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Daily Express
2 days ago
- Business
- Daily Express
Sarawak defends gas rights in court battle with Petronas
Published on: Thursday, June 12, 2025 Published on: Thu, Jun 12, 2025 Text Size: KUCHING: During a High Court hearing on Wednesday, lawyers for Petroleum Sarawak Berhad (Petros) and the Sarawak government argued that Petronas violated the Sarawak Gas Sales Agreement (SGSA) and state laws by supplying gas without a valid licence. Petros seeks to nullify a RM7.95 million bank guarantee claim by Petronas, calling it 'unconscionable and illegal.' Advertisement Amicus curiae Datuk Seri J.C. Fong emphasized that under the SGSA and the Distribution of Gas Ordinance 2016 (DGO), Petronas must recognize Petros as Sarawak's sole gas aggregator. He accused Petronas of bypassing legal obligations, obstructing licensed suppliers, and undermining Petros' statutory role. Fong dismissed Petronas' reliance on the Petroleum Development Act 1974, stating the SGSA is a standalone commercial agreement and does not supersede Sarawak's constitutional rights over gas regulation. He also refuted claims that oil royalty payments imply Sarawak relinquished its regulatory authority. * Follow us on our official WhatsApp channel and Telegram for breaking news alerts and key updates! * 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
New Straits Times
2 days ago
- Business
- New Straits Times
Petronas breaches Sarawak gas sales agreement, court told
KUCHING: Lawyers for Petroleum Sarawak Berhad (Petros) and the Sarawak government argued that national oil company Petronas had failed to comply with state laws as required under the Sarawak Gas Sales Agreement (SGSA) signed on Dec 30, 2019, and still sought to supply gas to Petros without a valid licence. During a hearing on Petros' originating summons at the Kuching High Court today, in which the state-owned company seeks to restrain and nullify Petronas' demand under a RM7.95 million Maybank Islamic bank guarantee, described by Petros as "unconscionable, illegal, and therefore null and void", Datuk Seri J.C. Fong, appearing as amicus curiae (friend of the court) for the Sarawak government, said Petronas was attempting to bypass legal requirements. "Petronas wants to continue supplying gas to Petros without a licence and does not want to recognise Petros as the gas aggregator in Sarawak. Petronas cannot approbate and reprobate," Fong told judicial commissioner Datuk Faridz Gohim Abdullah. He cited Article 24.2 of the SGSA, which states that "nothing in this agreement shall entitle the parties, Petronas and Petros, to exercise the rights, privileges, and powers conferred on them which would contravene any written laws in force in Malaysia". Fong also said that the Distribution of Gas Ordinance 2016 (DGO 2016), passed by the Sarawak State Legislative Assembly, was a valid written law in force in Malaysia. He added that Article 2.3 of the SGSA further stipulated that should any new codes, regulations, or rules be issued that affect the sale and purchase of gas, both parties are required to take necessary steps to comply. In 2023, the Sarawak assembly amended the DGO to include two key provisions: that only a gas aggregator may supply gas, and that the state cabinet has the authority to appoint the aggregator. Subsequently, Petros was officially appointed as the sole gas aggregator in the state. Responding to claims of Petronas' "unconscionable conduct", Fong told the court that unchallenged evidence in an affidavit showed that Petronas was obstructing upstream gas suppliers, licensed under the DGO, from selling to Petros, thus hindering Petros from carrying out its statutory functions. "Petronas's failure to comply with the DGO, its continued supply of gas without a proper licence, and its prevention of other licensed suppliers from dealing with Petros must constitute unconscionable conduct," he said. On Petronas' argument that it was acting within its rights under the Petroleum Development Act 1974 (PDA74), Fong said the SGSA had no connection to the PDA or to Petronas' business under it, as those rights had been transferred to Petros. "There is nothing in the SGSA to suggest that it was entered into pursuant to the PDA. It is purely a commercial agreement based solely on commercial considerations," he said. Responding to Petronas' claim that Sarawak had relinquished its rights over petroleum and gas in return for annual payments, Fong said the "yearly payments" (oil royalty) were for "the purported vesting of petroleum in Petronas". He said that this had no bearing on Sarawak's constitutional right to regulate the distribution of gas. "There is nothing in the PDA or any agreements between Petronas and the Sarawak government, based on evidence before the court, to indicate that the annual payments were in exchange for Sarawak relinquishing its legislative and executive powers over gas distribution," he added.
Borneo Post
2 days ago
- Business
- Borneo Post
Petros vs Petronas: Failure to comply with DGO constitutes ‘unconscionable conduct', court told
Fong (right) exits the courtroom after the proceedings. KUCHING (July 11): The Distribution of Gas Ordinance (DGO) 2016 is a written law passed by the Sarawak Legislature and is therefore a written law in force in Malaysia, the High Court here was told today. State Legal Counsel Dato Sri JC Fong said Petroliam Nasional Berhad's (Petronas) failure to comply with the DGO and continuing to supply gas without a licence issued under the DGO, and then preventing other licensed gas suppliers or producers from selling gas to Petroleum Sarawak Berhad (Petros) as the state's gas aggregator, constitutes 'unconscionable conduct' on the part of national oil firm. In his submission to the court in the lawsuit brought by Petros against Petronas, Fong, appearing for the Sarawak government, said Petros is invoking the court's inherent jurisdiction to declare that the demand by Petronas on a bank guarantee issued by Maybank Islamic Berhad is 'unconscionable, unlawful, null and void'. He said all parties, including the federal and Sarawak governments, have agreed that 'unconscionability' is a ground to restrain a beneficiary of a bank guarantee or performance bond from making a call on a bank guarantee or performance bond. 'In this case, the underlying contract is the Sarawak Gas Sales Agreement (SGSA) dated Dec 30, 2019. 'The bank guarantee was issued pursuant to this underlying contract to secure payment for gas supplied by Petronas to Petros. Petronas is the beneficiary of the bank guarantee. 'Petronas did not sign the SGSA because the PDA (Petroleum Development Act) 1974 guarantees the role of Petronas nationwide,' said Fong. He said Petronas entered into the SGSA because it had sold and transferred its business of supplying gas to customers in Bintulu and Miri to Petros, and is selling gas to Petros to enable the state-owned company to fulfil its obligations to its customers who were previously customers of Petronas. 'This SGSA has nothing to do with the PDA or the business of Petronas under the PDA, which had been sold and transferred to Petros. There is nothing in the SGSA which even suggests that Petronas entered into this SGSA in pursuance of the PDA. 'It was purely a commercial contract based on purely commercial consideration, but the mode of performance thereof must not contravene any written law in force in Malaysia.' Fong said for Petronas to consciously disobey, disregard, and disrespect the DGO amounts to a contravention of an important constitutional safeguard and an attempt to undermine the Sarawak government's executive authority under Article 80(2) of the Federal Constitution. 'This itself is clearly unconscionable conduct which this honourable court should not condone at all. 'Consequently, the calling upon the bank guarantee by Petronas, in these circumstances to obtain payment from Petros for gas supplied in contravention of the DGO and also in breach of Article 24.2 of the SGSA, is clearly unconscionable and unlawful,' he said. Article 24.2 of the SGSA stipulates that 'Nothing in this Agreement shall entitle the Parties (i.e. Petronas and Petros) to exercise the rights, privileges and powers conferred on it in a manner which would contravene any written law for the time being in force in Malaysia.' Petros is seeking a court order for the return of RM7.95 million paid to Petronas under the bank guarantee. The conflict began in October 2024 when Petronas called on the bank guarantee in response to a RM28.1 million demand from Petros related to gas supply. Petros then initiated legal proceedings against Petronas and sought an injunction to stop the disbursement of the funds. However, the injunction request became academic after Maybank Islamic Berhad released the payment to Petronas. Petronas was represented by counsels Datuk Dr Cyrus Das and Khoo Guan Huat, while Petros was represented by counsels Tan Sri Cecil Abraham, Sim Hui Chuang and Lim Lip Tze. The proceeding was heard before Judicial Commissioner Datuk Faridz Gohim Abdullah, who fixed Aug 25 and 26 for the next hearing. DGO Distribution of Gas Ordinance JC Fong Petronas Petros
New Straits Times
28-04-2025
- Business
- New Straits Times
Petronas fails to halt Petros suit on gas payment
KUCHING: Petronas has failed in its bid to delay a suit that Petros had filed to stop the national petroleum company from demanding payment for natural gas. On Oct 15 last year, Sarawak-owned petroleum company Petros filed a suit seeking a declaration that Petronas' demand for a RM7.95 million bank guarantee for gas payment was "unconscionable, unlawful and, therefore, null and void". Petronas had sought to stay Petros' suit until a case filed by Shell SDMS Sdn Bhd against Petronas and Petros in the Kuala Lumpur High Court had been settled. Shell SDMS's court action was to determine which company it should pay for the natural gas it received. Judicial Commissioner Datuk Faridz Gohim Abdullah in dismissing Petronas' application agreed with Petros lead counsel Sim Hui Chuang and Sarawak government special counsel Datuk Seri J.C. Fong that there were no special circumstances to warrant a stay. Faridz also agreed that a stay of the Kuching proceedings while waiting for the Kuala Lumpur case to be disposed would be an injustice to Petros and the public interest. Petros and Sarawak argued the Kuching case was ready to be heard, the Kuala Lumpur proceedings were still at pre-trial case management, with the next hearing on May 23. They argued that there was no indication when the Kuala Lumpur case would start, and a stay of the Kuching proceedings could potentially be for years. The federal and Sarawak governments have been added to appear in the hearing as amicus curiae (friends of the court). Faridz has set June 11 to hear Petros' originating summons. Petronas lead counsel Alex Ngu's application for a stay on the dismissal of the injunction was also dismissed by the court. The judicial commissioner said Ngu should make a formal application on the appeal. Petros is disputing Petronas's demand for a RM7.95 million bank guarantee under the Sarawak Gas Sales Agreement (SGSA) dated Dec 30, 2019. Petros contends that the SGSA is invalid because Petronas lacks a license under Sarawak's Distribution of Gas Ordinance 2016 (DGO 2016) to distribute gas in the state. Petronas, on the other hand, maintains that its rights under the federal Petroleum Development Act 1974 (PDA) supersede state laws like the DGO 2016. In an affidavit filed on Nov 5, last year, Petronas said it was the legitimate aggregator of natural gas, including for domestic distribution, and that the SGSA was valid and enforceable.
