Sarawak, the biggest state in oil and gas producer Malaysia, is set to take control of its natural gas assets as the state on the Borneo island is now looking for more autonomy from the federal government.
The state of Sarawak has long sought more royalties from the government of Malaysia and the government-controlled oil giant Petronas. However, Sarawak hasn't had much success in this, until the election in 2022, which now makes the federal government coalition dependent on the support of Sarawak Premier Abang Johari Openg.
Petroleum Sarawak Berhad (PETROS), the oil firm of the Sarawak state, signed last week its first gas sale agreements, Bloomberg reported on Wednesday.
PETROS is now beginning to take over control of Sarawak's natural gas distribution network, which is currently in the hands of Petronas.
For its part, Petronas seeks more time in the takeover of control and wants to first discuss and agree on gas supply deals with Sarawak as it operates large LNG plants in the state.
"We said we respect their concern because we have equity in the LNG plants," Abang Johari Openg, Sarawak Premier, was cited as saying by the News Straits Times newspaper earlier this week.
"The discussions must be finalized by October 1, otherwise, we will go ahead with the arrangement," the Sarawak Premier added.
The concessions that Petronas, wholly owned by the federal government, will make in the gas agreements could lead to additional discussions with the state of Sarawak regarding revenue sharing from oil and gas production and sales, control over operations, and regulatory supervision, analysts told Bloomberg.
It is uncertain how the new arrangements with the state of Sarawak would impact the revenues and earnings of Petronas, one of the world's largest national oil companies (NOCs).
Petronas's standalone credit profile (SCP) is stronger than that of its shareholder, the government of Malaysia. The SCP reflects the company's integrated oil and gas operations, large scale, and very strong financial profile with a net cash position, Fitch Ratings said earlier this year.
By Charles Kennedy for Oilprice.com
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