Federal law vs state law: how will Anwar navigate this tricky legal “landmine”…?
Last Sunday (May 4) prime minister Anwar Ibrahim had expressed his “confidence” that the simmering dispute between the federal government-owned oil and gas corporation Petronas and Sarawak’s state-owned Petros will be resolved through “healthy and meaningful” discussions with Sarawak premier Abang Johari; however, the question that is sure to be on the minds of many observers is: how sure is Anwar that there will be a win-win situation for this increasingly ugly face-off?
Recently, the two companies' long-running dispute over gas distribution rights escalated after Petronas broke the news that its Petronas Carigali subsidiary had received “notices” from the Sarawak state government; this was over allegations that the national oil company's Miri Crude Oil Terminal lacked a proper “operating licence” and that it has been given 21 days to obtain the required licence - or face financial penalties under the local state law!
This latest episode where the Sarawak government had accused Petronas of flouting its (state) laws has deepened a worsening spat that may have already rattled foreign investors’ confidence in a pivotal sector in the Malaysian economy.
Certainly, Sarawak has legitimate rights to its own resources - but why only now…?!
In fact, it would appear that the latest action by Sarawak is an “open challenge” by the state to the decades-old monopoly Petronas has held since it was incorporated under a parliamentary statute in 1974 known as the Petroleum Development Act or PDA.
For context, the PDA, among other things, stipulates that the national oil corporation is the “sole guardian” of the nation’s hydrocarbon reserves.
But while the Sarawak government seems adamant in regaining control over all matters relating to oil and gas in the state, understandably Petronas doesn't appear ready to give in to the former's demands.
In fact, Petronas had reportedly stated that while it respects the aspirations of the state of Sarawak, it is also duty-bound to uphold the PDA 1974 and safeguard national interests; furthermore, it has asserted that its subsidiaries are empowered by the existing (federal) law to undertake all oil and gas-related activities (in the country).
For the record, Sarawak is believed to be sitting on huge petroleum reserves representing 60.87 percent of Malaysia’s total reserves while accounting for 90 percent of the country's liquified natural gas (LNG) exports.
However, trouble has been brewing after it became obvious that the state wanted “greater control over its resources” through its wholly owned subsidiary Petroleum Sarawak (Petros) - virtually rendering the PDA redundant; hence, the ongoing feud which has pitted both parties in a bitter tug-of-war - for which it seems unlikely there will be an easy and amicable solution!
State espionage…?
Interestingly, to add to the intrigue, allegations had also surfaced that Petros may have engaged in “corporate espionage” to secure some form of leverage in its squabble with Petronas; this was after one of the latter’s senior manager was charged in court for attempting to leak highly confidential information on the national oil corporation’s inner workings to Petros last June.
But why has Sarawak resorted to playing hard ball with the Federal government of which it is an integral part?
Ironically, Abang Johari’s state government is a crucial ally in PM Anwar’s coalition government and it is believed that the rising tensions with Petronas have strained federal-state ties.
To its credit, Petronas seemed to have taken a “less-hostile” approach to the issue while Sarawak appeared to have made it clear that it disputes the “overarching” powers Petronas wields under the PDA.
In short, Sarawak actually wants all the hydrocarbon reserves in the state to be regulated under a “colonial-era” Oil Mining Ordinance 1958 that stipulates that oil and gas resources found within 200 nautical miles of its waters belong to the state!
Incidentally, this crisis has also sparked heated debate in the peninsular with one vocal, prominent ex-lawmaker Zaid Ibrahim seemingly coming to the defence of the national oil company which appears to be left stranded fighting a “solo war” against the might of a rich, giant state!
In a stinging post in his popular “X” account, the maverick former UMNO MP stressed that Petronas was not just another company but the “crown jewel” of Malaysia’s economic sovereignty; moreover, according to him, it was an institution borne from the conviction that the Malays can helm a world class enterprise and manage the country's wealth!
Does it all boil down to political survival?
Not mincing words, he went on to question: where are the so-called “champions” of the Malays when it comes to defending the very dignity and authority of a Malay-led national institution? Are they fearful of offending their (key) coalition partners?
A clearly incensed Zaid then signed off by seemingly challenging Anwar’s Madani administration: can't they tell the difference between national interests and political interests?
While the hesitation on the part of Anwar to "directly and actively" intervene in the crisis may be understandable, the entire episode seemed to have morphed into an unexpected “east versus west” battle; it has also raised some serious concerns as well as some interesting questions…
Given that it appears like a “zero sum” game, how will this embarrassing and potentially damaging “internal crisis” play out? Is there a possibility that the Madani government might even implode?
In view that Petronas has literally been the “cash cow” for the federal government for decades, how will this affect the country's finances, the national budget, and the rakyat?
What else will end up as collateral damage?
How will the opposition Perikatan Nasional react to Sarawak’s hardline stance on this matter? Will they voice their objection to the east Malaysian state’s “aggressive” actions or choose to remain silent for strategic political reasons?
Or will the opposition play the “devil's advocate” by seizing the opportunity in siding with the wealthy east Malaysian state, and even demand the same…?
Could Sarawak’s uncompromising stand on the issue also be an ominous precursor to its possible “separation” from the Federation? Or will its shrewd and farsighted leaders merely use whatever advantage gained to secure more autonomy (read: freedom) for the state?
Finally, what if Petronas, having exhausted all it's options, decides to pursue legal action, confident that it has always acted within the ambit of the PDA which was enacted in 1974, and which predates the opaque “colonial-era” laws used by Sarawak and the Malaysia Agreement 63 (MA63)?
But more critically, what if the court verdict isn't favourable to the east Malaysian state? Will it be compelled to explore new political alliances - which may entail pulling the plug on Madani?
Main information source: Reuters, CNA, Zaid Ibrahim “X” and The Coverage.
JK Joseph is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
The User Content (as defined on Newswav Terms of Use) above including the views expressed and media (pictures, videos, citations etc) were submitted & posted by the author. Newswav is solely an aggregation platform that hosts the User Content. If you have any questions about the content, copyright or other issues of the work, please contact creator@newswav.com.
