KUALA LUMPUR, Sept 13 — Sarawak’s push to gain greater control over its natural gas resources is gathering pace, with the state seeking a larger role in how the resource is managed — a move analysts say could reshape Malaysia’s energy landscape.
The state government is seeking revised terms with national oil company Petronas to increase gas allocated for domestic use and to expand its role in the sector.
Analysts said the outcome will likely depend on how any eventual arrangement between Petronas and state-owned Petros is structured, noting that cooperation and careful planning would be key to avoiding risks to national stability.
Mounting demands, rising tensions
Sarawak has long argued it deserves a bigger share of the gas produced off its shores as part of its broader drive for economic autonomy.
“Sixty per cent of Malaysia’s gas lies off Sarawak’s shores, yet the state retains only a small share for its own use. About 94 per cent is exported as LNG, leaving just six per cent for domestic consumption,” oil and gas analyst Jamil Ghani said.
He cautioned that without involvement in gas aggregation, the imbalance would likely continue and constrain Sarawak’s downstream industrial plans.
Still, he stressed that collaboration must take precedence, noting the energy sector is not a zero-sum game and that both the state and nation could lose if the system fractures under competing pressures.
One of Sarawak’s central proposals is for Petros to be made the sole gas aggregator — buying from upstream producers and reselling to downstream buyers — effectively giving the state pricing power and policy influence over its gas supply.
“This would allow Petros to buy gas upstream at lower prices and sell it downstream at higher margins,” Jamil said.
“But LNG contracts are locked in. This could cause Petronas to lose heavily while still honouring long-term export commitments.”
Some analysts suggest a middle path: a shared model where Petros handles domestic pricing and distribution, while Petronas retains control over upstream production and LNG exports.
This, they said, could give Sarawak more say in the sector without jeopardising national energy stability.
Sarawak is also pushing for a fixed RM10 billion annual payout and a threefold increase in gas supply — from the current 450 million to 1.2 billion standard cubic feet per day — proposals that have sparked debate over their feasibility.
Petronas’s ability to deliver such payouts would depend on aggregator margins, which fluctuate with market prices and demand.
“No energy company can commit to fixed payouts on variable income,” former law minister Zaid Ibrahim wrote on X, warning that such a model could risk bankrupting Petronas.
Jamil added that Sarawak’s request for more gas supply should be matched with binding supply agreements to ensure real demand exists.
“Demand must lead supply, not the other way around,” he said, suggesting payouts should be tied to actual performance rather than projections.
Legal complexities and a way forward
Sarawak has also asked for Petronas to seek exemptions from the state’s Distribution of Gas Ordinance 2016 for its operations there.
However, the federal Petroleum Development Act 1974 (PDA) gives Petronas ownership and regulatory authority over all petroleum resources in Malaysia.
Last month, Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said reminded Parliament that the PDA remains the backbone of the national petroleum framework, warning that overriding it could result in overlapping jurisdictions and investor uncertainty.
“What needs to be codified is the primacy of the PDA and a return to investor-friendly policies,” Jamil said.
“No business should be left hostage to the weaponisation of regulations.”
Analysts said that for Sarawak’s aspirations to succeed without undermining the wider system, the eventual deal must be guided by pragmatism.
They note that Petros could be allowed to lead on domestic pricing and distribution while Petronas continues overseeing upstream production and LNG exports, preserving national revenue streams and stability.
They also stress that any financial commitments should be linked to actual performance rather than fixed sums, and that expansions should follow proven demand rather than speculative targets.
Most importantly, they said, the PDA must remain the central regulatory framework to avoid jurisdictional overlap and safeguard investor confidence.
If framed around these principles, analysts said the proposed Petronas-Petros deal could serve as a model for federal-state collaboration, allowing Sarawak to pursue its energy ambitions without weakening Malaysia’s energy system.
