Many officials have said we are looking for a ‘win-win’ solution in the Petronas vs. Petros dispute. But who are we kidding? How can there be a ‘win-win’ outcome when Petros takes over a large portion of Petronas’s business?
There’s no beating around the bush—Petronas, the jewel of Malaysia’s economy, is hanging by a thread. For decades, this government-linked giant has been the backbone of our economic stability, pumping billions into federal coffers and driving the nation’s development.
But now, that very foundation is at risk of crumbling, threatening not just Peninsular Malaysia but the entire federation. Sarawak’s push to seize control of its oil resources is both understandable and perilous, and the consequences could be catastrophic.
Sarawak’s fight for rights—and the overlooked details
Sarawak’s frustrations are valid. The state claims it received only RM33 billion out of the RM550 billion in oil and gas revenues it contributed to the nation between 1976 and 2017. For decades, Sarawak has seen its wealth funnelled into federal projects with little return.
So, in 2017, Sarawak made a bold move by establishing Petros, a state-owned oil company designed to wrest control back from the federal government and Petronas.
This isn’t just a bureaucratic shuffle; it’s a fight for what Sarawak sees as its rightful share. But while Sarawak’s demands are grounded in a sense of justice, there’s another side to the story that’s being overlooked.
The Petroleum Development Act (PDA) of 1974 was an agreement made by all states, including Sarawak led by then Chief Minister Rahman Ya’kub. The deal was simple: if oil was found in waters adjacent to a state, that state would receive a 5% royalty.
Most of Malaysia’s oil isn’t found within state borders but offshore, on the continental shelf, making the federal government—and by extension, Petronas—a legitimate stakeholder in these resources.
Why now? The power play behind Sarawak’s push
So, why is Sarawak pushing so hard now? The answer lies in the current political landscape. Prime Minister Anwar Ibrahim’s unity government is fragile, heavily reliant on the support of Gabungan Parti Sarawak (GPS) to maintain a majority in Parliament.
This gives Sarawak’s Premier, Abang Johari (Abang Jo), enormous leverage in negotiations. With the federal government in a weakened state, Sarawak is capitalising on the opportunity to push its agenda harder than ever before.
But while this political manoeuvring might benefit Sarawak in the short term, it’s a dangerous game that could destabilise the entire federation.
If the federal government continues to bend to Sarawak’s demands, it could undermine the balance of power between federal and state governments, threatening national unity.
A mad case of mutually assured destruction
If Sarawak’s ambitions with Petros come to fruition, the consequences for Petronas—and the nation—could be dire. Petronas has thrived because of its economies of scale, global reputation, and decades of expertise in the oil and gas industry.
Splitting off a significant portion of its operations to Petros could cripple both companies, turning them from industry giants into struggling competitors.
Let’s be clear: Petronas’s success is not an accident. It’s a product of consolidated operations, massive scale, and a hard-earned reputation on the global stage. Fragmenting this structure would weaken both Petronas and Petros, eroding their ability to negotiate deals, secure investments, and operate profitably. In a game of divide and conquer, everyone loses.
Petros, for all its ambition, is still a fledgling company with a steep learning curve ahead. Building the credibility and operational expertise that Petronas has developed over decades won’t happen overnight.
And without the vast reserves and financial clout that Petronas enjoys, Petros could find itself out of its depth, unable to compete on the same level.
The domino effect: A threat to Petronas’s very existence
The danger doesn’t end with Sarawak. If Sarawak successfully asserts control over its oil resources through Petros, what’s stopping other states like Sabah, Terengganu, or Kelantan—where significant oil reserves are also found—from doing the same?
This could trigger a domino effect where each state demands greater control over its resources, leaving Petronas stripped of its most valuable assets.
Imagine a scenario where multiple states establish their own versions of Petros, siphoning off resources that have historically powered Petronas’s success. The result would be apocalyptic for Petronas.
The company that has long been Malaysia’s economic engine could be reduced to a shell of its former self, with the federal government losing 20% of their source of revenue.
The political implications: A volatile future
Prime Minister Anwar Ibrahim may soon face a tough decision. If Sarawak’s demands continue to escalate, he might need to rally more Peninsular-based Members of Parliament to his side—perhaps even courting PAS or Bersatu—to regain leverage against Sarawak.
This would fundamentally shift the political balance, potentially allowing the federal government to push back against Sarawak’s ambitions. But such a move could also introduce new risks, destabilising an already fragile political landscape.
While Sarawak has every right to argue for a fairer share of its resources, the path it’s on could lead to mutual destruction.
Dissecting Petronas’s infrastructure and pitting Petros against it might satisfy short-term grievances, but the long-term costs could be enormous.
Instead of fragmenting the nation’s most important economic engine, a more balanced approach might involve revisiting the PDA to increase Sarawak’s royalty share without dismantling Petronas.
Not that this was not done before. Sarawak wanted 20% royalty to no avail. This time around perhaps everyone should take each other more seriously to at least meet somewhere in between.
The stakes couldn’t be higher
This isn’t just about oil and gas—it’s about the future of Malaysia. If the current trajectory continues, we could see the collapse of one of the nation’s most valuable assets, dragging down the hopes and dreams of millions with it.
The nation stands at a crossroads, and the decisions made in the coming months will determine whether we remain united and prosperous, or whether we splinter, to everyone’s detriment.
The solution isn’t simple, but it is clear: find a way to balance Sarawak’s rightful demands with the broader needs of the federation. The future of Malaysia depends on it.
Source : Politik Ekonomi
The difficult engagement between Petronas and Sarawak government now gained public attention and led a lawyer to privately express concern on the fate of Petronas if Sarawak were to get its way.
That’s RM30-40 billion short in revenue annually for Petronas i.e. Federal government.
Source : Thick Brick Blogpost
Source : Dagang News
Petronas may lose part of revenue to Petros, capex may be hit — RHB IB
Malaysia’s national oil-and-gas company Petroliam Nasional Bhd, or Petronas, may lose a portion of revenue following the appointment of Petroleum Sarawak Bhd (Petros) as the sole gas aggregator in Sarawak, said RHB Investment Bank (RHB IB).
The earnings impact to Petronas remains uncertain, the research house flagged. Depending on the loss, the shift could affect its ability to keep up capital spending in the long term, though its current balance sheet remains solid, even with dividend commitment to the federal government, RHB IB noted.
“We may see some potential operational disruption in the near term, before much clarity or a clear resolution is achieved,” RHB IB said. “However, we believe [that] ultimately, both parties would want to maximise production, especially when oil prices are expected to remain stable.”
The gas segment contributed about RM101 billion, or 30% to Petronas’ revenue in 2023. Petronas also delivered 403 liquefied natural gas (LNG) cargoes from its LNG complex and 38 LNG cargoes from two floating LNGs (FLNG) and 2.2 billion standard cubic feet per day of average sales gas volume in Peninsular Malaysia.
On May 13, Sarawak announced that Petros will take over Petronas’ role in all natural gas trading activities in the state effective July 1. Petros and Petronas also agreed to sign a definitive agreement where Petronas will acknowledge Petros as the sole gas aggregator.
The agreement allows Petros to conclude gas purchase agreements with all upstream producers involved in the production of natural gas in Sarawak and gas sales agreements with all downstream buyers, foreign or domestic.
Consequently, Petronas will cease all buying and selling activities of the product in the state and hand over its natural gas distribution network and system to Petros.
The gas business took up 22% of Petronas’ domestic capital expenditure, and the transfer to Petros may lead to a “more prominent” cut in the segment, RHB IB warned.
If Petronas decides to scale back substantially, exploration and green field projects are likely to take a bigger hit, it said. Domestic drilling activities, offshore fabrication works, hook-up and commissioning and offshore support vessel demand supporting drilling projects will be reduced accordingly.
“Brownfield projects and maintenance activities will be of lesser impact, given its importance to maintain current production for current operating cash flow generation purposes,” RHB IB noted.
Source : The Edge
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