“Sarawak’s stance has not changed since last year although federal and Sarawak government leaders have announced that negotiations were progressing,” the Sarawak government insider told FMT.
The source said the Sarawak government is insisting that all domestic gas users, including liquefied natural gas (LNG) plants located in the state, must comply with its Distribution of Gas Ordinance 2016 (DGO) and buy their gas from Petros.
“In effect, Petros will become a ‘middleman’ between Petronas and end users.
“Needless to say, such an arrangement is bound to disrupt existing commercial agreements Petronas has with end users in the state,” said the source.
The source said Sarawak’s position runs counter to the agreement announced by Prime Minister Anwar Ibrahim in the Dewan Rakyat last month and affirmed by Sarawak premier Abang Johari Openg one day later.
On Feb 17, Anwar told Parliament that Sarawak had agreed that the Petroleum Development Act 1974 (PDA) will remain the overarching framework for governance in Malaysia’s oil and gas industry.
The prime minister also announced that all Petronas’s existing agreements will remain intact and governed entirely by the PDA, and that Petronas and its subsidiaries will not be obliged to comply with any additional requirements imposed under state law.
However, Anwar said Petros would be allowed to perform its role as Sarawak’s gas aggregator under the DGO, which “must be read together” with the PDA.
“The inability of both sides to come to a compromise highlights the complexity of having two overlapping laws.
“Both Petronas and Petros are adamant that they are exercising their strict legal rights, with Petronas pointing to the PDA and Petros to the DGO to support their respective positions,” said the source.
The source said this was why Anwar called for a “commercial solution” to resolve the long-running dispute.
“Unless a commercial compromise is achieved, both oil companies and their respective governments will find themselves in a ‘lose-lose’ position over the longer term,” the source said.
Earlier this week, deputy prime minister Fadillah Yusof said Petronas and Petros were still hammering out the details of their proposed collaboration.
He said Petros had recently submitted a letter to Petronas setting out its proposed terms, which have yet to be agreed upon.