KUCHING, Nov 18 — The High Court will decide on January 30, 2026 whether to grant Petroleum Sarawak Bhd (Petros) a declaration on its claim that Petroliam Nasional Bhd’s (Petronas) call on a RM7.95 million bank guarantee is unconscionable, null and void.

During the proceedings today, Judge Datuk Faridz Gohim Abdullah said he will deliver the judgment.

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

During proceedings, the court allowed Petronas and the federal government, represented by Dato Cyrus Das and the Senior Federal Counsel (SFC), to file additional submissions by this Nov 28.

Petros and the Sarawak government were also permitted to provide a final reply by this December 14.

Speaking on behalf of the Sarawak government, State Legal Counsel Dato Sri JC Fong highlighted Petronas’ alleged unconscionable conduct.

He said Petronas had refused to comply with a valid state law, the DGO, despite agreeing under the Sarawak Gas Sales Agreement (SGSA) to follow all written laws; prevented other licensed upstream gas producers, such as Petroleum Sarawak Exploration and Production Sdn Bhd, from selling gas to Petros; and continued to deliver gas to Petros after the SGSA had become frustrated, in contravention of the DGO.

Fong emphasised that such actions undermined the DGO, which was enacted under Article 95C of the Federal Constitution based on the Inter-Governmental Committee (IGC) Report, and stressed that the Sarawak government has a duty to ensure compliance with laws passed for the benefit of the people.

“The refusal by Petronas to comply with the licensing requirements of the DGO is unconscionable conduct and totally unacceptable,” he said.

He added that the Sarawak government supports Petros’ claim that Petronas’ call on the bank guarantee was unlawful.

He further argued that once unconscionable conduct is established, it renders the guarantee call invalid, regardless of whether it is “on demand guarantee” or “conditional or unconditional guarantee”.

Petros’ lead counsel Tan Sri Cecil Abraham submitted that the DGO, including its 2023 amendments, was within the legislative competence of the Sarawak Legislature.

He refuted Petronas’ claim that Petros was launching a collateral attack on the validity and constitutionality of the Petroleum Development Act 1974 (PDA).

Cecil argued that the PDA does not exempt Petronas from complying with state laws like the DGO.

He also noted that after the Gas Supply Act 1993 (GSA) was passed — applicable only to Peninsular Malaysia — any inconsistencies between the PDA and GSA must defer to the GSA.

“If Petronas has to be licensed under section 11 of GSA to supply gas in Peninsular Malaysia, despite the PDA, how can Petronas maintain that it has a more privileged position in Sarawak, that it does need a license in Sarawak?” he argued.

He concluded that Petronas must obtain a license under the DGO to lawfully distribute gas in Sarawak.

After the proceedings, Cyrus confirmed the court has fixed January 30 next year for its decision, and noted that both parties have been directed to file a short written note, not exceeding 10 pages, before the judgment.

“Today you have heard the submissions from the plaintiff, followed by the State Legal Counsel and thereafter counsel for Petros. That concludes the arguments,” he said, reiterating Petros’ position that the DGO is valid and the demand on the bank guarantee was invalid.

“Our case is straightforward: the amounts were owing, there was a regular request for supply, the supply was provided, and payment must follow. That is the core of the dispute,” he added.

Meanwhile, when met, Fong said that the extension accommodates the opposing party’s request to file additional written arguments.

“They want to put in further arguments in writing, and we will be responding on January 14, 2026,” he said. — The Borneo Post