroleum resources and has regulatory authority over the country’s upstream sector both onshore and offshore.

The application of leave was filed under Article 4(4) of the Federal Constitution and ultimately sought to establish the Parliament as the legislative authority over the exploration, exploitation and mining of petroleum throughout the country.

Presiding over the federal hearing, Chief Judge of the High Court in Malaya Tan Sri Ahmad Maarop dismissed the case, citing the application as not coming within the ambit of Article 4(3) and Article 4(4) of the Constitution.

“Hence, the declaratory sought by the applicant (Petronas) is not within the exclusive jurisdiction of the Federal Court.

“The declaratory sought is within the jurisdiction of the High Court — the application of leave under Article 4(4) does not arise,” he said. Petronas is unable to appeal the decision as the case was brought to the highest court in Malaysia.

Lawyer Datuk Malik Imtiaz Sarwar, who represented Petronas, said his firm will take instructions from their client on whether a case will be brought to the High Court.

“We will take instructions from Petronas and consider what the court has ruled. This is something new — it is a precedent that the Federal Court has set,” he told members of the press after the federal hearing last Friday.

The federal ruling effectively paves the way for Sarawak’s Oil Mining Ordinance 1958 (OMO) to take effect on July 1 this year, which will see the Sarawak state government assume regulatory control over its oil and gas (O&G) resources.

Petronas, alongside other upstream players, will be made to procure the necessary licences and leases from Sarawak state-owned O&G firm Petroleum Sarawak Bhd or Petros.

Commenting on the Federal Court decision, Assistant Minister of Law, State-Federal Relations and Project Monitoring Sharifah Hasidah Sayeed Aman Ghazall said the “rule of law prevails” ahead of the July 1 implementation.

“As far as we are concerned, the OMO is a valid law — it is a good law, and is enforceable in Sarawak.

“It is not a law that can simply be repelled or superseded by any other law, so we will enforce it,” she said after Petronas’ case was dismissed.

However, Malik Imtiaz said the federal ruling is a “procedural step” and that no determination has been made as to the validity of the PDA and OMO.

“The decision does not mean that the PDA is invalid and it does not mean that the OMO is valid,” he said.

He said the issue is whether the PDA applies to Sarawak or not, which has not been determined yet.

The OMO predates the PDA and was a colonial law consolidated under the Malaysia Agreement 1963, which granted Sabah and Sarawak full authority over its natural resources under the Federal Constitution.

At the same time, the PDA has been the rule of the land since it came into effect in 1974.

Galen Centre for Health and Social Policy CEO Azrul Mohd Khalib said the federal ruling does not resolve the issue of two separate yet contradictory laws existing in Malaysia, but only points out a preliminary route for Petronas to take to seek remedial action.

“Nothing has been decided — the court decision does not settle any of the questions currently under contention, such as whether the OMO will take precedence over the PDA,” he told The Malaysian Reserve.

“The Sarawak government’s decision to proceed is rooted on the basis that the OMO, while being a state law, is also dependent on the state rights as outlined under the Federal Constitution.”

He added that Parliament must move to amend the PDA accordingly if Sarawak is allowed to exert its rights under the OMO.

Representing the Sarawak state government during the federal hearing, lawyer Datuk Seri JC Fong said Sarawak will continue to work with Petronas to harmonise the two laws for the sake of national interest.

“We will comply with the federal laws which, of course, need to be constitutionally enacted, but we want Petronas to comply with the state law,” he said after the hearing.