O&G and gridlock: Yet there's political diplomacy in the air!

Borneo Post

17-05-2025

Photo, taken in Putrajaya earlier this month, shows Abang Johari (right) and Anwar meeting to resolve O&G issues. — Sarawak Public Communications Unit photo
THE ongoing debate between Petroliam Nasional Bhd (Petronas) and Petroleum Sarawak Bhd (Petros) regarding oil and gas (O&G) rights in Sarawak centres on differing interpretations of the Malaysian Constitution and the Petroleum Development Act (PDA) 1974.
I have opted to sidestep the word 'conflict', which can imply a ruthless power struggle with an emphasis on control and dominance, and it frequently evokes images of a Machiavellian pursuit driven by a desire to assert one's will and gain an upper hand.
Using different language allows for a more nuanced and potentially less aggressive understanding of the situation.
So, let diplomacy also take its course!
The debate surrounding O&G rights between Petronas, Malaysia's national oil company, and Petros, the Sarawak state-owned O&G company, has become a complex arena for political manoeuvring and delicate diplomacy between state and federal leadership.
Sarawak's pursuit of greater autonomy over its O&G resources has fuelled tensions, requiring careful negotiation to balance state-level ambitions with national interests and revenue sharing.
Scrutinise details with care
Sarawakians are generally keeping abreast of the case through media reports.
While not actively participating, many are keenly observing and offering support when positive developments occur and occasionally expressing combative remarks when stating displeasure.
Familiarising oneself with the pertinent clauses of the PDA 1974 can significantly enhance comprehension of the complexities and debated points surrounding the relationship between Petronas and Petros.
Reviewing this legislation will provide a stronger foundation for understanding the nuances of their arguments.
This fosters a more critical and analytical mindset among supporters of Sarawak's pursuit of greater control over its O&G resources.
This approach motivates individuals to scrutinise details with greater care, fostering deeper insight and a more complete grasp of the subject matter instead of being influenced by hype.
Despite the PDA 1974 granting Petronas control over hydrocarbon resources, Sarawak maintains that its constitutional right to govern the land, from which these resources are sourced, remains intact.
Sarawak argues that the State Legislative Assembly (DUN) has never formally approved or ratified the PDA 1974, implying its lack of consent to the federal law superseding its land rights, and that the Oil Mining Ordinance (OMO) 1958 is a law that still remains in force today.
Full authority under OMO 1958
Therefore, to Sarawak, the OMO 1958 gives Sarawak full regulatory authority over all persons and companies involved in the operations of the oil and gas industry in Sarawak.
This was stated emphatically by the Premier of Sarawak Datuk Patinggi Tan Sri Abang Johari Tun Openg as 'a defining factor of legal weightage'.
Effective July 1, 2018, Sarawak began enforcing the OMO 1958 and the Gas Distribution Ordinance 2016 via the Sarawak Minerals and Management Authority (SMMA), utilising Petros as the enforcement vehicle.
This action followed the recent passage of the Oil Mining (Amendment) Bill 2018 on July 10, 2018, meant to strengthen the legal framework for these enforcement activities.
This situation often involves high-level discussions addressing constitutional rights, revenue distribution formulas, and the operational control of O&G fields, all while navigating the politically sensitive landscape of regional identity and resource nationalism.
The success of these negotiations is dependent on the ability of both federal and state leaders to engage in constructive dialogue, compromise on competing priorities, and reach agreements that are perceived as equitable and beneficial to Sarawak's development as well as the nation's overall economic well-being.
'More than a legal battle'
The notion that a straightforward application of the law could have easily solved the problem reveals a simplistic and concerning passage of thought where it disregards the unavoidable subjectivity present, where legal professionals often disagree and interpretations of the law are constantly debated.
The process involves more than just a legal dispute where the winner and loser are determined solely by interpreting the letter of the law and established legal principles.
Deeper considerations and a comprehensive grasp of the broader context, including the interwoven relationship between law, power politics and social polity are frequently required in situations like the O&G dispute.
Instead of continuing down a combative path, achieving the same goal through a more cooperative approach would have led to a definitive solution.
This would have fostered a more positive and collaborative environment moving forward.
Essentially, the situation could have shifted from conflict to cooperation, allowing everyone involved to concentrate on productive and beneficial activities.
Equitable, balanced discourse
Achieving a genuinely equitable and balanced discourse is desirable.
Nevertheless, the situation becomes even more challenging when intrinsic power dynamics are involved and serve as a biased determinant.
This is especially true when the debate touches upon the complex relationship between federal and state governments, especially now under the ongoing pursuit of some devolutionary powers under the Malaysia Agreement 1963 (MA63) by Sarawak.
It is a situation where the subtle, but influential, exertion of power can easily overshadow the merits of the O&G arguments themselves.
In essence, a supposedly level playing field can suffer cracks under the existing power structures inherent in the broader framework of federal-state relations.
The idea that a team of compliant legal professionals would have swiftly resolved the issue by adhering to the law ignores the complex factors of bias, authority and opposing viewpoints that invariably influence the decision over the O&G controversy.
The concept of the law as an objective 'definitive answer' is a misleading and risky idea, masking the human involvement that ultimately influences its use and makes justice inherently uncertain.
Sarawak, through Petros, argues for greater control over its natural resources, citing historical agreements and constitutional provisions that predate PDA 1974.
Tan Sri Hamid Bugo (second right), the chairman of the Petros board, seen with the senior executives at Petros' historic milestone, which is the first drill at the SK433 Onshore Block in Miri. — Photo courtesy of Petros
'Core of debate'
The core of the debate revolves around whether Sarawak's rights were adequately protected under the Federal Constitution and subsequent legislation, and whether Petros' establishment and ambitions to play a more significant role in the O&G sector are legally permissible within the existing framework.
This has led to discussions on revenue sharing, regulatory powers, and the overall balance of power between the federal government and the Sarawak state government in managing Sarawak's valuable resources.
Watchers and social influencers who are unaware of the case's intricacies and contents may be persuaded to focus on particular contentious issues that arise and allow state feelings to prevail.
Politicians who must balance state sentiment with federal power find it to be a touchy subject.
The primary point of contention between Petronas and Petros is their divergent interpretations of the PDA 1974 and the scope of Sarawak's rights to its natural resources.
One major topic of disagreement is the extent to which the PDA eliminated Sarawak's pre-existing rights to O&G found within its limits.
Petros advocated for increased control and engagement in the upstream sector, arguing that the state should benefit more directly from the resources taken from its territory.
Another topic of contention concerns revenue sharing and the allocation of earnings from O&G production.
Sarawak contends that the MA63, which formed Malaysia, grants it significant control over its O&G resources, a position they argue has been eroded over time by Petronas' dominance.
Specifically, Sarawak desires greater control over the exploration, development and production of O&G within its territorial boundaries, seeking a larger share of the revenue generated and a more active role in the management of these resources.
The state wants to gain more directly from its natural wealth and assure its long-term development, which has caused conflict with Petronas, which has long had near-exclusive control of Malaysia's O&G sector nationally.
The argument, which has escalated into a full-fledged judicial battle, is centred on a struggle for authority and opposing interpretations of who controls natural resources under Malaysia's federal system.
In essence, the conflict is over the proper distribution of power and the definition of property rights within the nation's political framework.
Delicate equilibrium of authority
At its core, the dispute, now a formalised legal contest, centres on the delicate equilibrium of authority and the differing perspectives on who controls natural resources under Malaysia's federal system.
The heart of the matter lies in defining the boundaries of power and ownership within the nation's governmental structure.
The escalating conflict boils down to disagreements over the distribution of power and how resource ownership is understood within Malaysia's federal framework, now being fought over in the courts.
As the legal disputes heat up, the interpretation of constitutional provisions governing natural resources becomes a flashpoint, potentially leading to increased state autonomy demands and a weakening of federal control.
Prime Minister Datuk Seri Anwar Ibrahim is walking a fine line in the wake of increasing legal and political complexity.
While acknowledging resource-rich governments' valid concerns and the need for equitable accords, he also recognises the critical role that O&G earnings play in national growth and economic stability.
PM Anwar's stance must be properly balanced to prevent upsetting the party.
A perception of favouritism toward the federal government might stoke more animosity in Sarawak and Sabah, potentially undermining his coalition.
Conversely, granting too much autonomy or revenue to Sarawak and Sabah may result in a backlash from other states, weakening the federal government's authority and setting a precedent for future demands.
'View through political lens'
PM Anwar is currently in a difficult situation, caught between the competing forces of legal authority and political influence.
Meanwhile, Abang Johari maintains a strong stance, resolutely focused on achieving what he believes is best for the state.
PM Anwar's decision will inevitably be viewed through a political lens, and any misstep could jeopardise his leadership and the stability of his administration.
He must seek a balanced and pragmatic solution that addresses the grievances of the state while safeguarding national interests and maintaining the integrity of the Federal structure.
Despite the protracted discussion, political diplomacy has not slipped the notice of the two leaders, PM Anwar and Abang Johari, who have met on multiple occasions to discuss ways to resolve the legal impasse in the O&G issue.
* Toman Mamora is 'Tokoh Media Sarawak 2022', recipient of Shell Journalism Gold Award (1996) and AZAM Best Writer Gold Award (1998). He remains true to his decades-long passion for critical writing as he seeks to gain insight into some untold stories of societal value.