After court decision, Sarawak asks Petronas to trust it to preserve O&G industry

Ida Lim

Datuk Seri JC Fong (left) and Sharifah Hasidah Sayeed Aman (right) speak to reporters at the Federal Court in Kuala Lumpur June 22, 2018. — Pictures by Azinuddin Ghazali

PUTRAJAYA, June 22 — Sarawak sought to assure state oil firm Petronas today that the state government will regulate the state’s petroleum resources without harming the oil-and-gas industry there.

Sarawak’s legal counsel Datuk Seri JC Fong was commenting on a legal dispute between Petronas and the state government, which arose as both wanted to apply different laws to determine which may regulate Sarawak’s oil and gas activities.

He also said the Sarawak state government remained open to collaboration with the state oil firm despite today’s outcome.

“We will continue to work with Petronas and we hope Petronas will continue to work with us at the state level to harmonise the two laws in the national interest,” he told reporters today after a Federal Court decision.

“We just only want Petronas, who is in Sarawak to get the benefit of the state’s natural resources that is petroleum, to comply with state laws. It’s as simple as that.

“We will comply with federal laws which of course need to be constitutionally enacted, but we want Petronas to comply with state laws, that’s all. That’s what the dispute is about,” he said.

He claimed that Petronas did not want to comply with Sarawak state laws related to petroleum, adding that that was “unacceptable”.

“But we will not enforce our law in a manner that will hurt anybody and that will not hurt the oil and gas industry in Sarawak,” he added.

Fong noted that the Sarawak chief minister consistently made such an assurance.

“So Petronas has got to trust that we will do that in a manner the chief minister has assured,” he said.

Sarawak in March launched its own oil company named Petroleum Sarawak Berhad (Petros), which is set to fully take over regulation and licensing of oil and gas activities in the state from July 1.

The Sarawak government had in an April 13 letter informed Petronas that it will need to comply with the Sarawak Oil Mining Ordinance (OMO) 1958 and obtain licences and leases under this law by July 1, with Petronas’ upstream oil and gas activities in Sarawak to be deemed illegal and subject to the state’s action if it fails to do so.

This then led to Petronas filing its constitutional challenge by applying under the Federal Constitution’s Article 4(4) for leave to start proceedings at the Federal Court against the Sarawak government.

Among other things, Petronas wants the court to declare that it has “exclusive regulatory authority” over upstream activities — including exploration, exploitation, winning and obtaining of onshore and offshore petroleum — throughout Malaysia.

The company also wants the courts to declare that the pre-Malaysia law Sarawak Oil Mining Ordinance (OMO) 1958 was implicitly repealed by the Petroleum Development Act 1974 (PDA) that was enacted by Parliament.

The PDA is a federal law that created the national oil regulator Petronas, and vested ownership and exclusive rights to upstream activities for Malaysia’s onshore and offshore petroleum in the company.

However, Sarawak is relying on OMO, which it said is still a valid state law, to start regulation of upstream petroleum activities in Sarawak as part of its efforts to restore the state’s rights under the Malaysia Agreement 1963 and pursue devolution of powers from the federal government.

The Federal Court today dismissed Petronas’s leave for its legal challenge to be heard, ruling that the case does not fall under the apex court’s jurisdiction and should be filed in the High Court instead.

The Federal Court’s decision did not go into substantial matters such as whether Petronas has the exclusive powers to regulate Malaysia’s petroleum activities including in Sarawak, but was merely on whether the legal challenge can proceed.

State-Federal Relations and Project Monitoring Sharifah Hasidah Sayeed Aman Ghazali speaks to reporters at the Federal Court in Kuala Lumpur June 22, 2018.

Sarawak’s Assistant Minister of Law, State-Federal Relations and Project Monitoring Sharifah Hasidah Sayeed Aman Ghazali, who was also present at court, hailed the decision as a “victory” for the state.

“So it’s good for Sarawak, so it’s a success for us, the rule of law prevails,” she told reporters when met here.

When asked if the Sarawak government will keep pushing the federal government to increase its share of oil royalties to 20 per cent, Sharifah Hasidah declined to comment.

“I can’t say this now, we will continue to fight for Sarawak’s rights,  that is what I can say,” she said instead.

She argued that the OMO granted the Sarawak state government the authority to regulate upstream activities within the state and that the administration will seek to enforce the state law.

“So we will defend our rights in Sarawak, at the same time we want to always work together with Petronas, the country and the people,” she said.