1 week ago
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ADVERTISE HERE
I refer to the recent statement by Zaid Ibrahim concerning PETRONAS, PETROS and Sarawak’s position on oil and gas.
With respect, the issue should not be presented as though Sarawak refuses to recognise the Petroleum Development Act 1974, or PDA 1974. Recognition of the PDA 1974 as a law of Malaysia has never been the issue.
The real constitutional and legal question is how the PDA 1974 applies in Sarawak without displacing Sarawak’s pre-existing laws, constitutional rights and legal framework, some of which existed before Malaysia itself was formed.
We must therefore begin with the correct historical facts.
The Federation of Malaya became independent on 31 August 1957. Malaysia was formed only on 16 September 1963, when the Federation of Malaya, Sarawak, Sabah and Singapore came together under the constitutional arrangements creating Malaysia. The Malaysia Act itself came into force on that date.
This distinction is fundamental.
Long before Malaysia was formed, Sarawak already had an established petroleum industry and its own laws governing land, oil and mining. Oil was being produced in Miri from 1910, while the Oil Mining Ordinance 1958, Cap. 85, was enacted five years before Malaysia was formed and 16 years before the PDA 1974.
That history cannot simply be erased by beginning the discussion in 1974.
The continuation of laws existing before Malaysia Day was expressly addressed when Malaysia was formed. Section 73 of the Malaysia Act 1963 provides for the continued operation of the “present laws” existing before Malaysia Day, including the laws of the Borneo States. Article 159A of the Federal Constitution gives Part IV of the Malaysia Act 1963 constitutional effect as though those provisions were embodied in the Federal Constitution.
Therefore, the OMO 1958 cannot simply be dismissed as though it never existed or automatically became irrelevant when the PDA was enacted in 1974.
The precise interaction between Sarawak’s pre-Malaysia laws, subsequent federal petroleum legislation and the Federal Constitution is a proper constitutional question. Indeed, that is one of the reasons these matters are now before the courts.
PETROS and PETRONAS can coexist
Zaid says PETROS taking over the gas aggregator role amounts to taking over a key part of PETRONAS’ business.
But this leaves out a very important development.
On 21 May 2025, Prime Minister Datuk Seri Anwar Ibrahim and the Premier of Sarawak Datuk Patinggi Tan Sri Abang Johari Tun Openg signed a Joint Declaration which recognised that the relevant Federal and Sarawak laws concerning gas distribution in Sarawak are to coexist and be respected.
Under that framework, PETRONAS continues to perform its functions and responsibilities under the PDA 1974, while PETROS is recognised as Sarawak’s gas aggregator, effective from 1 March 2025. Existing PETRONAS LNG export arrangements were also expressly left unaffected.
Therefore, saying that PETROS is simply “displacing” PETRONAS does not accurately describe the arrangement.
PETROS having a lawful role within Sarawak does not require PETRONAS to cease being Malaysia’s national petroleum company.
Both can operate within their respective legal and commercial frameworks.
Indeed, that is precisely what the Joint Declaration envisaged.
RM10B cannot determine constitutional rights
Zaid also raises the suggestion that PETRONAS could lose billions of ringgit, with Sarawak gas business estimated at around RM10 billion annually.
Financial consequences are certainly important. PETRONAS is a major national institution and its financial strength matters to Malaysia.
But commercial value cannot by itself determine constitutional jurisdiction.
If a constitutional or legal right exists, it does not disappear merely because recognising that right may affect the revenue of another entity.
The more appropriate approach is to establish clearly the respective legal rights of PETRONAS, PETROS, the Federal Government and Sarawak and then develop commercial arrangements that protect both Sarawak’s interests and Malaysia’s overall economic interests.
Furthermore, figures in the RM10 billion to RM20 billion range have appeared in reporting as estimates of profits associated with Sarawak gas exports rather than as an established audited amount that PETRONAS will automatically “lose” because of PETROS.
That distinction matters.
Shell MDS case doesn’t settle rights
The Shell MDS dispute has also been cited as evidence of damage caused by the PETRONAS-PETROS situation.
The facts need to be understood properly.
Shell MDS received competing claims concerning payments and sought court protection because it was concerned about paying twice. Payments in the region of RM70 million to RM80 million monthly were involved.
The Court of Appeal subsequently ordered Shell MDS to pay PETRONAS pursuant to its existing gas supply agreement and held that PETRONAS had continued fulfilling its contractual supply obligations.
That judgment should of course be respected.
But it did not finally determine the much wider constitutional question concerning the respective legislative and regulatory powers of Sarawak and the Federation over oil and gas.
A commercial dispute over who should receive payment under an existing contract should therefore not be presented as though it has conclusively extinguished Sarawak’s legal position.
It has not.
PDA 1974 cannot be “non-negotiable”
This is where I respectfully disagree most strongly with Zaid’s conclusion.
He says the starting point must be that Sarawak first recognises PETRONAS’ rights under the PDA 1974 as “non-negotiable”, and only after that should the role of PETROS be negotiated.
But that formulation effectively assumes the answer to the very constitutional question now requiring judicial determination.
PETRONAS itself has gone to the Federal Court seeking clarity on the regulatory framework applicable to its operations in Sarawak. PETRONAS stated publicly in January 2026 that differences remained regarding the legal obligations applicable to its operations in Sarawak.
Sarawak has likewise brought its own constitutional questions before the Federal Court.
The Federal Court has now fixed five days beginning 25 January 2027 to hear the separate PETRONAS and Sarawak Government petitions concerning federal and Sarawak oil and gas laws.
Therefore, describing one side’s interpretation as already “non-negotiable” is premature.
The Federal Constitution is supreme.
The proper starting point must therefore be the Federal Constitution, the Malaysia Act 1963, the legal arrangements surrounding the formation of Malaysia on 16 September 1963, Sarawak’s pre-existing laws, subsequent Federal and Sarawak legislation, and the authoritative interpretation of those instruments by the courts.
“What if every oil-producing state does the same?”
Zaid also suggests that if every oil-producing state followed Sarawak, PETRONAS would lose the scale that made it strong.
But not every oil-producing state has Sarawak’s history, pre-Malaysia legal framework or constitutional arrangements as one of the Borneo States. Sarawak had its own government, laws governing land and natural resources, and an established petroleum industry before Malaysia was formed.
This is not about encouraging states to dismantle PETRONAS, but recognising that different constitutional arrangements may legitimately apply within a federation.
PETRONAS and PETROS need not be enemies
I have said before, and I repeat, that this should not become a contest of PETRONAS versus PETROS, much less Malaysia versus Sarawak.
PETRONAS has played and should continue to play an important role for Malaysia.
PETROS has an equally legitimate responsibility to advance Sarawak’s participation in and development of its own oil and gas industry within the law.
One does not have to destroy the other.
Sarawak does not become less Malaysian by insisting that its laws and constitutional rights be respected.
Nor does respecting Sarawak’s legal position mean weakening PETRONAS.
A mature Federation should be capable of doing both.
The Joint Declaration of 21 May 2025 itself recognised the principle that relevant Federal and Sarawak laws concerning gas distribution should coexist and be respected, while PETRONAS continues performing its functions under the PDA and PETROS performs its role as Sarawak’s gas aggregator.
The correct starting point
I respectfully disagree that Sarawak must first recognise PETRONAS’ rights under the PDA 1974 as “non-negotiable”. The starting point must instead be the Federal Constitution, the Malaysia Act 1963 and Sarawak’s pre-existing laws and constitutional safeguards, including the Oil Mining Ordinance 1958. The PDA 1974 is a federal law of Malaysia, but its application in Sarawak must be determined without improperly displacing those existing rights. Ultimately, the disputed constitutional questions should be determined by the courts.
That is not a rejection of Malaysia, but federalism operating according to law. Sarawak is asking for what its law, history and constitutional arrangements provide, and should not be expected to accept anything less.
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