Win-win for Petronas, Petros must pass commercial test

KUALA LUMPUR, Oct 9 — A Petronas-Petros settlement cannot credibly be described as “win-win” if the commercial consequences for one side are treated as irrelevant, one analyst says.

Samirul Ariff Othman from Global Asia Consulting was responding to Sarawak senator Datuk Ahmad Ibrahim’s statement that commercial considerations involving Petronas cannot override Sarawak’s constitutional rights. Ahmad was rebutting former law minister Datuk Zaid Ibrahim, who warned that Petronas could lose billions in business if Petros assumes a larger role in Sarawak’s gas sector.

Samirul said the latest argument also had to be read against the framework agreed by the federal and Sarawak governments in May last year.

Under the May 21, 2025 Joint Declaration signed by Prime Minister Datuk Seri Anwar Ibrahim and Sarawak Premier Tan Sri Abang Johari Openg, Petros was recognised as Sarawak’s gas aggregator, but it also recognises Petronas’ continued aggregator role and affirms Petronas’s continuing responsibilities under the 1974 Petroleum Development Act. The declaration further provided that Petronas’s existing arrangements with third parties for LNG would remain unaffected.

Abang Johari subsequently described the arrangement as a “win-win” for Petros and Petronas, saying it preserved Petronas’s existing role while recognising Petros as gas aggregator.

Samirul said this made it difficult to argue now that Petronas’s commercial position was irrelevant to the eventual arrangement.

“The May declaration was not simply an acknowledgement of Petros’s role. It was a balance. Petros was recognised as one of the aggregators, but Petronas’s existing business and responsibilities were also expressly preserved.”

“Saying commercial considerations cannot override rights is not the same as saying commercial considerations do not matter. But it is still moving away from the logic of the very agreement that was described as win-win.”

“This was agreed upon by both the federal and Sarawak governments. You cannot ignore the parts intended to protect Petronas’s existing commercial position.”

Court has not settled rights

Samirul said Ahmad’s argument assumed a legal position that had yet to be settled.

“If Sarawak has a legal right, then of course that right does not disappear simply because another party will bear commercial costs.”

“But what exactly are Sarawak’s rights now? That is precisely the issue still before the courts. You cannot say Sarawak is entitled to a particular outcome because of the law when the scope of that entitlement has not yet been decided.”

The Federal Court is set to hear the case in January 2027, with Samirul adding that all parties should allow that process to run its course.

“The proper thing is to let the court decide what the law actually requires. Until then, both sides are advancing legal claims. Neither side can treat its own interpretation as though it is already the settled legal position.”

What could a ‘win-win’ model look like?

In the spirit of the May 2025 framework, Samirul said one possible commercial model would be for Sarawak to take a larger role not only in the returns from the petroleum industry, but also in the investment and risks involved in creating that value.

Samirul said this could take the form of greater equity participation, co-investment, joint ventures and infrastructure ownership.

“Greater control should normally be accompanied by greater responsibility. Greater return should normally be accompanied by greater exposure to risk. This is what it means to do business.”

He said this would allow both sides to share the gains when projects succeed as well as the risks when they do not. Petronas and Petros had already shown that such cooperation was possible, including through potential gas development in the Lundu-Balingian area.

“The broader principle is that participation, investment, risk and reward can be shared rather than treated as mutually exclusive.”

“This converts the relationship from dividing rents into jointly creating value.”

Samirul said this was particularly important because Petronas still carries wider responsibilities, including upstream investment, maintaining production, LNG commitments and national energy security.

“If Petronas remains responsible for those functions, it must retain sufficient commercial authority and economic return to perform them. Petronas can perform several of these roles simultaneously. But it cannot do so without limits.”

Samirul said the challenge was therefore to enable Sarawak’s larger role without undermining Petronas’s ability to continue carrying its wider responsibilities. The ongoing dispute should also not be treated as a choice between a stronger Sarawak petroleum industry and a strong Petronas.

“A settlement that weakens either side would be a poor bargain. The real question is whether the eventual arrangement keeps control, capital, risk and returns aligned. Once those four become separated, the business model starts to weaken.”