A YEAR after Sarawak undertook regulatory rights over its oil and gas activities, the state has yet to make headway on exercising full regulation and previous business processes are still in place, said sources.

The state began regulating its oil and gas industry in accordance with the Sarawak Oil Mining Ordinance 1958 and other relevant regulations on July 1 last year.

Oil and gas players, including Petronas, are required to apply for licences, permits, leases and approvals to undertake downstream and upstream activities in Sarawak.

State-owned oil company Petroleum Sarawak Bhd (Petros) was set up in March last year with a mandate to regulate the state’s oil and gas activities.

Prior to that, Petronas, in its capacity as the national oil company, was in charge of regulatory activities.

Oil and gas companies have been given a grace period until the year-end to carry out business as usual, while also working to comply with Sarawak’s new regulations.

Industry sources told The Malaysian Insight that the old permits and licences still stand and Petros has yet to start issuing its own.

They said the firm’s direction forward remains sketchy, with few details available.

“There has been no news so far (on Petros’ direction and progress). Perhaps, this is due to the unsuccessful bid to amend the Malaysia Agreement 1963 during the last parliamentary session,” said a source.

A Petros spokesman said Sarawak’s oil and gas industry is undergoing a transition period, without commenting further.

To recap, Sarawak officially started exercising regulation over its oil and gas industry after a legal tussle with Petronas concerning such rights in the state.

In June last year, Petronas filed an application for leave at the Federal Court to commence proceedings against Sarawak over regulatory rights. It also sought a declaration that it is the sole authority and exclusive owner of Malaysia’s oil and gas resources, based on the Petroleum Development Act 1974.

The application was struck out by the apex court on June 22.

Following Sarawak’s enforcement of regulatory rights, companies operating in the state, including Petronas, are required to comply with state laws on the exploration, prospecting and mining of petroleum and natural gas, as well as the distribution of gas within Sarawak.

Companies have to submit applications for licences to the state Minerals Management Authority through Petros.

Chief Minister Abang Johari Openg has said Sarawak won’t compromise on its regulatory rights over oil and gas activities.

He said the Oil Mining Ordinance has been amended to further strengthen the state’s regulatory rights over oil and gas in its territory.

“I would like to assure you once again that we will not compromise on the issue of Sarawak oil and gas. The resources are ours, and the ordinance gives us full control over them in our state.”

The issue of Sarawak’s right to its oil resources has long been contentious, with the state demanding more than the 5% in oil and gas royalties it receives from the federal government each year.

Pakatan Harapan, in its 14th general election manifesto, promised to increase the rate to 20%. – June 25, 2019.