PETRONAS-PETROS dispute to be settled by year-end, says Abang Johari

Thursday 05 Nov 2026

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KUALA LUMPUR (Nov 5): The dispute between Petroliam Nasional Bhd (PETRONAS) and Petroleum Sarawak Bhd (PETROS) is expected to be settled by year-end, according to Sarawak Premier Tan Sri Abang Johari Tun Openg.

In an interview with The Edge, Abang Johari said an independent technical committee is weighing both companies' arguments despite the ongoing legal battle.

The parties will be guided by the joint declaration signed between Putrajaya and Sarawak in May 2025, which recognises both federal and state laws, he added.

The declaration, among others, ensures the supply of 1.2 billion standard cubic feet (cu ft) of gas per day to Sarawak and provides for collaboration between PETRONAS and PETROS on future projects in line with the state's aspirations.

Further, the declaration was also intended to clearly define their respective roles — PETROS would control domestic gas distribution while PETRONAS would handle LNG exports — but no final commercial agreement has been reached.

When asked on what a settlement might look like over the next few months, or weeks rather, and what Sarawak expects, Abang Johari said:

"I think I will just pursue what we have agreed on with the prime minister. I mean, PETRONAS cannot be acting like the federal government, right? You are a commercial entity. How can you be stronger than the government? Aih, cannot be lah ... And neither can PETROS be stronger than the state government. It is a question of how you work [this out]."

Who controls the gas

At the heart of the dispute is who controls gas distribution in Sarawak.

PETRONAS is tasked with developing the country's hydrocarbon resources under the Petroleum Development Act 1974 (PDA). Sarawak, citing the Malaysia Agreement 1963, argues its Oil Mining Ordinance 1958 was never repealed and should coexist with the PDA.

PETROS, wholly owned by the state, was appointed Sarawak's sole gas aggregator in February 2024 under the Distribution of Gas Ordinance 2016 (DGO).

The DGO prohibits any entity from supplying or distributing gas in Sarawak without a licence. PETRONAS, which derives its rights from the PDA, however, maintains that it does not need such a licence from Sarawak.

The clash went to court, with customers caught in the middle. Shell MDS, a subsidiary of Shell that has been operating in Sarawak for more than three decades, asked the courts to decide whom it should pay for gas at its Bintulu plant.

In a separate case, PETROS refused to pay for gas supplied in August 2024, arguing that PETRONAS was unlicensed, prompting PETRONAS to call on a RM7.95 million bank guarantee.

Although the court ruled in favour of PETRONAS in both cases, those questions are still raised before the apex court.

PETRONAS filed its petition on Jan 12, and in March the Federal Court allowed it to challenge Sarawak's gas and oil mining ordinances. PETRONAS is challenging the competence of the Sarawak State Legislative Assembly to enact 10 laws, which it says encroach on federal powers set out in the Constitution's Federal List.

Chief among them is the Oil Mining Ordinance (OMO), which extends Sarawak's offshore borders beyond what is set by the federal government and international treaties. Other state laws being challenged include the Environment (Reduction of Greenhouse Gas Emission) Ordinance 2023 and the Sarawak Oil Mining Ordinance 1958.

Sarawak, which filed its own petition on Feb 23, is challenging three federal laws: the PDA, the Continental Shelf Act 1966 and the Petroleum Mining Act 1966.

On Oct 1, a Federal Court judge ruled that PETRONAS would submit its arguments first, but left it to the full bench to decide whether Sarawak's preliminary issue on the OMO should be heard first. The full bench hearing is set for five days from Jan 25, with the parties seeking a panel of nine to 11 judges.

Even as both sides prepare for a landmark constitutional hearing at the Federal Court in January, Abang Johari told The Edge he expects an out-of-court settlement before the year ends. The following is an excerpt of the interview:

The Edge: Premier, we have to ask this — PETRONAS brought the dispute over gas issues to court. Can you update us on the latest status?

Abang Johari: It’s a question of understanding the law. You know, PETRONAS says we have no rights in terms of [being the gas] aggregator. And the aggregator is part of the distribution of gas. And we [already] had that law before Malaysia was formed, right? And then PETRONAS says under the PDA (Petroleum Development Act), they have the absolute rights. We said that cannot be it because there is also state law. So what we want to do now is to work out a compromise between PETRONAS and PETROS on behalf of the state and federal governments. And there is a technical committee now, an independent one, to look at our argument as well as PETRONAS’ argument. We hope it can be settled out of court. Because the joint declaration [with] the prime minister has become a guiding principle to reach a compromise.

How is it that you and the prime minister have agreed, but the dispute is still ongoing?

There are certain areas, grey areas, where they don’t agree. So what the PM and I have agreed [on is], okay, if that is the case, we get a third party to look at it.

Is there a time frame for when you hope to sort out the problem?

Yes, before the end of the year.

So, in two months?

Now, it’s almost there ... for the sake of the whole country.

It seems a lot of Sarawak’s plans are hinging on PETROS. Let’s say it doesn’t go well with PETRONAS. What happens then? Do you have a contingency plan?

No. I think I will just pursue what we have agreed on with the prime minister. I mean, PETRONAS cannot be acting like the federal government, right? You are a commercial entity. How can you be stronger than the government? Aih, cannot be lah ... And neither can PETROS be stronger than the state government. It is a question of how you work [this out].

Our understanding is that, in the agreement between PETROS and PETRONAS, the state will have a certain quota of the gas supply every year. And for the remaining, PETRONAS will have the right to export it.

Correct. They have, in principle, agreed to give us 1.2 billion standard cu ft per day. And then we say we agree; the remaining gas is meant for our LNG (liquefied natural gas) [for export]. But then, we also need gas for domestic use, particularly our power. So we ask them, where do you get the gas? You know, it could be good on paper, but then [it’s a matter of] whether you can deliver or not. That is our concern. If that is the case, why not have a joint entity, PETROS and PETRONAS, to explore and to produce and then land the gas at our low-carbon hub? The gas is somewhere here, say, near Natuna; then you land in Kuching, less cost … so that’s why we build that infrastructure (onshore gas pipes) for the future.

How’s the acceptance of the PETROS and PETRONAS collaboration (joint entity) that you mentioned?

Under discussion. That’s why I said we are about to reach the last mile [in resolving the PETRONAS-PETROS dispute].

Edited ByEmir Zainul

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