Sabah-Petronas partnership in state’s best interests, says minister

 Sabah and Sarawak affairs minister Mustapha Sakmud calls for the national oil and gas industry to be protected, even as Sarawak charts its own course.

Mustapha Sakmud says the partnership model struck between the Sabah government and Petronas represents a deliberate choice of building from within the federal framework rather than around it.

KUALA LUMPUR:

 Sabah respects the different path Sarawak has taken over oil and gas resources but has chosen to collaborate with Petronas in the state’s own best interests, says Sabah and Sarawak affairs minister Mustapha Sakmud.

In an exclusive interview with FMT, Mustapha acknowledged that the two East Malaysian states have adopted vastly different approaches to the matter.

“Sabah’s approach is a joint venture with Petronas,” he said, highlighting the commercial collaboration agreement struck by chief minister Hajiji Noor’s state administration with the national oil and gas company in December 2021.

Mustapha said Sabah’s was a “subtle, gentle” approach which prioritised “mutual interests”.

Acknowledging that revenue growth under its approach may be more gradual than owning the entire supply chain, Mustapha said it was an appropriate model given Sabah’s current stage of capacity-building.

With the state still closing an infrastructure gap, the minister said the partnership model represented a deliberate choice of building from within the federal framework rather than around it.

Mustapha insisted that Sarawak has every right to take a different path.

In February, Sarawak filed a petition challenging the constitutional validity and applicability of three federal laws to the state: the Petroleum Development Act 1974 (PDA), the Continental Shelf Act 1966, and Petroleum Mining Act 1966.

“We respect the Sarawak state government’s petition to gain clarity, and will let the courts decide,” he said.

Mustapha said Sarawak’s views should be respected, as it likely believes it has the capacity to chart its own path. He noted that Sarawak has had longer exposure in the oil and gas sector, with established local contractors and talent.

He also said the decision of both Petronas and the Sarawak government to turn to the courts to resolve their differences over the PDA and related federal and state laws was a positive development.

“One thing I hold to is etiquette around managing different opinions,” said Mustapha.

“If our intention is to seek truth, and we respect both the federal and state constitutions, then it is positive when the court is asked to interpret the laws.”

He said clarity was crucial to ensure Petronas and Sarawak’s state-owned oil and gas entity, Petros, are not left stuck in legal uncertainty, warning that prolonged ambiguity could erode investor confidence in the national oil company.

“We especially don’t want Petronas compromised by such issues,” he said, noting that the national oil company has investments worldwide and a global reputation to safeguard.

What’s important is that Malaysia’s oil and gas industry must remain strong, said Mustapha.

“We can’t sacrifice Petronas. It’s already a globally recognised company, and we don’t want Petronas to be harmed.

“We want the national oil and gas industry to grow stronger.”

Mustapha warned that any weakening of Petronas would reduce oil and gas revenues, which Malaysia remains heavily reliant on.

“When Petronas is harmed, our national oil and gas revenue is reduced.”

He said it was important to bear in mind that Petronas has been in existence for more than 50 years, and has created a host of jobs nationwide, particularly in Sabah and Sarawak.

Mustapha warned instability could damage future talent development and Malaysia’s energy transition plans.

“We don’t want these issues to harm the national oil and gas industry’s future, or undermine job opportunities especially for the future generations,” he said. - FMT