Malaysia: Petronas Seeks Separate Hearing as Sarawak Expands Legal Fight

What happened: Petronas wants its Federal Court petition heard separately after Sarawak sought to amend its own petition in the long-running dispute over gas rights.

Why it matters: Sarawak’s amendments sharpen the challenge to the PDA 1974, escalating a regulatory conflict into a constitutional battle that risks undermining Petronas’ legal authority.

What happens next: The next major signpost is 28 August, but political timelines point towards further delay.

There's yet another twist in the Petronas-Sarawak gas fight: Petronas wants its Federal Court petition heard separately from Sarawak’s petition, a change from its earlier position.

After Sarawak filed its own petition, the NOC initially wanted both cases heard together. As both involved overlapping questions over oil and gas authority in Sarawak, one bench hearing them together made sense because it avoided different verdicts on related points.

So, what changed? Well, Sarawak amended its petition in response to Petronas' request to combine the cases; this seems to have changed the nature of the fight.

Sarawak Widens the Question

Petronas’ January petition was framed narrowly — it wanted clarification on the legal and regulatory framework governing its operations in Sarawak. Then, in February, Sarawak filed its own petition, questioning the constitutional validity and the application of three federal laws to Sarawak: the Petroleum Development Act (PDA) 1974, the Continental Shelf Act (CSA) 1966, and the Petroleum Mining Act (PMA) 1966.

At the crux of the dispute is the PDA 1974, the federal law that underpins Petronas’ national authority, while Sarawak argues Petronas still has to obey state laws, particularly the Distribution of Gas Ordinance (DGO) 2016. But by adding CSA 1966 and PMA 1966 to its February petition, Sarawak effectively expanded what began as a dispute over gas distribution into an argument over who controls offshore petroleum exploration and production.

Sarawak’s amended petition now asks the court to consider a more foundational question: whether Parliament could vest Sarawak’s petroleum in Petronas at all. Sarawak’s argument is that petroleum is tied to land and mining powers reserved to the state. Under the Federal Constitution, if Parliament wanted to legislate on those state matters, it would require a request from the Sarawak State Legislative Assembly, which Sarawak says never occurred.

PDA In the Crosshairs

This sharpens the attack against PDA 1974 and escalates the tussle from a regulatory conflict — which law applies to Petronas in Sarawak, the federal PDA 1974 or the state DGO 2016 — to a constitutional battle over whether Parliament should have been allowed to enact PDA 1974 at all.

If this issue is framed only as a conflict between federal and state law, Petronas could rely on the principle that federal law prevails over conflicting state law. But Sarawak is now making a more ambitious argument — one that could dismantle the law that established Petronas and gives it legal authority.

This is why the NOC would now prefer separate hearings (it filed this request on 28 May, but the media only caught wind of it last week). Petronas wants its own case to stay focused on whether Sarawak’s laws can restrict its operations. It doesn't want that case merged into Sarawak’s broader argument that the PDA itself was constitutionally defective.

Sabah Enters Side Door

There is a further wrinkle: Sabah Action Body Advocating Rights, or Sabar, has applied to participate in Sarawak’s petition for the court to also consider overlapping Sabah-related issues with the CSA 1966 and PMA 1966, although it does not question the validity of PDA 1974.

Petronas has objected to Sabar's intervention, which is procedurally weaker because it's an NGO and not a direct party to the dispute. But it shows how the Petronas-Sarawak battle could easily become a wider issue about Borneo rights. The federal-friendly stance of the Hajiji Noor administration notwithstanding, any verdict in favor of Sarawak will be a legal precedent for Sabah to press its own claims.

Commercial Cases Wait Behind

All this legal uncertainty directly affects commercial disputes also undergoing legal proceedings. The Petros bank guarantee case goes to the Court of Appeal, with case management fixed for 22 June. Meanwhile, the Shell MDS payment dispute has been delayed pending Petronas' petition — it is effectively parked behind the Federal Court process.

The next major signpost is 28 August, when the Federal Court is scheduled to hear Sabar’s application to intervene, Petronas’ objection to Sabar’s intervention, and Sarawak’s application to amend its petition.

Politics Points to Delay

The timing is politically awkward as the election season is now upon us. Johor will vote on 11 July and Negeri Sembilan on 1 August. Sarawak's state election is due by 2027, but Premier Abang Johari is widely expected to call it earlier. The next general election is not due until early 2028, but Prime Minister Anwar Ibrahim could call a snap election as early as October, depending on how the Johor and Negeri Sembilan polls turn out.

This suggests a Federal Court verdict is not coming soon. As it stands, there is little incentive for Anwar to have a clear legal decision or political settlement. As his second-term prospects continue to dwindle, the PM can hardly afford to alienate Abang Johari's GPS before a general election. But it would also be disastrous if he presides over a court decision or settlement that concedes Petronas' authority and revenue in Sarawak.