Petronas suit: Sabah lawyers ready to help
KOTA KINABALU: The Sabah Law Society (SLS) is similarly concerned that Petroliam Nasional Berhad (Petronas) is challenging the State Government of Sarawak's claim to regulatory authority in the upstream oil and gas sector.
The SLS understands that one of the central issues is whether the extraction of petroleum resources requires mining leases from the State Government of Sarawak.
It notes that these legal proceedings were commenced by Petronas in response to the Sarawak State Government's recent announcement that all companies operating in the upstream oil and gas sector in Sarawak must obtain additional licences and leases from the State Government in accordance with the Sarawak oil Mining Ordinance 1958.
In response, Petronas is relying on the Petroleum Development Act 1974 (PDA) which states that Petronas is the exclusive regulatory authority of the upstream oil and gas sector throughout Malaysia. The PDA vests Petronas with the entire ownership, rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia.
SLS president Brenndon Keith Soh said the association had sighted a copy of the Notice of Motion filed by Petronas which seeks to obtain leave from the Federal Court to commence proceedings against the State Government of Sarawak pursuant to Article 4(4) of the Federal Constitution (FC) in the exercise of its original jurisdiction under Article 4(3) and 128(1)(a) of the FC by way of a petition for declaratory relief.
In this motion, Petronas is seeking a declaration that by virtue of Article 74(1) read with item 8(j), List I, Ninth Schedule, FC, Parliament has exclusive legislative competence to enact laws pertaining to exploration of petroleum throughout Malaysia and that consequentially the PDA was duly enacted by Parliament. Therefore, by virtue of section 7 of the PDA and regulations 3 and 5 of the Petroleum Regulations 1974 and the Order dated 28.11.1980 made under section 7A of the PDA, the Chairman and Chief Executive of Petronas have exclusive regulatory authority over all upstream activity. In addition, Petronas is seeking a further declaration that the Sarawak Mining Ordinance 1958 was impliedly repealed by the PDA.
Brenndon said it is common knowledge that Sabah is the major producer of the nation's oil production. Any interpretation of the PDA by the judiciary will be a binding precedent and could have far reaching consequences for the State of Sabah.
According to him, several matters which are likely to be canvassed before the court will include the legality of the intention of the State to issue mining permits and licences (which are State matters under item 2 (c) of the State List), provisions of the FC in relation to royalty from petroleum and may also include the validity of the Territorial Sea Act 2012 which purports to limit the territorial sea of Sabah to three nautical miles, among others.
In relation to the above, he said the SLS stands guided by the State Attorney General of Sabah who is constitutionally mandated to advise the State Government of Sabah on all legal matters involving the State.
In the event that the State Government of Sabah is minded to intervene in the proceedings launched by Petronas against the State Government of Sarawak, he said the SLS affirms its commitment to be ready and willing to assist.
“In this respect, the SLS is prepared to form a special committee of legal practitioners who are familiar with the legal issues involved to further strengthen Sabah's legal position in this matter,” he said in a statement yesterday.
Petronas is seeking legal redress to its oil and gas rights in Sarawak.
The suit comes two months after the Sarawak government announced that a new regulatory framework over the oil and gas industry would come into force effective July 1.
When the regulatory framework, which is also applicable to Petronas, comes into force, actions and penalties will be taken against any person or company including its contractors, sub-contractors and vendors operating in Sarawak without licences issued by Sarawak government.
The Sarawak government has confirmed that it has been made a party in the suit brought by the national oil corporation and the application for leave made under Article 4(4) of the Federal Constitution would be heard in Putrajaya on June 12.
Petronas said it had filed an application before the Federal Court seeking for a declaration on the Petroleum Development Act 1974 (PDA 1974), being the law applicable for the petroleum industry in Malaysia.
It is seeking to clarify that under the law, it is the exclusive owner of the petroleum resources as well as the regulator of the upstream industry throughout Malaysia, including in Sarawak.