KUCHING, Jan 21 — Five subsidiaries of Petroliam Nasional Berhad (Petronas) are jointly seeking leave from the Kuching High Court to apply for a judicial review against the imposition of penalties totalling RM120 million by the Sarawak Gas Distribution Director and Sarawak Minister of Utilities and Telecommunications, Datuk Seri Julaihi Narawi.

The judicial review applicants appeared before Judge Dean Wayne Daly today for the first hearing of the leave application.

Malaysia LNG Sdn Bhd, Malaysia LNG Dua Sdn Bhd, Malaysia LNG Tiga Sdn Bhd, Petronas Carigali Sdn Bhd and Petronas LNG 9 Sdn Bhd had been penalised for failing to apply for licences to operate in Sarawak, a requirement under Section 7 of the Distribution of Gas Ordinance (DGO) 2016.

By virtue of Section 21A of the DGO 2016, the maximum penalty is RM20 million per case. However, the five subsidiaries were issued eight notices for failing to apply for licences, with penalties of RM15 million each imposed against them.

The applicants’ legal team, comprising lawyers Khoo Guan Huat and Alex Ngu Sze Shae, argued today that the DGO 2016 does not apply to the subsidiaries’ operations.

The respondents were represented by State Legal Counsel Datuk Seri JC Fong and State Senior Counsel Mohd Adzrul Adzlan from the State Attorney General’s Chambers.

Senior Federal Counsel Ahmad Hanir Hambaly appeared for the Federal Attorney-General’s Chambers.

Judge Dean Wayne fixed February 3 for his decision.

During the proceeding, Khoo argued that the financial penalties were ultra vires the DGO 2016, and that the Sarawak State Legislature (DUN) had exceeded powers conferred by the Borneo State (Legislative Powers) Order 1963 by requiring licences for the treatment, processing, separation, and transportation of gas, as well as the building and maintenance of gas pipelines.

He also contended that the companies, being subsidiaries and operating arms of Petronas, should be regulated under the Petroleum Development Act 1974 (PDA74), a federal law, rather than the state-level DGO 2016.

Ahmad Hanir told the court he had no objection to granting the leave application, while Fong argued that the subsidiaries had not shown an arguable case to proceed with judicial review.

Fong emphasised that a subsidiary is a distinct legal entity from its parent company.

“Therefore, what is conferred by PDA74 on Petronas, like the business doing marketing and distribution of petroleum without permission of the Prime Minister under Section 6, does not apply to Petronas’ subsidiaries, who must follow the State laws on supply and distribution of gas.

“They need to be licensed under DGO,” he said.

He explained that under Article 95C(3), the legislative power over “distribution of gas” granted to the DUN by the Borneo States (Legislative Powers) Order 1963 places it on the Concurrent List of the Ninth Schedule of the Federal Constitution, allowing the state to regulate distribution activities.

Citing the federal Court decision in Gin Poh Holdings Sdn Bhd v Government of Penang, Fong argued that the scope of “distribution of gas” includes all ancillary activities such as processing, separation, treatment, supply, transportation, pipeline maintenance, and licensing.

“The evidence shows that Petronas’ subsidiaries are involved in these activities without a licence.

“The financial penalties are legally imposed and the Applicants have no arguable case to have the financial penalties quashed. All the Applications for leave should be dismissed,” he said.

Fong further submitted that even if leave were granted, the court should not stay enforcement of the penalties, noting that the applicants had not demonstrated any special circumstances.

He added that if the court ultimately rules in favour of the subsidiaries, the government could refund any monies paid.

Khoo requested an interim stay of the penalties pending the Feb 3 decision, but Judge Wayne denied the request.

The five subsidiaries had also applied for a certiorari order to quash the Notices of Financial Penalty, each requiring payment of RM15 million for operating without the required licence under Section 7 of the DGO 2016. — The Borneo Post