Petronas-Petros negotiation may have broken down, Putrajaya to intervene?

Are negotiations between Petroliam Nasional Berhad (Petronas) and Petroleum Sarawak Berhad (Petros) over the distribution of natural gas in the state still on? Or have they broken down?

"Based on the information that we have, negotiations may have broken down and this matter may go to court.

It will be a long-protracted affair. Nobody knows how long it will take," BIMB Securities oil and gas research analyst Azim Faris told DagangNews.

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Sarawak Premier Tan Sri Abang Johari Tun Openg hinted over the weekend that the state is ready to defend its rights in court.

"Sarawak is ready to go to court if any party disrespects Sarawak’s rights as the sole gas aggregator in the state.

“I know what I am doing. Being the sole gas aggregator in Sarawak, it is our right, and if anyone disrespects that, I am willing to face them in court,” he said in Simunjan on Sunday as reported by the media.

State-owned Petronas is the country's oil and gas custodian and pay states such as Sarawak and Terengganu with fossil fuel reserves annual royalties.

But the oil producing states are now contesting with Petronas for their oil and gas rights and want full control.

Negotiations between Petronas and Petros were supposed to conclude on October 1 after it was extended from July this year.

Petronas needs to honour its contracts

Analysts said part of the reason why the issue is ''sticky" is because of Petronas's on-going contracts with LNG (liquefied natural gas) buyers.

"It is quite a complicated issue as Petronas needs to supply its existing LNG customers," said Azim.

Minister in the Prime Minister's Department Datuk Seri Azalina Othman Said reportedly said negotiations were prolonged due to the complexities surrounding Sarawak's Gas Distribution Ordinance (Amendment) 2023.

RM100 billion worth of gas at stake?

It is said that Sarawak's offshore is rich with natural gas worth RM100 billion.

A Petronas source said the government knows this and Petronas is set to lose a lot of money if it "let’s go" off Sarawak.

"That is why negotiations could have ended, gone south," a source told DagangNews.

Strategic assets best controlled by government

Analyst say natural gas and oil are strategic commodities best controlled by the federal government.

"Just like electricity which is controlled by state-owned Tenaga Nasional, it is best that our oil and gas be managed by Petronas.

These assets are the nation's security resources providing for the welfare of Malaysians and should not be managed by anybody else which could exploit them," an analyst who declined to be identified told Dagangnews.

Putrajaya to intervene?

Due to the complexities of this tussle, will the federal government intervene?

"I don't think the government will intervene as by doing so, it would be an unpopular move and could affect the politician's political chances," said Azim.

In a written parliamentary reply to Sibu Member of Parliament Oscar Ling Chai Yew, Azalina said the talks have been prolonged due to the complexities surrounding Sarawak's Gas Distribution Ordinance (Amendment) 2023.

"This involves various aspects and significant impacts from the implementation of Sarawak's Gas Distribution Ordinance (Amendment) 2023 and existing laws," she said.

The minister added that all parties are working to find a solution that addresses the interests and needs of everyone involved.

Petros had signed gas sale agreements (GSAs) with Sarawak Petchem Sdn Bhd and Sarawak Energy Bhd in July, following earlier announcements in the Sarawak State Assembly that Petros was set to take over from Petronas as the sole gas aggregator in Sarawak.

Currently, the majority of Petronas' LNG export cargoes from Malaysia are either sourced from Sarawak or pass through the state's gas infrastructure.

Singapore's Channel News Asia previously reported that Petronas was considering filing a court injunction against Sarawak to maintain its role as the sole custodian of Malaysia's hydrocarbon resources, citing sources.

However, Petronas, the Sarawak government, and Petros met on Sept 24 and issued a joint statement refuting the claim, confirming that no legal action is being contemplated by Petronas against Sarawak and Petros.

Sabah also in the picture

Petronas also pays Sabah RM508.8 million in sales tax for the first nine months.

In response to a query from Ranau MP Datuk Jonathan Yasin, Azalina said Petronas and its subsidiaries paid the Sabah government RM508.8 million in state sales tax on petroleum products for the first nine months of 2024.

Additionally, the Sabah government received petroleum revenue payments totalling RM640.8 million for the first half of 2024.

As of August 2024, production from 18 offshore oil fields in Sabah recorded 161,100 barrels per day, said Azalina.

Meanwhile, production from 68 offshore oil fields in Sarawak reached 154,800 barrels per day.

However, Azalina did not disclose the petroleum revenue or sales tax received by the Sarawak government. - DagangNews.com