KUALA LUMPUR (Feb 25): Petroleum Sarawak Bhd (Petros) has lost its bid in the Kuching High Court to stop the national oil and gas company from calling on a RM7.95 million bank guarantee.
Judge Datuk Faridz Gohim Abdullah ruled that Petros' attempt to prevent PETRONAS, officially known as Petroliam Nasional Bhd, from cashing in the bank guarantee was not unconscionable or unlawful.
PETRONAS’ claim to the guarantee is valid as it is in line with the terms, Faridz said.
The case revolves around the recovery of RM7.95 million released to PETRONAS after Petros refused to pay for gas supplied in August 2024.
On Wednesday, Faridz also refused to determine the constitutionality of the Petroleum Development Act 1974 (PDA) and Sarawak’s Distribution of Gas Ordinance 2016 (DGO).
The issue at hand is whether the claim by PETRONAS for the bank guarantee with Maybank Islamic Bhd is valid or illegal as claimed by Petros in its originating summons, and the constitutional issues raised fell outside the current case, he said.
The constitutionality of the federal and state legislations should be determined by the Federal Court, Faridz said.
He also ordered Petros to pay RM50,000 costs.
The dismissal was first reported by East Malaysian press and The Edge has also independently confirmed the outcome with one of PETRONAS' counsels Khoo Guan Huat, who appeared with lead counsel Datuk Dr Cyrus Das in the matter.
Faridz was initially scheduled to deliver his decision on Jan 30, but then deferred it to Wednesday (Feb 25).
Petros was represented by Tan Sri Cecil Abraham, while Datuk JC Fong appeared for the Sarawak government, and senior federal counsel Ahmad Hanir Hambaly @ Arwi appeared for the federal government.
Petros says ruling on bank guarantee only, DGO rights unaffected
In a short statement following the ruling by the Kuching High Court, Petros said its case was solely on technical grounds concerning the bank guarantee under the Sarawak Gas Sale Agreement (GSA). It did not rule on the legality of the GSA or constitutional issues under the DGO.
The decision does not prevent Petros from pursuing further legal action to clarify its rights and position under the DGO.
Petros said it will review the judgement and consider next legal steps.
Petros filed an originating summons last year, disputing PETRONAS’ claim on its bank guarantee, as part of payments claimed for gas supply in the state, among others, on the grounds that PETRONAS does not have a licence to operate in Sarawak under the state law — the DGO — and its amendments in 2023.
In its submission in early October sighted by The Edge, PETRONAS said that it does not need a licence from the Sarawak authorities to supply gas there.
PETRONAS also submitted in court that it is “not required to be licensed due to its existing rights under the PDA”, and as such the licensing requirement under state law does not apply.
While the PDA, a federal law, grants PETRONAS the rights over onshore and offshore petroleum nationwide, the DGO designates Petros as the sole gas aggregator in Sarawak, the largest gas-producing state in the country.
PETRONAS, Sarawak state file separate Federal Court bids over petroleum rights
PETRONAS and the Sarawak government have filed separate applications at the Federal Court over petroleum rights in Sarawak.
Last month, PETRONAS sought the Federal Court’s leave to clarify the legal position of its petroleum operations in Sarawak, citing uncertainty due to overlapping federal and state laws. The national oil company wants the court to determine how the PDA interacts with Sarawak’s DGO, following ongoing disputes with state-owned Petros over licensing, regulation and gas supply.
PETRONAS said the move is not meant to challenge Sarawak’s development plans or Petros’ role, but to ensure it operates in compliance with the law.
The PETRONAS motion, where it also named the Sarawak government and the federal government as respondents, is fixed for hearing on March 16.
Separately, the Sarawak government has filed a petition asking the Federal Court to rule on the constitutional validity of three federal laws — the PDA, the Continental Shelf Act 1966, and the Petroleum Mining Act 1966.
The Office of the Premier of Sarawak, in a statement, said the federal laws infringe upon and restrict Sarawak's rights over its natural resources, particularly oil and gas, located in the seabed of the Continental Shelf.
“The sovereign rights to petroleum resources within Sarawak's boundaries 'were vested on Malaysia Day by the British government, in Sarawak and not in the Federation or federal government', as provided for under the Malaysia Agreement 1963 and its annexed instruments,” the state government said in the statement.