KUCHING: State Legal Counsel Dato Sri JC Fong, told the High Court yesterday that by the Borneo States (Legislative Powers) Order, 1963, the legislative authority of Sarawak was extended to include Electricity and Distribution of Gas.

He was submitting before Judicial Commissioner, Dato’ Faridz Gohim Abdullah who was hearing the case brought by Petroleum Sarawak Berhad (Petros) against Petronas to challenge Petronas’ call on a Bank Guarantee for RM7.95 million.

Appearing on behalf of the Sarawak Government, Dato Sri Fong said the Order made under Article 95C (1) of the Federal Constitution means that by virtue of Article 76A (3) of Federal Constitution, distribution of gas is deemed a subject matter in the Concurrent List, whereby both Parliament and Sarawak State Legislature can make laws.

However, Parliament had always respected and had not encroached on Sarawak’ rights to legislate on Electricity and Distribution of Gas.

“Therefore, the following laws passed by Parliament are not made applicable to Sarawak, namely, the Electricity Supply Act, 1990, the Gas Supply Act, 1990, the Energy Commission Act, 2001 and the Energy Efficiency and Conservation Act, 2004,” said Dato Sri Fong when contacted by UKAS on Thursday.

Dato Sri Fong had told the Court yesterday that to ensure that the State has full legislative and executive control of Distribution of Gas in Sarawak, the Notification of Exemption (Amendment) 2021 signed by the then Prime Minister was gazetted to exempt the business of marketing and distribution of natural gas and liquefied petroleum gas from the requirement of Section 6(1) and (3) of Petroleum Development Act, 1974 (PDA) to secure the permission of the Prime Minister.

As federal laws on distribution of gas do not apply to Sarawak, the Dewan Undangan Negeri decided, to fill the vacuum by passing the Distribution of Gas Ordinance 2016 (DGO) to regulate the business of gas supply and distribution in Sarawak and appoint its own gas aggregator.

Dato Sri Fong argued that the DGO and the appointment of gas aggregator cannot be inconsistent with section 6(1) and (3) of PDA as Sarawak is exempted from these sections.

The DGO is a valid law, never invalidate by any Court in Malaysia and enjoys the presumption of constitutionality.
Petronas had agreed under Article 24.2 of the Sarawak Gas Supply Agreement (SGSA) it entered into with PETROS that both Parties shall not exercise and right conferred by the Agreement in contravention of any written laws for the time being in force in Malaysia.

Petronas must not be allowed to breach its own agreement to comply with the DGO by refusing to obtain a license under DGO to distribute gas in Sarawak.

Fong informed the Court that Petronas’ mode of performance of the SGSA, by supplying gas to Petros without a license issued under the DGO has rendered that agreement illegal and unenforceable.

The call on the Bank Guarantee to obtain payment of gas supplied in contravention of section 7 of the DGO is unconscionable.
He said if the declaration sought by Petros to declare the call on the Bank Guarantee is not granted by the Court, Petronas would retain the guaranteed sum of RM7.95 mln received from the guarantor bank, Maybank Islamic Berhad, be unjustly enriched by getting payment through illegal supplying of gas to Petros. Petros would suffer grave injustice.

Petronas had prevented Petros from getting supplies of gas from the licensed upstream gas produces and sell to its customers in Sarawak so as to discharge its statutory functions as gas aggregator.

Petros will pay for the Gas to the upstream gas producers and supplies and not to Petronas.

“The grant of the declaration that the call on the bank guarantee is unconscionable and unlawful is needed for justice to be done to Petros and to prevent Petronas from undermining Sarawak’s executive authority over gas distribution and further to ensure respect for and compliance with State laws by all persons doing oil and gas in Sarawak as stated in para 1.1 of the Joint Declaration signed by the Prime Minister and Premier of Sarawak on 21 May, 2025,” added Dato Sri Fong.
Hearing will resume on August 25 and 26. -UKASnews