This article first appeared in The Edge Malaysia Weekly on May 26, 2025 - June 1, 2025

LAST week’s signing of a joint declaration between the federal and Sarawak governments, with regard to issues between national oil company Petroliam Nasional Bhd (Petronas) and Petroleum Sarawak Bhd (Petros), has left many in the industry wanting, with one oilman even deeming it “superficial”.

The joint declaration, signed by Prime Minister Datuk Seri Anwar Ibrahim and Sarawak Premier Tan Sri Abang Johari Tun Openg, basically says Petronas and Petros will jointly develop the country’s oil and gas (O&G) sector. However, the details and new structure of the development of Sarawak’s O&G sector were not disclosed.

Due to the sensitivity of the situation, given that both Petronas and Petros dish out contracts to the industry, none of the players would go on record to share their views. And neither the Malaysian Oil, Gas and Energy Services Council, the largest industry association representing the interests of the oil, gas and energy industry, nor the Malaysia OSV (offshore support vessel) Owners’ Association would comment on the matter.

“All this [fighting] is going on while the industry is facing such tough times,” an O&G executive points out.

Since the middle of January this year, Brent Crude has fallen more than 22% to below the US$65 per barrel band. And making the situation worse for local O&G players is Petronas putting on hold a number of upstream exploration projects in Sarawak as a result of its ongoing feud with Petros.

Last week, O&G stalwart Dayang Enterprise Holdings Bhd (KL:DAYANG) announced the financial results for its first quarter ended March 31, 2025 (1QFY2025). Its net profit fell 56% year on year to RM12.31 million while revenue fell 38% to RM153.8 million.

Reviewing its financial performance, Dayang says, “The lower revenue in the current quarter is mainly attributable to a lower vessel utilisation rate of 26% compared to 48% in the previous corresponding quarter, largely resulting from a delay in contract commencement by oil majors.”

Perdana Petroleum Bhd (KL:PERDANA) a 63.42% unit of Dayang, suffered a net loss of RM18.33 million on revenue of RM37.56 million for its 1QFY2025 ended March. In the previous corresponding period, Perdana registered a net profit of RM6.07 million on revenue of RM99.22 million.

Other companies that have shown similar patterns include offshore service provider Keyfield International Bhd (KL:KEYFIELD). In its first quarter ended March 2025, Keyfield managed to chalk up a net profit of RM20.68 million on revenue of RM86.75 million. In comparison to the similar period a year ago, Keyfield’s net profit and revenue were down almost 32% and 18.46% respectively.

In its first financial quarter ended March 2025, Petra Energy Bhd (KL:PENERGY) saw its net loss widen to RM7.48 million from RM2.36 million a year ago. It had reported a net profit of RM13.17 million for the quarter ended Dec 31, 2024.

Petronas and Petros have been locking horns for more than a year now over the role of gas aggregator in the state. A resolution was supposed to have been reached on July 1, 2024 but the deadline was extended to Oct 1, 2024. Yet almost a year later, a resolution still seems elusive.

Sarawak is challenging Petronas’ hold over Malaysia’s oil and gas reserves, as stated in the Petroleum Development Act (PDA) of 1974, which gives the national O&G company control of all of Malaysia’s hydrocarbon reserves. However, Sarawak holds about 60% of the country’s gas reserves and accounts for 90% of Malaysia’s liquefied natural gas (LNG) exports — facts that have led state-controlled Petros to clamour for the sole aggregator’s role.

This role would entail Petros acquiring gas from upstream producers and consolidating and selling it to downstream players. Petros would also be tasked with building and managing the requisite infrastructure, including condensing and processing facilities, pipelines and even export terminals. To counter the PDA 1974, Sarawak has amended the state’s Distribution of Gas Ordinance (DGO) 2016 for Petros to be the sole gas aggregator for the state and require any company undertaking gas distribution activities in Sarawak to get a licence.

Petronas and Petros are currently embroiled in a number legal disputes. Earlier this month, Petronas was slapped with a letter of demand as its exploration subsidiary Petronas Carigali Sdn Bhd’s plant at the Miri Crude Oil Terminal was alleged to be in violation of the DGO 2016, possibly operating without a licence and undertaking gas distribution.

Shell MDS (M) Sdn Bhd, a unit of Anglo Dutch Shell plc obtained a court decision where it was granted the right to suspend payments for natural gas supplies in Bintulu. This legal action stemmed from both Petronas and Petros independently submitting invoices to Shell MDS for the same gas supplied.

“The OGSE (oil and gas services and equipment) workforce of 70,000 is worried. We are the ones doing the work, not Petronas or Petros,” an O&G industry veteran says. 

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