Kuching High Court rules Petronas’ RM7.95 mln bank guarantee demand on Petros valid (Video)

KUCHING (Feb 25): The High Court here has ruled that Petroliam Nasional Berhad’s (Petronas) demand for a bank guarantee of RM7.95 million from Petroleum Sarawak Berhad (Petros) was valid.

Judge Datuk Faridz Gohim Abdullah held that Petros had failed to prove that the call on the bank guarantee was either unconscionable or unlawful.

On constitutional issues, he explained that these matters fell outside the scope of Petros’ originating summons.

Faridz Gohim said questions concerning the constitutionality of the two laws — the Petroleum Development Act 1974 (a federal law) and the Distribution of Gas Ordinance 2016 (a Sarawak law) — should be determined by the Federal Court.

The court dismissed Petros’ originating summons with costs of RM50,000 payable to Petronas.

Petronas had called on the bank guarantee after Petros refused to pay for gas supplied in August 2024, arguing that Petronas had no valid licence under the Distribution of Gas Ordinance 2016 (DGO 2016) to supply gas in Sarawak.

Subsequently, Petros sought a court declaration that Petronas’ call on the RM7.95 million bank guarantee was unconscionable, null and void.

Petronas was represented by lead counsel Datuk Cyrus Das, assisted by counsels Khoo Guan Huat and Alex Ngu, while Petros and the Sarawak government were represented by counsel Tan Sri Cecil Abraham and State Legal Counsel Dato Sri JC Fong, respectively.

The federal government was represented by Senior Federal Counsel Ahmad Hanir Hambaly.

When met after the proceeding today, Cyrus said Petronas will be applying for leave on March 16 to refer the constitutional questions to the Federal Court, and the application is expected to be opposed.

He added that the Sarawak government has also filed its own petition, and both matters will have to be addressed by the apex court.

In short, he said the constitutional validity of the Petroleum Development Act 1974 (PDA74) and the DGO 2016) will ultimately be decided by the Federal Court.

“Insofar as the constitutional issues are concerned, the judge also decided that they are matters that fell outside the scope of the OS (originating summons) and that the proper forum for it to be decided on the constitutionality of the two rival laws, so to speak — the PDA74, which is federal law, and the DGO 2016, which is Sarawak law — should be done in the Federal Court.”

On Jan 12, Petronas filed a motion in Putrajaya seeking the Federal Court’s determination on the legal position applicable to its operations in Sarawak to ensure compliance with relevant laws and good governance practices.

The Federal Court in Kuala Lumpur then fixed March 16, to decide whether Petronas should be granted leave to seek clarity on the regulatory framework governing its operations in Sarawak.

The Sarawak government has also filed a petition in the Federal Court seeking a determination on the constitutional validity and continued applicability of several federal petroleum laws to the state.

Deputy Minister in the Premier’s Department (Law, MA63 and State-Federal Relations) Datuk Sharifah Hasidah Sayeed Aman Ghazali said the petition was filed to determine the constitutional validity and continued applicability of the Petroleum Development Act 1974, Continental Shelf Act 1966, and Petroleum Mining Act 1966 to Sarawak.

She said the federal Acts adversely affect and deprive Sarawak of its rights to natural resources, including oil and gas, found in the seabed of the continental shelf within the boundaries as extended and defined by the Sarawak (Alteration of Boundaries) Order in Council 1954 and the Sarawak (Definition of Boundaries) Order in Council 1958.

When contacted, Fong said the state will issue a press statement later regarding the High Court’s decision.

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