Petronas, Petros to jointly develop Malaysia's oil and gas sectors as federal, Sarawak governments resolve dispute
KUALA LUMPUR: Malaysia's federal government and the Sarawak state government have inked a joint declaration, seemingly putting to bed a protracted dispute over the governance of oil and gas distribution within Sarawak.
Signed by Prime Minister Anwar Ibrahim and Sarawak Premier Abang Johari Openg on Wednesday (May 21), the declaration will see Malaysia's national oil corporation Petronas and Sarawak's state-owned oil and gas company Petros jointly developing the country's oil and gas sectors.
It also sets out the parameters and collaborative framework for the two firms, which have been at odds with one another.
Sarawak has been challenging the decades-old monopoly Petronas holds over Malaysia's oil and gas reserves as enshrined under a parliamentary statute in 1974.
Known as the Petroleum Development Act or PDA, the legislation decrees, among other things, that Petronas is the sole guardian of Malaysia's hydrocarbon reserves.
Anwar said that while the role of Petronas remained intact and it would continue to fulfil its national role, Petros' role would be recognised at the same time.
"So, this understanding we've reached ensures that Petronas' operations continue, while also recognising the role of Petros,' he was quoted as saying by The Star during a joint press conference with Abang Johari on Wednesday.
"Both entities will now work hand-in-hand to elevate the nation through the oil and gas industry, both upstream and downstream, as well as in various alternative energy initiatives, as outlined in our joint declaration.'
Sarawak wants its hydrocarbon reserves to be regulated under a colonial-era law that stipulates oil and gas resources found within 200 nautical miles of the state's waters belong to it.
The long-running dispute between Petronas and Petros over gas distribution reached an impasse last year and escalated in late April, with Petronas saying that its Petronas Carigali subsidiary had received notices from the Sarawak state government about its activities there.
The impasse has also raised concerns about the potential impact on Petronas' revenues, which are a major source of income for the federal government.
Sarawak holds about 60 per cent of Malaysia's gas reserves and accounts for 90 per cent of Malaysia's liquified natural gas (LNG) exports.
The rift also appeared to cause investor disquiet following a surprise withdrawal by US oil firm ConocoPhillips from an oil project off the Borneo coast.
In April, ConocoPhillips decided to withdraw from operating the Salam-Patawali deepwater oil and gas field that the company discovered in 2018 with Petronas in a 50-50 joint venture that was expected to cost RM13.7 billion (US$3.13 billion).
Anwar said on Wednesday that the joint declaration aimed to establish clear parameters and to acknowledge the PDA and the Distribution of Gas Ordinance (DGO) 2016.
The DGO provides the legal framework for the Sarawak state government to regulate and manage the distribution of gas within its borders.
'This means that the current situation requires us to acknowledge that Sarawak has grown and now has the capacity, including establishing its own state oil company,' said Anwar as quoted by The Star.
"Our shared aspiration, beyond just strengthening Petronas, is to position Sarawak as a launching hub for ASEAN.
"To me, this is a very realistic approach, and it will lead to national success, meaningful outcomes, and the elevation of Sarawak's economic standing.'
DECLARATION DETAILS
A statement issued by Malaysia's Prime Minister's Office later on Wednesday provided specifics of the joint declaration.
The declaration acknowledged federal and state laws, the status of existing agreements, and the formation of a framework for cooperation between Petronas and Petros, according to the statement.
Additionally, all federal and Sarawak laws related to the distribution of gas within Sarawak would co-exist and be respected by all parties carrying out such activities in the state, including Petronas and Petros.
According to the statement, the declaration noted that Petronas would maintain its functions, activities, responsibilities, and obligations as outlined in the PDA and its regulations, while the Sarawak government had appointed Petros as the gas aggregator from March.
Existing LNG export agreements by Petronas would remain unchanged.
The statement also said that Petronas and Petros would hold discussions for the purpose of expanding cooperation for the domestic gas needs of Sarawak in the areas of gas supply pipeline projects, as well as other green energy, hydrogen, and electricity generation projects.
'Both Petronas and Petros shall endeavour to continue working together to detail the framework for the benefit of the nation in accordance with transparent commercial principles,' said the statement.
'The significant potential that can be fully explored from this agreement is capable of strengthening trust and restoring the confidence of investors, especially international companies in the petroleum sector, to finalise their respective investment directions in Malaysia.'
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