The Petronas and Petros Feud! (Part 1)

Petronas and Petros have been locking horns for more than a year now over the role of gas aggregator in the state. A resolution was supposed to have been reached on July 1, 2024, but the deadline was extended to Oct 1, 2024. Yet almost a year later, a resolution still seems elusive.

Sarawak is challenging Petronas’ hold over Malaysia’s oil and gas reserves, as stated in the Petroleum Development Act (PDA) of 1974, which gives the national O&G company control of all of Malaysia’s hydrocarbon reserves. However, Sarawak holds about 60% of the country’s gas reserves and accounts for 90% of Malaysia’s liquefied natural gas (LNG) exports — facts that have led state-controlled Petros to clamour for the sole aggregator’s role.

This role would entail Petros acquiring gas from upstream producers and consolidating and selling it to downstream players. Petros would also be tasked with building and managing the requisite infrastructure, including condensing and processing facilities, pipelines and even export terminals. To counter the PDA 1974, Sarawak has amended the state’s Distribution of Gas Ordinance (DGO) 2016 for Petros to be the sole gas aggregator for the state and require any company undertaking gas distribution activities in Sarawak to get a licence.

Petronas and Petros are currently embroiled in a number of legal disputes. Earlier this month, Petronas was slapped with a letter of demand as its exploration subsidiary Petronas Carigali Sdn Bhd’s plant at the Miri Crude Oil Terminal was alleged to be in violation of the DGO 2016, possibly operating without a licence and undertaking gas distribution. 

Sarawak is relying on a pre-independence Oil Mining Ordinance to assert its rights over the state’s oil and gas resources and other land code legislation that stipulates that its continental shelf stretches 200 nautical miles out to the sea, as opposed to the current PDA, which limits the territorial waters to three nautical miles from the coast and assigns all rights beyond that to Petronas.

So, what are the key issues, and can it be resolved? Read Part 2 tomorrow.

References:

O&G industry suffers as Petronas-Petros feud drags on, Jose Barrock / The Edge Malaysia, 2 June 2025

‘Puzzling’: Malaysia’s new rules for Sarawak’s oil and gas sector set to trigger fresh political tensions, Leslie Lopez, Channel News Asia, 10 Feb 2025