PETRONAS’ decision to go to the courts in its quest for clarity on the do’s and dont’s of operating in Sarawak has been greeted with hostility, derision and annoyance by some people in the state.
If some social media posts were to be believed, Petronas is now a persona-non-grata there. There are calls for the boycott of Petronas’ stations and products, to stop its workers at the border, to protest at its assets, to refer it to the International Court of Justice, as well as many other suggestions of the you-are-not-welcomed-here kind.
Why such hostility towards its largest investor that has significantly contributed to the state’s economy for over 50 years?
Oil and gas resources represent revenue, and wealth, and Sarawakians are saying that they are not getting a fair share from the resources exploited in the state. This is seen by many Sarawakians as emblematic of the problems with the union called Malaysia.
One can theorise that the anger at Petronas is a manifestation of Sarawak’s dissatisfaction at the honouring of the Malaysia Agreement, 1963, which was signed by Sarawak, Sabah, Singapore and the Federation of Malaya to form Malaysia.
This anger sort of boiled over when Petronas filed a motion at the Federal Court a couple of weeks back for a ruling on a licensing issue for its Sarawak operations. By going to court, it is seen to be attempting to undermine the state’s law and Sarawak’s effort to regain control of its oil and gas resources.
Incidentally, the apex court may also rule on a constitutional issue – whether the law of the land, in this case the Petroleum Development Act, 1974, which vested the nation’s oil and gas resources to Petronas, has priority over a state’s statutes, like Sarawak’s Distribution of Gas Order, 2006 or the pre-Malaysia Oil Mining Ordinance, 1958.
The rationale for going to the Federal court, and naming both Sarawak and Federal governments as interested parties, is to seek clarity when both Putrajaya and Kuching have not issued clear ground rules on what it can or cannot do in the state. Incidentally, there are also several other cases at the courts in Kuching now involving several Petronas subsidiaries and their licensing status, as well.
The requirement for Petronas to be licensed in Sarawak, or not, seemed to be interpreted differently by the state and the federal governments. Clearly such ambiguity is not good for business, hence the need to go to court for direction. It’s not personal, it’s just business.
Petronas as a business entity probably is agnostic of the MA63 and its implementation, and is only perhaps interested in how it affects its business and operations. MA63, which is the birth certificate of the nation, and its implementation, or lack of, is the domain of politicians and perhaps the courts.
Incidentally, one of the obvious outcomes of Sarawak’s decision to have a greater say of its oil and gas resources is a projected lower income for Petronas, some estimate to be about 30 per cent less. From this year, the state’s Petroleum Sarawak Bhd (Petros) will take over from Petronas the exclusive right to gas distribution activities in the state.
While the reduced revenue in itself is serious enough, the polite standoff between the Federal and State governments is not doing Petronas and Malaysia any good, and ironically Sarawak, too. When Petronas is hobbled, the nation limps.
The decision to go to the apex court ultimately is to seek certainty, as uncertainty is the bane to business. Putrajaya and Kuching suggested then that they merely needed to dot the i’s and cross the t’s but it has been a year since a consensus was to be reached, which obviously they had not.
This uncertainty spooks Petronas’ clients and investors, among others.
Apart from the licensing requirement, Sarawak’s insistence that Petros be the sole gas aggregator could also undermine Petronas’ business – for instance, would it need to buy back gas produced in Sarawak from a state-owned middleman to fulfill its multi-billion ringgit export commitments? With over RM90 billion invested in Sarawak in the last decade, Petronas also risks the need to unwind its business arrangements.
It’s not personal, it’s just business
Petronas’ bonds are highly rated, in fact higher than Malaysia’s sovereign debts, resulting in its ability to tap into the financial market to fund its investments or acquisitions at a cheaper rate. Petronas, with a significant portion of its earnings shaved off, will likely see higher borrowing costs from now on.
Presumably, it is hard to run a global energy business if the rules are interpreted differently every time you cross a state border. Thus, regardless of the outcome of the courts’ decision, it will give Petronas clarity on how to move forward. It’s not personal, it’s just business.
From afar, at the moment, it looks like the local state authorities are testing Petronas’ mettle, and perhaps even Putrajaya’s resoluteness, by digging their heels on the licensing issue.
We can respect Sarawak’s quest for a fairer share. It is a long-standing grievance that needs a-fixing.The fact that the MA63 are not honoured to the fullest should be something that has to be recognised and resolved.
The failure to honour MA63 can be attributed to elected officials, both from federal as well as state governments, over the years. To be fair, the current government acknowledges the MA63 and is looking at ways to implement them, though not at a pace that Sarawak, and Sabah like. But that’s a story for another day.
We all need a win-win solution for the Petronas issue in Sarawak. At the moment it is almost a lose-lose proposition for the nation regardless whoever wins their day in court . There must be a better way to do this. Lest we are not careful, we may be killing the golden goose. It’s not personal, it’s just business. January 27, 2026
Datuk Zainul Arifin is the Chief Executive Office of Big Boom Media that publishes Scoop.my