This article first appeared in The Edge Malaysia Weekly on October 3, 2022 - October 9, 2022

THE heirs of the late Sulu Sultan Jamalul Kiram II upped the ante last Thursday by initiating legal proceedings to seize national oil company Petroliam Nasional Bhd’s (Petronas) assets registered in the Netherlands, the value of which could run into the billions.

Attempts to seize Malaysian assets in Holland come after bailiffs acting for the heirs of the Sulu Sultan seized Petronas Azerbaijan (Shah Deniz) Sàrl and Petronas South Caucasus Sàrl in Luxembourg in mid-July. The Petronas controlled entities were seized to satisfy a US$14.92 billion (RM66.4 billion in mid-July) award by Spanish arbitrator Gonzalo Stampa.

In response to the planned seizing of Malaysian assets in Holland, Minister in the Prime Minister’s Department (parliament and law) Datuk Seri Wan Junaidi Tuanku Jaafar said in a statement last Friday, “Malaysia has instituted legal proceedings in Luxembourg and will take similar steps in the Netherlands to resist and set aside any attempt by the purported Sulu heirs to enforce or obtain a benefit from the impugned award.

“Malaysia will not tolerate or capitulate to those who cynically seek to manipulate and abuse the system for personal gain or profit. To that end, Malaysia will spare no expense in defending its sovereignty and its assets abroad wherever they may be situated.”

Interestingly, Wan Junaidi added, “I must stress here that Petronas’ assets are not assets belonging to the government of Malaysia and it would be an abuse of the process of any court to seek enforcement against such assets.”

This, however, is likely to be a moot point.

In an immediate response to Wan Junaidi, a spokesman for the claimants commented, “If the minister is saying that, contrary to the 1974 Petroleum Development Act, the Malaysian government doesn’t own Petronas, the Malaysian citizens may wonder who does. Maybe the government can offer up a list of any other strategic assets it wants to disown. We might settle this matter very quickly.”

Petronas did not respond to questions posed by The Edge.

It is worth noting that Petronas seems to have a lot of assets parked under Dutch companies.

While putting a value to the companies was difficult, checks by The Edge indicate that Petronas Carigali Canada BV, which is a wholly-owned entity of the national oil company, has a 100% equity interest in Petronas Energy Canada Ltd and Petronas Canada LNG Ltd, which are huge entities.

Petronas Canada LNG has a 72% stake in the North Montney Joint Venture, where its partners include China’s Sinopec Corp (15% stake), Indian Oil Corp (10%) and Petroleum Brunei (3%). The North Montney Joint Venture has 1,250 square miles of shale formation, with more than 15,000 drilling locations.

Petronas Canada LNG was previously known as Progress Energy Canada Ltd, and was acquired at end-2012 for close to US$5.2 billion.

Meanwhile, Petronas Energy Canada issued US$600 million (RM2.48 billion) worth of debt paper in March last year.

In May 2018, Petronas announced the acquisition of a 25% stake in the LNG Canada project in Kitimat, British Columbia, which is 40% held by Royal Dutch Shell plc, 15% by PetroChina Canada Ltd, 15% by Japanese giant Mitsubishi via subsidiary Diamond LNG Canada Ltd, and the remaining 5% by Korea Gas.

LNG Canada is a US$29 billion (about RM127 billion) liquefied natural gas project that is still being developed and is likely to produce LNG sometime in the middle of this decade.

Apart from assets in Canada, a number of Dutch companies controlled by Petronas — Petronas West Papua IV Indonesia BV, Petronas Gebang Indonesia BV, Petronas Aru Indonesia BV, Petronas Andaman III Indonesia BV, Natuna 1 BV, PC Sakakemang BV — control the national oil company’s Indonesian operations.

Petronas Andaman III has a 49% stake in a joint venture with Repsol, PC Sakakemang has 45% equity interest in the Sakakemang production sharing contract (PSC) and Petronas Aru Indonesia owns 40% of the Aru PSC, among others. Petronas, via PT PLI Indonesia, also has a downstream lubricants business — held via Netherlands-based company PLI (Netherlands) BV. PLI has a huge lubricant business, with operations in Italy, the UK, Russia, Germany, France, Belgium, Mexico, Brazil and Argentina, among others.

In April 2019, Petronas, via Dutch-registered Petronas International Power Corp BV, acquired a 100% stake in Amplus Energy Solutions Pte Ltd, a Singapore-headquartered renewable energy outfit.

Meanwhile, Petronas Carigali Iraq Holding BV — also registered in Holland — holds a 45% stake in the Garraf oilfield, located in the province of Thi Qar, about 5km northwest of Al Refaei city and 85km north of the city of Nasiriya.

Petronas’ 51%-owned shipping company MISC Bhd also has several companies in Holland that hold some of its assets.

When the Sulu Sultan’s heirs sought to seize Petronas’ assets in Luxembourg in July, the national oil company said in a press release that its two subsidiaries — Petronas Azerbaijan (Shah Deniz) Sàrl and Petronas South Caucasus Sàrl — were basically shell companies.

In response, one source familiar with the whole episode explained that the move was “more to show that it [the seizure] could be done” and not part of any attempt to obtain the US$14.92 billion or RM66.4 billion purportedly owed by the Malaysian government to the claimants.

To recap, the legal dispute erupted after eight heirs of the late Sulu Sultan initiated international arbitration proceedings against the government of Malaysia, which commenced at end-January 2018 in Madrid, Spain.

At the crux of the dispute is an 1878 agreement between Sultan Mohamet Jamal Al Alam (the then Sultan of Sulu), Baron de Overbeck and Alfred Dent, which granted perpetual sovereign rights over what is parts of Sabah today, in return for an annual token payment of RM5,300, which Malaysia had been paying since 1878.

The Datuk Seri Najib Razak administration ceased the yearly payments in 2013, after an incursion of more than 200 armed militants into Lahad Datu, Sabah, which resulted in 78 deaths.

While Malaysia says the militants are linked to the Sultan of Sulu, as the incursion would be deemed to be in breach of the 1878 agreement, the heirs dispute this.

Backing the Sulu Sultan’s heirs on this venture is Therium, a company registered in Jersey in the English Channel and headquartered in London, and one of the world’s largest litigation funding firms.

News reports have it that Therium has sunk US$10 million into the dispute in support of the Sulu Sultan’s heirs. In reality, this whole exercise is likely to be a ploy to bring Malaysia to the negotiating table to settle the dispute.

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