The Petronas and Petros Feud (Part 2)

1.         Control Over Gas Distribution Rights

·             Sarawak insists that Petros should be the sole gas aggregator in the state, managing gas procurement, pricing, and distribution under the Sarawak Distribution of Gas Ordinance 2016 (DGO).

·             Petronas, governed by the 1974 Petroleum Development Act (PDA), asserts federal control over all oil and gas operations, including exports. 

·             The clash stems from Sarawak’s claim that the PDA does not apply to the state, citing pre-independence laws like the 1958 Oil Mining Ordinance. 

Source; https://ms.m.wikipedia.org

2.         Revenue and Economic Impact

·             If Petros takes full control, Petronas could lose RM10–20 billion annually, affecting federal revenue and subsidies for Malaysians.

·             Sarawak currently receives only 5% royalties but seeks higher returns to fund local development (e.g., free education, infrastructure). 

3.         Legal and Operational Conflicts

·              Petros has sued Petronas over issues like a RM7.95 million bank guarantee and accused it of operating without state licenses.

·             Shell MDS has withheld payments due to the dispute, setting a precedent for other contractors to delay projects. 

4.         Political Tensions

 

·         Sarawak’s ruling coalition (GPS) is a key ally in PM Anwar’s unity government, giving it leverages to push for autonomy.

·         The federal government risks fragmentation if other states (e.g., Sabah) demand similar resource control. 

 

5.         Investor Uncertainty

·              Prolonged disputes have spooked investors, with projects like ConocoPhillips’ Salam-Patawali withdrawal and Shell’s legal challenges. 

Will the Dispute Be Resolved?

(a)        Short-Term:

PM has expressed confidence in a negotiated solution, but talks have stalled multiple times. A May 2025 joint declaration affirmed Petronas’ role in LNG exports while allowing Petros domestic gas control, but enforcement remains unclear. 

(b)        Long-Term: 

                    i.     Political Compromise: Anwar may need to concede greater revenue sharing or operational roles to Sarawak to maintain GPS support. 

 

                 ii.      Legal Clarity: Courts may ultimately decide whether Sarawak’s laws override federal authority, but a Pyrrhic victory for either side could worsen tensions.

 

               iii.      Economic Rebalancing: Federal reforms (e.g., sharing consumption tax revenue) could reduce reliance on Petronas dividends and ease state-federal conflicts. 

The tussle reflects deeper federal-state power struggles and Sarawak’s push for autonomy. While short-term resolutions are possible, lasting peace requires revenue-sharing reforms and clear legal frameworks to balance national and regional interests. The outcome will shape Malaysia’s energy governance and economic stability for decades.