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New Straits Times
03-05-2025
- Business
- New Straits Times
Petronas Carigali-Sarawak legal dispute may affect partners, contractors
KUALA LUMPUR: Petronas Carigali Sdn Bhd's legal dispute with Sarawak goverment may have cascading effects on partners, contractors and companies dependent on Petroliam Nasional Bhd-operated infrastructure or feedstock there, said analysts. They named Petronas Gas Bhd, Petronas Chemicals Group Bhd, Hibiscus Petroleum Bhd, Dialog Group Bhd and Sapura Energy Bhd as among those that may be affected. Sarawak's utility and telecommunications ministry had on May 1 issued a letter of demand to Petronas Carigali over alleged unauthorised operations at the Miri Crude Oil Terminal (MCOT). The allegation is based on non-compliance with Section 7(e) of the Distribution of Gas Ordinance (DGO) 2016, which regulates construction and operation of gas infrastructure in Sarawak. Petronas on Friday confirmed receiving the notices. The national oil company, however, said its upstream arm Petronas Carigali is operating in accordance with the Petroleum Development Act 1974 (PDA 1974). The Act provides statutory authority for the company to carry out petroleum-related operations nationwide, subject to legal compliance. "While we respect the aspirations of the state of Sarawak, Petronas also has a duty to uphold the PDA 1974 and safeguard national interests," it said in a statement. Petronas said it remains committed to constructive engagement and will continue working closely with both the federal and Sarawak state governments. This includes collaboration with Sarawak's state-owned oil and gas firm, Petroleum Sarawak Bhd (Petros), to explore future arrangements that ensure regulatory clarity and operational continuity. "We are also committed to ensuring that the rights and interests of all parties, including end-consumers and investors, are addressed accordingly," it said. Political economic and international relations analyst Samirul Ariff Othman said uncertainty over infrastructure ownership, licensing and compliance in Sarawak will ripple across the industry. "Publicly listed companies involved in gas infrastructure, liquefied natural gas (LNG) and upstream activities in Sarawak will need to monitor the situation closely," he told the Business Times. BMI senior oil and gas analyst San Naing exopect the uncertainty will have a freezing effect on new investments in Sarawak, at least in the near term. Naing said Shell and ConocoPhilips, which operate large-scale projects in Sarawak are likely to be affected by the legal dispute. "ConocoPhilips has reportedly divested from one of the offshore deepwater projects recently. PTT Exploration and Production Public Co Ltd (PTTEP) has already postponed the final investment decision for investment in the Lang Lebah gas project. "It remains uncertain PTTEP's operator of the Lang Lebah natural gas and carbon capture and storage (CCS) project will materialise soon. Further delays to the project will adversely affect LNG production ambitions by PTTEP and Petronas," Naing added. According to Samirul, the potential ramifications for Petronas are significant. Sarawak holds over 60 per cent of Malaysia's total gas reserves and 40 per cent of its oil, including vital fields in the Central Luconia and Bintulu offshore basins. He said these provide feedstock to the Bintulu LNG Complex - a key export revenue generator - and to domestic industrial gas users. "Disruptions to gas licensing or terminal access, as is possible with MCOT, could delay LNG exports, raise compliance costs, and reduce overall revenue certainty," Samirul added. Meanwhile, Naing expects Petronas's strategic priorities and investment plans to focus more on resources in the shallow waters of Peninsular Malaysia and Sabah. "Petronas is still able to manage oil and gas blocks in Sabah, but this may change in the future if the Sabah state government follows Sarawak's lead," he said. "Moving forward, maintaining an amicable relationship with the Sabah government remains critical for Petronas in managing the hydrocarbon resources there," he added. In a separate statement, Bersatu's youth wing Armada dismissed the Sarawak government's claim that Petronas Carigali is operating illegally at MCOT. Armada called the accusation baseless and inconsistent with existing laws. It said the PDA 1974 act clearly grants Petronas exclusive rights to regulate all petroleum-related activities across Malaysia. "Based on this legal foundation, Petronas does not require any licence or permit from the Sarawak government to conduct its petroleum operations in the state," it said. Armad reminded the public that in 1976, the Sarawak government had signed a formal agreement with the federal government, transferring ownership and control of its petroleum resources to Petronas. "Any claims that Petronas is operating illegally in Sarawak are clearly unfounded and contradict legal facts," it added.
New Straits Times
30-04-2025
- Business
- New Straits Times
Petronas-Petros clarity needed to stem investment outflow: Analysts
KUALA LUMPUR: Sarawak could be looking at a broader pattern of foreign direct investment outflow barring greater regulatory clarity, several analysts suggested. Speaking to FMT, senior consultant Samirul Ariff Othman said a mix of local and international challenges motivated the recent ConocoPhilips exit from the Salam-Patawali project. The US oil major's exit from Salam-Patawali comes months after another foreign oil and gas company, Thailand's PTTEP, shelved the Lang Lebah gas project until 2026. Industry observers point to the ongoing regulatory uncertainty caused by the unresolved Petronas-Petros settlement as causing this two-year delay, as reported by Scoop. While each project has unique challenges, the back-to-back cancellations suggest a potential emerging trend influenced by economic pressures and regulatory uncertainties," Samirul from Global Asia Consulting said. In 2025, an ongoing trade war between the United States and various countries has triggered other economic risks. These include fears of inflation and recession, as well as falling oil prices. "Fluctuating global energy prices and economic uncertainties can impact investment decisions in large-scale O&G projects. "The combination of rising costs, global market volatility, and unresolved local disputes may lead other investors to reassess their commitments in the region," Samirul said. Jamil Ghani, a former analyst with the Malaysia Petroleum Resources Corporation, told FMT that regulatory clarity is of utmost importance to stabilise Malaysia's business environment. "Regulatory uncertainty - especially the unresolved role of Petros as the state's designated gas aggregator - risks amplifying investor anxiety. Although Petronas has confirmed that discussions with Petros are ongoing, ambiguity around intermediary or middleman arrangements undermines confidence at a time when national cohesion is critical," Jamil said, referring to the federal government's insistence that Petronas' contracts remain untouched with no middleman involved. Amid a challenging global environment, he stressed that Malaysia cannot afford the perception of internal disunity - least of all in its strategic energy sector. "If Petronas is to remain a bulwark of national stability, policy cohesion and operational continuity must take precedence," Jamil added. "That means Sarawak and the federal government must urgently stabilise the current dispute for the economic resilience of an entire nation." Long-term regulatory clarity is crucial for attracting and retaining foreign partners in Malaysia's upstream sector. "Clear and stable fiscal terms, along with consistent enforcement of production sharing contracts, are essential to maintain investor confidence," Samirul said. Challenges ahead According to Upstream, the Salam-Patawali was not a large project but a pivotal one considering Malaysia's ambitions to raise oil and gas production. The standalone development, which involved a floating vessel capable of handling over 100 million cubic feet of gas, was well-supported by Petronas. According to Upstream Online, Petronas is keen to continue the project but cannot take it forward alone for the time being due to lack of capacity. Pritish Bhattacharya, a research officer at Singapore's ISEAS-Yusof Ishak Institute, told FMT Sarawak's push for oil and gas autonomy has put Petronas's monopoly at risk, with broader repercussions for the national economy and local industry. Pritish said the implications for the overall Malaysian economy are still "very hard to quantify". "(On the other hand), the potential loss of Petronas's resource access will create spillover challenges for international oil companies that are accustomed to centralised dealings," he said. This will be a concern especially in terms of foreign investments. These investors have essentially dealt only with Petronas in their dealings in Malaysia, and it could complicate matters if they now have to work with Petros. Jamil said the sector's domestic value chain is wide and vulnerable. According to the statistics department, there were 2,894 establishments engaged in oil and gas services and equipment activities as of the latest census.
Daily Express
30-04-2025
- Business
- Daily Express
ConocoPhilips quits Sarawak, to focus on Sabah
Published on: Wednesday, April 30, 2025 Published on: Wed, Apr 30, 2025 By: Malay Mail Text Size: The logo of American oil and natural gas exploration and production company ConocoPhillips is seen during the LNG 2023 energy trade show in Vancouver, British Columbia, Canada, July 12, 2023. — Reuters pic Kuala Lumpur: US oil firm ConocoPhillips has unexpectedly withdrawn from operating the Salam-Patawali deepwater oil and gas field off Sarawak's coast, adding to the state's rights dispute with Petronas. The project, discovered jointly with Malaysia's national oil corporation Petronas in 2018, represented a 50-50 joint venture valued at approximately RM13.7 billion (US$3.13 billion). According to Channel News Asia, industry sources close to ConocoPhillips confirmed the withdrawal, attributing it to a 'country strategy review' without providing further details. Attempts to reach company executives at their Kuala Lumpur office were unsuccessful. According to multiple industry executives, the decision was partially motivated by regulatory uncertainties stemming from the ongoing dispute between Petronas and the Sarawak Government led by Premier Tun Abang Johari Openg. The Sarawak Government, which owns the oil and gas firm Petroleum Sarawak (Petros), has been asserting greater control over its natural resources. CNA reported that this stance has created discomfort among foreign companies operating in the region, who view Petronas — typically their joint-venture partner in exploration projects — as being under significant pressure in Sarawak. ConocoPhillips will reportedly now focus its operations in neighboring Sabah, where it already maintains a presence. As of April 2024, ConocoPhillips maintained exploration, development, and production activities across approximately 2.7 million net acres in Malaysia, with working interests in six production sharing contracts. The Salam-Patawali exploration block encompasses 300,000 net acres primarily in the Salam and Benum fields off southern Sarawak, where the company had recently conducted a 3D seismic survey in 2023 with ongoing data processing and evaluation. He withdrawal comes amid other developments in Sarawak's energy sector. Thailand's PTTEP, which holds a 42.5 per cent share in the Lang Lebah gas project off Sarawak's shore, is reportedly re-engineering the US$6 billion project 'to improve economic viability.' Sources told CNA that PTTEP has temporarily suspended development activities and postponed final decision-making until next year. Beyond affecting foreign investment, the Petronas-Sarawak dispute has led to allegations of corporate espionage. Former Petronas manager Khairul Akmal Jasni recently pleaded not guilty to charges of attempting to leak confidential information about the national oil corporation to Petros. This rare case of alleged corporate spying highlights the increasing stakes in Sarawak's efforts to challenge Petronas's monopoly. These developments are creating pressure on Prime Minister Datuk Seri Anwar Ibrahim to facilitate a resolution between Sarawak and Petronas, particularly as Malaysia faces economic headwinds from global trade uncertainties. A senior aide to the PM confirmed that Anwar had been briefed on the dispute but indicated that both parties remain firm in their positions, with a senior Petronas official similarly confirming that negotiations have stalled. The core of the conflict centers on Sarawak's challenge to Petronas's decades-old monopoly established under the 1974 Petroleum Development Act (PDA), which designates the national corporation as the sole guardian of Malaysia's hydrocarbon reserves. Sarawak, which accounts for over 60 per cent of Malaysia's petroleum reserves and 90 per cent of its LNG exports, argues that the PDA does not apply to the state and instead advocates for regulation under the colonial-era Oil Mining Ordinance 1958, which would grant the state ownership of resources within 200 nautical miles of its waters. ConocoPhillips' withdrawal represents a significant economic setback for Sarawak. While the exact investment to date in the Salam-Patawali field remains unclear, industry sources had projected development costs at RM13.7 billion, with production expected to peak in 2028 and operations continuing until 2067. ConocoPhillips also operates the SK304 block in Sarawak, encompassing 1.1 million net acres, though exploration there remains at the feasibility stage. The dispute has already spawned legal challenges. Petros filed suit against Petronas in the Kuching High Court in October, contesting a RM7.05 million payment demand related to a 2019 gas sales agreement. Petros argues the agreement is 'illegal and void' because Petronas failed to obtain necessary licensing under Sarawak's Distribution and Gas Ordinance. Separately, Shell's Malaysian unit obtained an interim court order in January to maintain gas supplies from the Bintulu facility pending resolution of the Petronas-Petros dispute. Industry executives note that while existing petroleum projects in Sarawak remain operational, the ongoing conflict could significantly dampen investor confidence in the state's oil and gas sector. They point out that Petros, formed in 2017, lacks the technological expertise and international experience of Petronas's exploration arm, Carigali. According to one Malaysian engineering executive with close ties to Petronas, 'Petros and the Sarawak-based E&P companies don't have the capabilities yet and that does not make them attractive partners without Petronas in the mix.' Sarawak now faces the immediate challenge of finding a replacement contractor for the Salam-Patawali oil field. * Follow us on Instagram and join our Telegram and/or WhatsApp channel(s) for the latest news you don't want to miss. * Do you have access to the Daily Express e-paper and online exclusive news? Check out subscription plans available. Stay up-to-date by following Daily Express's Telegram channel. Daily Express Malaysia
Malay Mail
29-04-2025
- Business
- Malay Mail
ConocoPhillips quits major Sarawak project amid state's row with Petronas
KUALA LUMPUR, April 29 — US oil firm ConocoPhillips has unexpectedly withdrawn from operating the Salam-Patawali deepwater oil and gas field off Sarawak's coast, adding to the state's rights dispute with Petronas. The project, discovered jointly with Malaysia's national oil corporation Petronas in 2018, represented a 50-50 joint venture valued at approximately RM13.7 billion (US$3.13 billion). According to Channel News Asia, industry sources close to ConocoPhillips confirmed the withdrawal, attributing it to a 'country strategy review' without providing further details. Attempts to reach company executives at their Kuala Lumpur office were unsuccessful. According to multiple industry executives, the decision was partially motivated by regulatory uncertainties stemming from the ongoing dispute between Petronas and the Sarawak state government led by Premier Tun Abang Johari Openg. The Sarawak government, which owns the oil and gas firm Petroleum Sarawak (Petros), has been asserting greater control over its natural resources. CNA reported that this stance has created discomfort among foreign companies operating in the region, who view Petronas — typically their joint-venture partner in exploration projects — as being under significant pressure in Sarawak. ConocoPhillips will reportedly now focus its operations in neighboring Sabah, where it already maintains a presence. As of April 2024, ConocoPhillips maintained exploration, development, and production activities across approximately 2.7 million net acres in Malaysia, with working interests in six production sharing contracts. The Salam-Patawali exploration block encompasses 300,000 net acres primarily in the Salam and Benum fields off southern Sarawak, where the company had recently conducted a 3D seismic survey in 2023 with ongoing data processing and evaluation. He withdrawal comes amid other developments in Sarawak's energy sector. Thailand's PTTEP, which holds a 42.5 per cent share in the Lang Lebah gas project off Sarawak's shore, is reportedly re-engineering the US$6 billion project 'to improve economic viability.' Sources told CNA that PTTEP has temporarily suspended development activities and postponed final decision-making until next year. Beyond affecting foreign investment, the Petronas-Sarawak dispute has led to allegations of corporate espionage. Former Petronas manager Khairul Akmal Jasni recently pleaded not guilty to charges of attempting to leak confidential information about the national oil corporation to Petros. This rare case of alleged corporate spying highlights the increasing stakes in Sarawak's efforts to challenge Petronas's monopoly. These developments are creating pressure on Prime Minister Datuk Seri Anwar Ibrahim to facilitate a resolution between Sarawak and Petronas, particularly as Malaysia faces economic headwinds from global trade uncertainties. A senior aide to the PM confirmed that Anwar had been briefed on the dispute but indicated that both parties remain firm in their positions, with a senior Petronas official similarly confirming that negotiations have stalled. The core of the conflict centers on Sarawak's challenge to Petronas's decades-old monopoly established under the 1974 Petroleum Development Act (PDA), which designates the national corporation as the sole guardian of Malaysia's hydrocarbon reserves. Sarawak, which accounts for over 60 per cent of Malaysia's petroleum reserves and 90 per cent of its LNG exports, argues that the PDA does not apply to the state and instead advocates for regulation under the colonial-era Oil Mining Ordinance 1958, which would grant the state ownership of resources within 200 nautical miles of its waters. ConocoPhillips' withdrawal represents a significant economic setback for Sarawak. While the exact investment to date in the Salam-Patawali field remains unclear, industry sources had projected development costs at RM13.7 billion, with production expected to peak in 2028 and operations continuing until 2067. ConocoPhillips also operates the SK304 block in Sarawak, encompassing 1.1 million net acres, though exploration there remains at the feasibility stage. The dispute has already spawned legal challenges. Petros filed suit against Petronas in the Kuching High Court in October, contesting a RM7.05 million payment demand related to a 2019 gas sales agreement. Petros argues the agreement is 'illegal and void' because Petronas failed to obtain necessary licensing under Sarawak's Distribution and Gas Ordinance. Separately, Shell's Malaysian unit obtained an interim court order in January to maintain gas supplies from the Bintulu facility pending resolution of the Petronas-Petros dispute. Industry executives note that while existing petroleum projects in Sarawak remain operational, the ongoing conflict could significantly dampen investor confidence in the state's oil and gas sector. They point out that Petros, formed in 2017, lacks the technological expertise and international experience of Petronas's exploration arm, Carigali. According to one Malaysian engineering executive with close ties to Petronas, 'Petros and the Sarawak-based E&P companies don't have the capabilities yet and that does not make them attractive partners without Petronas in the mix.' Sarawak now faces the immediate challenge of finding a replacement contractor for the Salam-Patawali oil field.
