Petros and the Sarawak Gas Dispute

At a negotiating table in Kuala Lumpur, two government-owned energy entities — one Federal, one state — tried to align on who controls the flow of gas in Sarawak. Behind it lay a larger question: which law prevails when state rights and Federal powers collide?

This article describes the background of that dispute descriptively and neutrally. It sets out the facts and the differing positions of each side without endorsing any party.

Who is Petros and what does it claim?

Petroleum Sarawak Berhad (Petros) is an oil and gas company wholly owned by the Sarawak State Government. Through the Distribution of Gas Ordinance 2016 (DGO 2016) — enacted in 2016 and in force on 1 July 2018 — and its amendment, the Distribution of Gas (Amendment) Ordinance 2023, the Sarawak Government appointed Petros as the sole gas aggregator in the state.

As a gas aggregator, Petros acts as the central party that consolidates, manages and sells the gas distributed within Sarawak. According to reports, this aggregator role excludes liquefied natural gas (LNG).

According to the position stated by the Sarawak Government, this appointment is not merely a commercial decision. Sarawak states that it is anchored in its claim to regulate gas distribution within its own state borders, as part of what it characterises as an effort to reclaim state rights under the framework of the Malaysia Agreement 1963 (MA63). This position is one held by the Sarawak side, not an independent assessment by this article.

Why did the dispute with the Federation and Petronas arise?

The core cause of the dispute is a difference in legal interpretation, not a refusal to negotiate. Two legal frameworks collide:

• Petroleum Development Act 1974 (PDA 1974) — the Federal law that is the central pillar of Malaysia’s oil and gas industry. It vests the entire ownership and the exclusive rights, powers and privileges to explore and exploit petroleum resources in Petronas.
• Distribution of Gas Ordinance 2016 (DGO 2016), as amended by the Distribution of Gas (Amendment) Ordinance 2023 — the Sarawak state ordinance that forms the basis for appointing Petros as the in-state gas aggregator.

The Federal Government and Petronas rely on PDA 1974 as the source of national authority over petroleum, including in Sarawak. The Sarawak Government, in turn, relies on the state’s regulatory powers and questions the extent to which PDA 1974 applies. According to The Edge Malaysia, Sarawak also questions the validity of PDA 1974, arguing that the act was passed within the framework of the Emergency Ordinance 1969, which was subsequently repealed in 2011. The same report, along with ISEAS analysis, also notes that Sarawak refers to the Oil Mining Ordinance 1958 to reinforce its position.

In short, the two sides hold two different legal bases for claiming authority over the same matter.

How did events unfold?

The following table summarises the key events as reported:

Period	Development (as reported)
2016	The Distribution of Gas Ordinance 2016 (DGO 2016) is enacted by the Sarawak State Legislative Assembly.
1 July 2018	DGO 2016 comes into force.
2023 – February 2024	The Distribution of Gas (Amendment) Ordinance 2023 — which forms the basis for appointing Petros as gas aggregator — is passed by the Sarawak State Legislative Assembly (reported in February 2024).
1 July 2024	The transition of gas sales from Petronas to Petros is reported to begin, planned to take place over six months.
7 January 2025	Meeting between Prime Minister Anwar Ibrahim and Sarawak Premier Abang Johari Openg.
February 2025	PM Anwar announces that Petros will act as Sarawak’s gas aggregator from 1 March 2025.
1 March 2025	Petros begins to act as Sarawak’s gas aggregator.

According to a statement by the Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said in Parliament — also reported by The Edge Malaysia and DayakDaily — Petronas accepted Petros’s role as Sarawak’s gas aggregator (excluding LNG) and agreed to work with Petros in the state, with Petronas and its subsidiaries not requiring additional licensing to operate in Sarawak beyond the requirements under PDA 1974.

What is each side’s position?

To remain neutral, each side’s position is stated as reported, without assessment:

• Sarawak Government / Petros: Sarawak holds that it is entitled to regulate gas distribution within its state through DGO 2016 and its amendment, in line with what it characterises as an effort to reclaim state rights under MA63. Petros is the state’s sole gas aggregator.
• Federal Government / Petronas: Petronas holds nationwide ownership and exclusive petroleum rights under PDA 1974. Petronas remains the custodian of national petroleum resources, while agreeing to work with Petros in the state gas aggregator role.
• Point of convergence: Both sides agree that Petros will be Sarawak’s gas aggregator (excluding LNG). The remaining differences are reported to revolve more around legal interpretation and commercial details than any unwillingness to negotiate.

Why is this issue sensitive?

This issue touches on matters larger than gas alone. It relates to Federal–state relations, the interpretation of MA63, and the division of powers and revenue from natural resources. For that reason, it is often viewed in the context of the constitution and state rights, rather than as merely an energy matter.

Because of this sensitivity, public reporting emphasises that a resolution is being sought through continued negotiation and mutually agreed legal interpretation, rather than through a single confrontation.

What’s next

This section lists matters that are still developing and worth monitoring from official sources, without making predictions:

• The final details of the commercial agreement between Petronas and Petros, including the scope of gas distribution and the LNG exclusion.
• How PDA 1974 and DGO 2016 (and its amendment) are reconciled in practice, and any mutually agreed legal interpretation.
• Official statements from the Federal Government, the Sarawak Government, Petronas and Petros regarding the implementation status.

Editorial note: This draft was prepared with AI assistance and has not yet undergone human review. The dates of enactment (2016), coming into force (1 July 2018) and amendment (Distribution of Gas (Amendment) Ordinance 2023) are reported by news sources; the official ordinance text and Petros/Petronas statements still need to be cross-verified before publication. The argument concerning the Emergency Ordinance 1969 and its 2011 repeal is reported by The Edge Malaysia and needs to be verified against the Sarawak Government’s official position.