Petronas using PDA as red herring, says activist

Zainnal Ajamain urges Sabah and Sarawak to seek international arbitration if the Federal Court rules in favour of the oil firm.

National oil firm Petronas is seeking a court declaration that it is the only regulator of upstream activities in the oil and gas industry. (Bernama pic)

PETALING JAYA: An activist for Sabah and Sarawak rights foresees Petronas’ role being reduced to that of a mere contractor if it fails in its bid to secure a Federal Court declaration that it is the exclusive owner of petroleum resources in the country.

Zainnal Ajamain, who has published books dealing with the Malaysia Agreement 1963 (MA63), said he believed Petronas would lose its case if pertinent laws were considered.

“Then Sabah and Sarawak, which together produce an estimated 60% of oil in Malaysia, will have a big say in their resources and Petronas will be reduced to the role of a contractor like Shell or Exxon Mobil,” he told FMT.

Should the court decide in favour of the company, he added, “then Sarawak and Sabah must drag Petronas and Putrajaya to an international arbitration court, though this will be bad for relations between West Malaysia and Sabah and Sarawak.”

The Petronas suit, which was filed on June 4, cites the Petroleum Development Act (PDA) 1974. The suit also seeks a declaration that the company is the only regulator of upstream activities in the oil and gas industry nationwide, including Sarawak.

Zainnal said Sarawak had a solid case for the defence of its oil rights. He described the PDA as “just a red herring” serving to legitimise Petronas’ claim to resources “it does not rightfully own”.

The PDA was enacted during a state of emergency, which has since ended, and it was under the emergency that state jurisdictions were limited to three nautical miles.

The National Operations Council, the regime in power during the emergency, gazetted the Petroleum Mining Act and Continental Shelf Act, both enacted in 1966, to be enforceable in Sabah and Sarawak, but Zainnal pointed out that the legislative assemblies of the two states had never passed the laws, “as required for them to be enforced”.

“The emergency declared following the May 13 riots effectively meant the suspension of Parliament, the Sabah and Sarawak state assemblies and MA63,” he said.

“So when the PDA was enacted in 1974, the federal government gave Petronas ownership of resources outside three nautical miles off Sabah and Sarawak based on the fact that the two states’ jurisdiction was limited to three nautical miles due to the emergency.

“Essentially, without the state of emergency, the federal government couldn’t enforce the Petroleum Mining Act and Continental Shelf Act without the consent of the state assemblies.”

He argued that the two states regained their jurisdiction over areas beyond three nautical miles when former prime minister Najib Razak lifted the state of emergency on Nov 24, 2011.

“As a result, the Petroleum Mining Act and Continental Shelf Act, which are the bases of Petronas’ claim of resources as per the PDA, are now void.

“Ultimately, this means that neither the federal government nor Parliament is in any position to allow Petronas to extract resources from waters within Sabah’s and Sarawak’s jurisdiction without their state assemblies’ approval.”

Zainnal also urged the Sabah government to hold a watching brief in the Petronas suit.

“If the federal court rules in favour of Sarawak, then it means the ownership of oil and gas resources are, undoubtedly and legally, fully owned by the state,” he said. “The same goes for Sabah.” -FMT