Abang Johari: Sarawak govt to assert right to regulate oil and gas industry

KUCHING: Sarawak will continue to assert its right to regulate the oil and gas industry in the state while pursuing royalties based on production, says Datuk Patinggi Abang Johari Tun Openg.

The Chief Minister said Petronas was now in discussions with the state-owned oil and gas company Petroleum Sarawak Bhd (Petros), pursuant to the passing of the Oil Mining Ordinance (Amendment) Bill in the Sarawak Legislative Assembly earlier this month.

The updated ordinance requires oil and gas industry players, including Petronas, to obtain licences and permits from the state government for their upstream activities.

They have been given a grace period until the end of next year to comply.

Abang Johari said he did not want to be dragged into the argument about whether the 20% royalty promised by Pakatan Harapan in its manifesto was based on production or profits in view of the ongoing discussion between Petronas and Petros.

“I do not want to jeopardise the discussion. Let them work together.

“Whatever decision they make, they will refer to the Federal Government as well as the state government.

“We leave it to the professionals. Politics must not be too dominant in this discussion,” he said during a high tea with the media here on Tuesday (July 31).

On Sarawak Pakatan’s announcement on Monday (July 30) that the state will be given 20% oil profits on top of the existing 5% royalty, Abang Johari said this came only from the state Pakatan parties and not the Federal Government.

“If it’s from the Federal Government, there will be communication with the state government. But as it is, there is no communication whatsoever,” he said.

He also reiterated that royalty must derive from production, not profit, and that the state would not give in on this matter.

“How can you say royalty is based on profits? Royalty means ownership.

“The oil and gas are found on our land, therefore how can we give in? That is our right.

“If (Pakatan) promised 20% in their manifesto and now they want to change their promise, that has nothing to do with us. That is up to them.

“But we must stick to the rights that we have over oil and gas, particularly our regulatory control,” he said.

Source: https://www.thestar.com.my/news/nation/2018/07/31/abang-johari-sarawak-govt-to-assert-right-to-regulate-oil-and-gas-industry/

Development plans put Sarawak on right track

KUCHING: Sarawak has achieved positive economic growth despite global economic uncertainty, Yang di-Pertua Negeri Tun Abdul Taib Mahmud said.

He said the state’s economy grew by 4.7% last year compared to 2.3% in 2016, while the Gross Domestic Product (GDP) per capita increased from RM44,000 in 2016 to RM46,000.

Exports also grew from RM77bil in 2016 to RM96bil last year. The poverty rate meanwhile dropped from 0.9% in 2014 to 0.6% last year and unemployment remained at less than 4%.

“Sarawak’s growth is supported by strong economic fundamentals, good administration and financial management by the state government,” Taib said when opening the Sarawak Legislative Assembly session here yesterday.

He said the state government’s development plans, such as the Socio-Economic Transformation Plan, Sarawak Corridor of Renewable Energy (SCORE) and Digital Economy Plan, would continue to boost growth and attract investment.

“These are people-centric plans that will improve socio-economic standards and create jobs, especially for the talented and highly-skilled younger generation,” he said.

In particular, he said the Digital Economy Plan could increase productivity in sectors like agriculture, manufacturing and services by promoting the use of digital technology and applications.

“The digital economy has the potential to create new opportunities for our younger generation.

“I believe our young people have the creative and innovative skills necessary for the digital era,” he said.

On another matter, Taib expressed confidence that the state government would be able to manage Sarawak’s oil and gas resources for the benefit of the people.

He said efforts towards developing and managing these resources sustainably had been put in place, including the enforcement of the Oil Mining Ordinance 1958 and Gas Distribution Ordinance 2016 and the formation of Petroleum Sarawak Bhd (Petros).

“This is in line with Sarawak’s aspiration to become an oil and gas hub in the region and to collaborate with Petronas for the interest of Malaysia and the state,” he said.

As such, he said Sarawak’s rights to its territorial waters must be preserved so that the oil and gas resources found there could be developed to benefit the state.

Source: https://www.thestar.com.my/metro/metro-news/2018/07/10/development-plans-put-sarawak-on-right-track-state-economy-grew-by-47-last-year-poverty-rate-dropped/

Affin Hwang upgrades Petra Energy to buy as risk-reward looks favourable

KUALA LUMPUR: Affin Hwang Capital Research says the risk-reward is looking favourable for Petra Energy and upgraded its rating to buy with a higher 12-month target price of 59 sen.

Accoding to the research house, Petronas has been issuing more contract awards and work orders while Petra Energy has also seen higher work orders for hook-up, construction and commissioning (HuCC) contract to the value of RM150mil.

Meanwhile, the maintanence, construction and modifgication contract with Petronas is also picking up momentum in terms of mor work programmes amounting to RM50mil by our estimates. 

“PENB has recently completed the production enhancement programme and is in the midst of
doing some commissioning work. Based on a back-of-envelope calculation, this will increase targeted production to approximately 5,500–5,800 barrels per day (from 4,500 barrels). 

“We are also positive that the KBM risk service contract (RSC), which is due to expire by mid-2020, stands a good chance of being extended, on the current high oil price and good production track record.”

Affin Hwang also believes that Petra Energy stands a good chance of wiinning a rebid for the HuCC contract for another five years, with a total outstanding orderbook current at RM1.6bil.

With regrds to operating in Sarawak, the research house said it understands that service providers like Petra Energy are still waiting for Petros to award licences although it should not have a problem in getting the licence.

Source: https://www.thestar.com.my/business/business-news/2018/07/05/affin-hwang-upgrades-petra-energy-to-buy-as-risk-reward-looks-favourable/

Petronas loses bid to challenge Sarawak govt

PUTRAJAYA: The Federal Court has denied leave to Petronas to commence a legal challenge against the Sarawak government over the national oil company’s right to regulate the state’s oil and gas upstream activities.

Chief Judge of Malaya Justice Ahmad Maarop ruled that the declaratory relief sought by Petronas did not come under Article 4 (4) and Article 4 (3) of the Federal Constitution.

Bernama quoted Justice Ahmad as saying that the declaratory relief sought by Petronas was not within the exclusive jurisdiction of the Federal Court but came under the jurisdiction of the High Court.

He dismissed yesterday the Petronas application for leave to commence proceedings against the Sarawak government and ordered the national oil company to pay RM50,000 in costs to the state government.

Meanwhile, Petronas withdrew its application for a stay order in respect to the Sarawak government’s commencement to regulate upstream activities in the state under the Sarawak Oil Mining Ordinance 1958 (OMO) beginning July 1.

Petronas would be required to comply with the OMO and must have the requisite licences or leases by July 1, failing which the upstream activities carried out by Petronas would be illegal and appropriate action would be taken.

The stay application was heard before a Federal Court three-man bench comprising Justice Ahmad and Federal Court judges Justices Azahar Mohamed and Zaharah Ibrahim, after Justice Ahmad dismissed Petronas’ leave application.

The bench struck out the stay ap­­pli­cation following the withdrawal.

Petronas had filed an application on June 6 for leave to commence proceedings under Article 4 (4) of the Federal Constitution to seek a declaration that the Petroleum Development Act (PDA) applied in respect of the regulation of upstream activities in Sarawak.

It sought the court’s declaration that the PDA was duly enacted by Parliament, and it states that Petronas is the exclusive regulatory authority for the upstream industry throughout Malaysia, including in Sarawak.

The company had sought a declaration that the OMO was impliedly repealed by the PDA.

Petronas was represented by lawyer Datuk Malik Imtiaz Sarwar while Sarawak state legal counsel Datuk Seri J.C. Fong appeared for the state government.

In a statement later, Petronas said its leave application was declined based solely on technical ground.

“The Federal Court did not in any way determine or endorse the merits of the legal position taken by the Government of Sarawak to regulate upstream petroleum activity under its Oil Mining Ordinance 1958.”

It said the court also noted the concession by the Government of Sarawak that the PDA was validly enacted.

“This reinforces Petronas’ view that only Parliament can legislate on matters relating to upstream petroleum industry including regulatory powers throughout Malaysia, both onshore and offshore by virtue of the PDA.”

It said the court decision did not in any way impair Petronas’ ability to further pursue its legal actions, with the intent to seek clarity on its rights and position under the PDA.

In Kuching, the Chief Minister’s Office welcomed the Federal Court outcome, saying that the decision paved the way for the state government to enforce its state laws from July 1.

It said in a statement that Petroleum Sarawak Bhd (Petros) would be delegated with the powers to implement OMO.

Sarawak had announced in March that it would assume full regulatory authority over oil and gas activities in the state by July 1.

This would require all those involved in the oil and gas industry in Sarawak to obtain the necessary licences and permits.

Source: https://www.thestar.com.my/news/nation/2018/06/23/petronas-loses-bid-to-challenge-sarawak-govt/

Federal Court turns down Petronas bid to challenge Sarawak

PUTRAJAYA: The Federal Court has dismissed Petroliam Nasional Bhd’s (Petronas) application to commence proceedings to determine that the national oil company is the sole authority of all upstream oil and gas activities in the country, including Sarawak.

Chief Judge of Malaya Tan Sri Ahmad Maarop had on Friday morning rejected Petronas’ application of leave to commence proceeding on the matter in the Federal Court. 

Petronas had last month filed an application to seek a declaration from the Federal Court on matters pertaining to the Petroleum Development Act 1974 (PDA) and its position with regard to the regulatory controls of upstream activities in Sarawak. 

This came in the wake of Sarawak setting up its own oil and gas company, Petros, as the regulator of oil and gas activities in the state based on Sarawak Oil Mining Ordinance (OMO). 

Petronas is seeking a declaration that the OMO was repealed by the PDA and hence Petros is not valid.

Petronas is seeking a declaration that the PDA was duly enacted by Parliament and stated that Petronas is the exclusive regulatory authority for the upstream industry throughout Malaysia, including in Sarawak.
 

Source: https://www.thestar.com.my/business/business-news/2018/06/22/federal-court-turns-down-petronas-bid-to-challenge-sarawak/

Sarawak welcomes dismissal of Petronas’ case over state oil rights

KUCHING: The Sarawak government has welcomed the Federal Court’s decision to dismiss Petronas’ application for leave to commence proceedings to determine that the national oil company is the sole regulatory authority of all upstream oil and gas activities in the country, including Sarawak.

The Chief Minister’s Office said the decision paved the way for the Sarawak government to enforce its state laws from July 1 as announced earlier this year.

“Our Chief Minister (Datuk Patinggi Abang Johari Tun Openg) would like to thank our state legal team and all Sarawakians for their solid support and prayers for Sarawak to exercise its constitutional rights related to oil and gas activities in Sarawak,” the office said in a statement on Friday (June 22).

It added that Petroleum Sarawak Bhd (Petros) would be given the appropriate powers to implement the state’s Oil Mining Ordinance (OMO) 1958.

Earlier on Friday, Chief Judge of Malaya Tan Sri Ahmad Maarop rejected Petronas’ application of leave to commence proceedings against the state government in Federal Court.

He held that the declarations sought by Petronas did not come within the jurisdiction of the Federal Court and should have been brought before the High Court instead.

Petronas had sought declarations that the Petroleum Development Act 1974 (PDA) applied to the regulatory control of upstream activities in Sarawak and that it repealed the OMO by implication.

This came in the wake of Sarawak setting up Petros, its own oil and gas company, as the regulator of oil and gas activities in the state based on the OMO.

Abang Johari had announced in March that Sarawak would assume full regulatory authority over oil and gas activities in the state by July 1.

This would require all persons and companies involved in the oil and gas industry in Sarawak to obtain the necessary licences and permits required by the state’s laws.

Source: https://www.thestar.com.my/news/nation/2018/06/22/sarawak-welcomes-dismissal-of-petronas-case/

Sabah granted observer status in Petronas vs Sarawak case

PETALING JAYA: The Sabah government will be participating as an observer in the legal proceeding between Petroliam Nasional Bhd (Petronas) and the Sarawak government, which will be held on June 21.

In a letter dated June 11, the Federal Court granted the Sabah Attorney General’s (AG) application to attend the hearing as a “watching brief”.

A watching brief functions as an observer in a proceeding in which one was not directly or immediately concerned. Sabah AG Dayangku Fazidah Hatun Pg Bagul submitted the application to the Federal Court on June 5 to attend the hearing as a watching brief, stating that any decision from the case would have an impact on the state.

Last week, Petronas challenged the Sarawak government by taking legal action in seeking a declaration that the national oil company is the sole governing authority for upstream oil and gas (O&G) activities in Malaysia for both onshore and offshore.

The case by Petronas, which was filed on June 4, said the national oil company was seeking the declaration that the Petroleum Development Act 1974 (PDA) supersedes the Sarawak Oil Mining Ordinance 1958 (OMO) , the law the state has used as its basis for setting up its own O&G company Petros (Petroleum Sarawak Bhd) as the sole authority for O&G activities in Sarawak.

On Monday, Sabah Chief Minister Datuk Seri Mohd Shafie Apdal said he had asked the state AG to monitor the legal case by Petronas against the Sarawak government as it would have an implication on the state.

Petronas filed another document on June 8 to seek a court order to preserve the status quo until the legal case was resolved.

The court hearing to seek leave was postponed to June 21 from June 12.

Following that, the Sarawak government issued a statement to express its “deep disappointment” with the decision by the Federal Court to postpone a hearing over the state’s rights on its O&G resources.

The state government said it would consider all other options to protect and enforce its constitutional rights.

“The state government would not allow Petronas to disrespect and disregard our rights to regulate the upstream activities under our laws such as the OMO and the Land Code,” it said.

Source: https://www.thestar.com.my/business/business-news/2018/06/13/sabah-granted-observer-status-in-petronas-vs-sarawak-case/

Sarawak govt ‘disappointed’ with decision to postpone hearing

KUCHING: The Sarawak government has expressed its “deep disappointment” with the decision by the Federal Court to postpone a hearing over the state rights on its oil and gas resources to June 21.

In a statement yesterday, the state government said it will consider all other options to protect and enforce its constitutional rights in this matter,

“The state government would not allow Petroliam Nasional Bhd (Petronas) to disrespect and disregard our rights to regulate the upstream activities under our laws such as the Oil Mining Ordinance and the Land Code,” it said.

Over the past year, Sarawak has embarked on several initiatives that would see Petroleum Sarawak Bhd (Petros) come into force from July.

An official letter from Sarawak Attorney General (AG) Datuk Talat Mahmood Abdul Rashid to Petronas president and chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin on April 13 stated that from July 1, the state government would regulate the downstream and upstream O&G industry in accordance to state laws.

On June 4, Petronas filed a suit seeking a declaration from the Federal Court that it is the exclusive owner of petroleum resources in the country, as well as the only regulator of upstream activities nationwide, including in Sarawak.

Meanwhile, the Sabah government is set to intervene in the Petronas suit seeking a declaration that it is the exclusive owner of the country’s petroleum resources.

Chief Minister Datuk Seri Mohd Shafie Apdal said that he had asked the state AG to monitor the suit against the Sarawak government that would have implications on Sabah.

Source: https://www.thestar.com.my/business/business-news/2018/06/12/sarawak-govt-disappointed-with-decision-to-postpone-hearing/

Sarawak govt ‘disappointed’ with decision by Federal Court to postpone hearing on Petronas case

KUCHING: The Sarawak government has expressed its “deep disappointment” with the decision by Federal Court to postpone to June 21 a hearing over the state rights on its oil and gas resources.

In a statement yesterday, the state government said it will consider all other options to protect and enforce its constitutional rights in this matter, 

On June 4, Petroliam Nasional Bhd (Petronas) filed a suit seeking a declaration from the Federal Court that it is the exclusive owner of petroleum resources in the country, as well as the only regulator of upstream activities nationwide, including in Sarawak.

The case was supposed to be heard on Monday, June 11.

“It is surprising that Petronas who made the application and sought an urgent hearing has no objection to the postponement of hearing of the case,” it said.

The postponement, according to the statement, was granted without according the Sarawak Attorney General legal team the courtesy of being heard on the state government’s objection.   

“The state government would not allow Petronas to disrespect and disregard our rights to regulate the upstream activities under our laws such as the Oil Mining Ordinance and the Land Code,” it said.

Over the past year, Sarawak has embarked on several initiatives that would see Petroleum Sarawak Bhd (Petros) come into force from July.

An official letter from Sarawak Attorney General (AG) Datuk Talat Mahmood Abdul Rashid to Petronas president and chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin on April 13 stated that from July 1, the state government would regulate the downstream and upstream O&G industry in accordance to state laws.

Source: https://www.thestar.com.my/business/business-news/2018/06/11/sarawak-govt-disappointed-with-decision/

The Petronas-Sarawak oil intrigue

Change in political landscape paves way for a decision on who has control over oil and gas resources once and for all

SIX DAYS after former prime minister Datuk Seri Najib Tun Razak announced the dissolution of Parliament, Petroliam Nasional Bhd (Petronas) received a letter from the Attorney General (AG) of Sarawak, which it knew it had to act on.

The letter effectively aimed to relieve Petronas as the undisputed guardian of oil and gas (O&G) resources in Malaysia and its powers to be shared with the state government-owned Petroleum Sarawak Bhd (Petros).

Officials familiar with the matter say the biggest fear for Petronas was that its role as the authority for any O&G exploration works would be compromised not because of inadequate laws, but the weak political strength of the federal government.

“But the change in the political landscape after May 9, where the shift in power moved to Pakatan Harapan, gave fresh hope that Petronas has an even chance to allow the courts to determine who is the guardian of all O&G resources in the country.

“The state based its case around the Sarawak Oil Mining Ordinance (OMO), while Petronas is anchoring its case on the Petroleum Development Act 1974 (PDA). Under Pakatan, the mantra is to follow the rule of law, which is good for all parties,” says the official.

On April 13, the letter from the Sarawak AG stated that Petronas would deal with Petros on all matters pertaining to the extraction of O&G resources effective July 1.

It officially positioned Petros as the sole authority to issue licences and permits on all upstream O&G activities carried out in the state.

Hence, Petronas, its sub-contractors and partners in the production-sharing contract ventures are to work with Petros in the extraction of O&G resources in the state with the most amount of reserves in Malaysia.

“When the letter came, Petronas was expecting the worst because over the past five years, it had lost many battles to the Sarawak state government. This was largely because the federal government was weak and did not provide Petronas with ‘air cover’ when it came to matters dealing with Sarawak,” says an official close to the matter.

To the international O&G world, the letter from Sarawak effectively was a blow to the standing of Petronas as the sole authority of O&G resources in the country.

The national oil company faces the daunting prospects of explaining to oil majors such as Shell, Murphy Oil, Mubadala Oil & Gas, Total and Nippon Oil that they have to go through one more layer – Petros – for any type of work they are going to undertake in O&G ventures in Sarawak.

In the past few years, Petronas president and chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin never hid the fact that the company was getting uncomfortable with the situation in Sarawak. He had the view that the practice in most countries was for a single body to be the sole authority for O&G resources.

In this respect, Petronas has always anchored on the PDA that came into effect in 1974, vesting it as the sole authority for all upstream O&G activities in the country. This involves exploration works and entering into contracts with international partners to mine O&G fields, whether onshore or offshore Malaysia.

In return, the states of Sarawak, Sabah and Terengganu, which have O&G resources, receive royalties amounting to 5% from Petronas.

The absolute amount received by these states depends on the quantum of O&G resources extracted from the state. For instance, between 1978 and March 2000, Terengganu received RM7.13bil in royalties. Global oil prices averaged US$20 per barrel then.

In a legal suit between Terengganu and the federal government, it was disclosed that the latter had offered to pay the state RM1.67bil for the period from March 2000 to 2009, while the state wanted RM2.79bil. The matter was settled out of court.

GE14 a turning point?

Petronas vice-president and group general counsel Maliki Kamal Mohd Yasin wrote back to the Sarawak AG stating that it disagreed with the assertion of the state requiring it to get licences and permission from Petros to embark on any work starting from July 1.

It is learnt that Maliki’s argument was anchored on the PDA that vested all rights to upstream O&G resource activities to Petronas.

Maliki’s letter was sent on May 22, just two weeks after Malaysia saw a turning point in its political landscape.

Sarawak, which was the king maker in the previous administration under the Barisan Nasional with 25 seats in Parliament led by Najib, no longer held that precious position. Sarawak’s Barisan won only 19 seats in the 14th general election (GE14) and is facing a different federal government in the form of Pakatan.

The new federal government does not need to depend on Sabah and Sarawak to control Parliament.

The Pakatan coalition, led by Prime Minister Tun Dr Mahathir Mohamad, has more than 112 Parliamentary seats in Peninsular Malaysia and does not have to depend on allies from Sabah and Sarawak to form the government.

The political shift is viewed as something that works in favour of Petronas.

Whether by sheer coincidence or design, in the first week of June, Petronas filed a suit seeking a declaration that it is the sole governing authority for upstream O&G activities in Malaysia for onshore and offshore fields.

Petronas also wants the courts to declare that the PDA supercedes the Sarawak OMO, the law that the state has used as its basis for setting up Petros as the sole authority for O&G activities in Sarawak.

It is not hard to fathom why Petronas wants a decision in determining who controls the O&G resources in Sarawak as soon as possible.

Starting from July 1, the function of Petros as the sole issuing authority for all licences and approvals for O&G activities in the state is to kick off. Petronas would be deemed illegal if it operates in Sarawak without getting the approval from Petros.

The suit, which is to be heard on July 12, will consequentially determine if the Sarawak state assembly has any standing to preside on matters regarding the upstream activities of the O&G industry.

However, when it comes to matters pertaining to Petros, the state Pakatan and Barisan parties seem to have a similar stance.

Towards this end, Sarawak Parti Keadilan Rakyat vice-chairman See Chee How has already stated that the state cannot afford to lose the case against Petronas.

However, the federal government has already stated that it would manage the country based on the rule of law. On this score, Dr Mahathir has already said that the Petronas case is something that the company has taken up and that it would abide by the decision of the court.

Landmark case

The case between Petronas and Sarawak will be an interesting landmark because it sets the stage for other states such as Sabah and Terengganu to set up their own version of “Petros”. In fact, Sabah already has a similar set-up but it is not active.

As for Terengganu, the state government will directly get oil royalties from Petronas after 18 years. And ironically, it is coming from the same Prime Minister who had stopped payments to the state after it fell into the hands of PAS in 1999.

After Barisan lost Terengganu to PAS in the November 1999 GE, Dr Mahathir channelled the payments to a federal government-owned entity. The payments stopped in March 2000.

Payments were made through a federal government entity and was known as Wang Ehsan. It continued until 2009 when Barisan regained the state.

The utilisation of funds between 2004 and 2008 was said to be one of the reasons that led to the ouster of Datuk Seri Idris Jusoh as Mentri Besar of Terengganu. He was replaced with Datuk Seri Ahmad Said after the 2008 GE.

During Ahmad Said’s tenure, one of the proposals for the utilisation of the funds in a supposedly transparent manner led to the birth of 1Malaysia Development Bhd or 1MDB – the fund that is subject to a massive investigation at domestic and international levels.

Since 1974, when the PDA came into effect, Petronas has been managing the resources. It has a monopoly and is the sole authority to go to for any investor wanting to get a piece of the action. Unlike some other state-owned petroleum companies such as Pertamina of Indonesia, Petronas has been handling the contracts well.

However, after 44 years, the states, especially Sarawak and Terengganu, have established many companies and employed people with vast experience in managing O&G resources. It is only natural that they would want a bigger role to play.

However, under the Pakatan government, Sabah and Sarawak are to get 20% of the royalties instead of 5%. That itself is a lot of money to handle – running into billions. As we have seen in Terengganu, the handling of the royalty money from Petronas itself is a full-time job.

Although the current case only involves Petronas and Sarawak, the implications are wide-ranging.

The courts will decide once and for all who controls the O&G resources. This decision will come in an environment where nobody has any room to cast doubts if there were hidden hands behind any court judgements.

A decision either way will have a major impact on the O&G industry in the country.

 

 

 

Related story:

Petronas warned of July 1 being the cut-off date

Source: https://www.thestar.com.my/business/business-news/2018/06/09/the-petronassarawak-oil-intrigue/

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