Kuala Lumpur: The Sarawak government should respect the agreement with the federal government as outlined in the Petroleum Development Act 1974 (PDA 1974), instead of creating disputes involving the operations of Petronas Carigali Sdn Bhd (PCSB) at the Miri Crude Oil Terminal, according to an analyst.
According to BERNAMA News Agency, Dr. Azmi Hassan, a geostrategist from the Nusantara Academy for Strategic Research, emphasized that any disputes raised could be detrimental to all parties involved, including the federal government, the Sarawak government, Petroliam Nasional Bhd (Petronas), and Petroleum Sarawak Bhd (Petros). He pointed out that Petronas has operated in Sarawak for decades under clear provisions in the PDA 1974, and interference now creates legal complications and affects foreign investor confidence. The situation has reportedly led to the withdrawal of US oil firm ConocoPhillips from a project in Sarawak.
Media reports have highlighted that ConocoPhillips exited the deepwater Salam-Patawali oil and gas project off Sarawak, valued at an estimated RM13.7 billion (USD3.13 billion), due to regulatory uncertainty stemming from ongoing disputes between Petronas and the Sarawak government.
Azmi further elaborated that unresolved issues could result in greater losses for the country, missing collaboration opportunities with global oil and gas giants such as Shell and ExxonMobil. Petronas confirmed to Bernama that its subsidiary PCSB received a notice from the Sarawak Ministry of Utility and Telecommunication concerning gas processing and distribution. However, the national oil company asserted its legal authority under the PDA 1974 and compliance with all applicable laws.
Meanwhile, Universiti Malaya sociopolitical analyst Datuk Prof Dr. Awang Azman Awang Pawi noted that the Sarawak government is asserting a different interpretation based on state rights as outlined in the Malaysia Agreement 1963 (MA63), despite the PDA 1974 being a recognized federal law. He mentioned that no formal breach has occurred yet, as there has been no court ruling or announcement of the cancellation of the joint agreement.
Awang Azman highlighted that the issue is both legal and a test of Malaysia’s federalism, particularly in natural resource management. Differing interpretations of the PDA 1974, MA63, and the Oil Mining Ordinance 1958 (OMO 1958) are evident. He warned that without wise handling through negotiations or legal review, a trust crisis between the federal and state governments could arise, negatively impacting investments and weakening the national energy strategy.
He also stated that any disruption to Petronas’ operations in Sarawak could have serious effects on the national oil and gas industry, including potential disruptions to both national and global supply chains. Sarawak is Malaysia’s main producer of liquefied natural gas (LNG), and disruptions could jeopardize exports and long-term commitments to countries like Japan and South Korea.
Awang Azman cautioned that an open conflict between the state government and Petronas could lead international investors to view Malaysia as a risky investment destination regarding policy and legal aspects. This situation raises the risk of dual power structures if Petronas adheres to federal law while Sarawak enforces state law, creating legal ambiguity that may require a federal-state legal resolution or court action.
He concluded that the conflict could hinder cooperation talks between Petros and Petronas, ultimately delaying strategic investments such as new gas field developments and energy infrastructure.