KUALA LUMPUR, Feb 12 — The ongoing disagreement between Petronas and Sarawak over gas aggregation appears to be rooted more in legal interpretation than in a breakdown of engagement, according to industry observers.
In May 2025, Prime Minister Datuk Seri Anwar Ibrahim and Sarawak Premier Tan Sri Abang Johari Openg signed a Joint Declaration (JD) outlining broad principles for gas aggregation and affirming the co-existence of the federal Petroleum Development Act 1974 (PDA) and Sarawak’s Distribution of Gas Ordinance (DGO).
The declaration followed discussions that have been ongoing since 2024 between Petronas and Petroleum Sarawak Berhad (Petros) over the aggregator role in the state.
However, analysts say the disagreement has created uncertainty over how the Joint Declaration should be applied.
“In the name of state rights, Sarawak has interpreted its own laws to the maximum,” said Abd Halim Husin, former president of the Malay Chamber of Commerce Malaysia (DPMM), in a Facebook post.
“That includes drafting and implementing provisions that directly or indirectly contradict the spirit and structure of the Petroleum Development Act 1974.”
He said this was done without thorough consultation, without federal political resolution and without national legal clarity.
The Joint Declaration does not refer to a “sole aggregator” arrangement. However, according to Samirul Ariff Othman, adjunct lecturer at Universiti Teknologi Petronas and senior consultant at Global Asia Consulting, there has been an increasingly public emphasis on sole aggregation by Sarawak-linked parties, including Unit Komunikasi Sarawak — a framing that has underpinned claims that Petronas is not complying with the agreement.
He said that narrative has contributed to perceptions that Petronas is not honouring the agreement, despite continued engagement between the parties.
Similarly, Samirul cautioned that claims of Petronas dishonouring the JD by seeking court clarification on how federal and state laws apply to the aggregator question misread what has actually taken place.
“Petronas’ request for judicial determination is to ensure continued compliance with applicable laws, after extended engagements since 2024 and the signing of commercial settlement arrangements,” Samirul said.
“And the record shows continuing talks, interim accommodations, commercial settlement agreements, and evolving regulatory discussions.”
The existence of these prolonged negotiations, joint frameworks and transitional arrangements to honour the JD reflect Petronas’ emphasis on “business continuity, respect for due process, and its commitment to Sarawak’s economy and communities”.
Samirul said the renewed insistence on sole aggregation deserves economic scrutiny.
While sole aggregation is often presented as synonymous with greater revenue and stronger sovereignty, he said it would also mean assuming the full burden of capital expenditure, full exposure to commodity price volatility, full infrastructure risk, full supply-security liability and full financing responsibility.
“These are risks Petronas today absorbs at scale for Sarawak,” he said. “Full control does not mean free benefit. It means full balance-sheet exposure. That is not empowerment. It is a transfer of risk.”
He pointed out that energy aggregation is, by nature, a scale business, working because portfolios are diversified, infrastructure is shared, offtake is balanced across fields and cycles, and optimisation is conducted across systems rather than within silos.
“But fragmenting aggregation reduces scale, raises unit costs, complicates balancing, and weakens bargaining power with both buyers and suppliers,” he added.
“Sole control within one geography may feel sovereign. Economically, it is thinner.”
Samirul stressed that Sarawak has an undeniable right to development.
“But does domestic priority require sole aggregation?” he asked. “Sole aggregation is not a gas-supply solution. It is a wholesale governance rewrite.
“Securing Sarawak’s domestic supply, pricing stability, and industrial access does not demand dismantling national aggregation. These objectives can be achieved through ring-fenced domestic allocations, structured joint-aggregation models, dedicated supply frameworks, and regulated pricing mechanisms.”
Halim warned that the result of this maximum interpretation is a slow drift away from the shared frameworks that have governed Malaysia’s energy sector for nearly half a century.
“More worryingly, these moves seem to ignore the spirit of past agreements and understandings that built the Malaysian petroleum ecosystem,” he said.
“The PDA is not just an Act. It is a social contract between producing states and the federal government — for the sake of national stability.”
He said the issue must also be viewed in the context of the Yang di-Pertuan Agong’s recent decree.
“His Majesty is not interfering in administration. He is using constitutional wisdom to remind the government of its responsibilities.”
“When His Majesty commands the federal government to act and resolve this dispute appropriately, the meaning is clear: The government can no longer hide behind the courts, companies, or political excuses.”
Halim stressed that the federal government must act immediately, saying it has a responsibility to protect the national interest without fear of political consequences.
He added that being firm should not be seen as oppressing the states, but as upholding the law, safeguarding institutions and ensuring national stability.
