Abg Johari going ahead with O&G plans despite change in political scene

Abang Johari (centre) having a light moment with representatives from the oil and gas companies before leaving the event.

KUCHING: Chief Minister Datuk Patinggi Abang Johari Tun Openg is keeping his cool over the state’s oil and gas plans going forward amid the present political uncertainties and complexity.

While the state government has not given a clear reaction about navigating the uncertainties and most importantly on Sarawak’s political future, Abang Johari however dismissed concerns that the federal government might derail his plans for the oil and gas sector in Sarawak.

“I don’t think so (that I am concerned about the Pakatan Harapan’s promise of 20 per cent oil royalty). But let them (federal government) settle down first… be fair to them plus I have communicated with them,” he said.

Affirming that he has spoken with Tun Daim Zainuddin, who heads the newly set-up Team of Eminent Persons that advises the Pakatan Harapan government, he however refused to share what they had deliberated on.

Abang Johari briefly addressed reporters after gracing the ‘Industry Engagement with Oil and Gas Companies in Sarawak’ session held at a leading hotel here yesterday.

The engagement session was attended by a large group of representatives from the oil and gas sector to better understand the regulatory and basic procedures of oil and gas industry in Sarawak.

Earlier on, he had reassured that the state government would continuously update the federal government and its agencies on the measures taken by the state in regulating the oil and gas industry in accordance with state laws.

“The state government will not encroach into areas which are under the constitutional authority of the federal government and will work with the federal government and Petronas to ensure that the oil and gas industry will continue to grow in Malaysia and contribute to the economic success of our nation.

“The state will exercise its regulatory powers in oil and gas sector in a manner that would not jeopardise the interests and investment of those who have already been operating in Sarawak,” he added.

He said that by July this year, every entity involved in the exploration and prospecting for, and mining of petroleum and the distribution of gas in Sarawak is required to comply with all state laws including those relating to the use and occupation of land and must have the licences, permits, leases and approvals under either the Oil Mining Ordinance, 1958, the Gas Distribution Ordinance, 2016 and the Land Code.

“The oil and gas industry should work with the government in the implementation and enforcement of our laws. In the enforcement of the laws, the state government will be fair and conducive to improving investor confidence in our oil and gas industry,” he said.

He trusts that the industry players know well that the Sarawak government has always been investment-friendly and welcomes investments including foreign participations in the state’s territorial waters such as Shell Company Ltd which has been around for centuries on Sarawak’s shores.

“When it comes to foreign participations in our oil and gas sector, you may have come across some irresponsible social media scare-mongering about their presence in the state, saying that Petronas is selling our state’s sovereignty.

“I know that well-informed and well-educated audience here this morning will recognise what baseless nonsense this is. Rest assured, my administration will never sacrifice an inch of our state’s sovereignty,” he assured.

Moving on, Abang Johari said he was equally upbeat about the prospects of high value downstream activities to continue growing in the years to come in Sarawak.

“This view of mine may be contrary to my present efforts for going upstream via the formation of Petros,” he added.

Petros, he said, is expected to work alongside with Petronas as co-regulator of oil and gas assets on Sarawak’s shores as well as in its continental shelf, including the Exclusive Economic Zone (EEZ).

“Petros will not undertake exploration activities. Again, Petros will be a co-regulator,” he urged.

A section of the representatives from the oil and gas sector at the engagement session.

Petros, he reiterated, was formed in order to take steps to safeguard Sarawak’s invaluable oil and gas resources and to develop an industry utilising these resources in a more inclusive, equitable and sustainable manner, opening up opportunities for Sarawak corporations and Sarawakians to participate meaningfully in the oil and gas industry.

“With this approach based on our constitutional rights over the exploration, prospecting and mining of these petroleum resources both onshore and offshore in the Continental Shelf, I have to ensure that the state derive optimal benefits from these resources and Sarawakians could look to the future, secured in the knowledge that the state is putting in place the right fundamentals for a stable, progressive and prosperous Sarawak,” he said.

“So, I took tough decisions – decisions that not every party in Sarawak would support – but which I believe are the right ones for our Sarawak’s economy and our people as we progress towards Digital Economy,” he added.

The measure involved the complete control over the granting of prospecting, exploration and mining rights within the boundaries of Sarawak as enshrined in Article 1(3) of Federal Constitution.

“It is important in the state’s interests and in the national interests.

“National unity and state-federal relationship will be strengthened when the rights guaranteed to the state under the Malaysia Agreement 1963 and the Federal Constitution are honoured and complied with,” he said.

As such, Abang Johari hopes to see more Sarawakian oil and gas companies exploring high value-added downstream opportunities in order to sustain over the longer term spectrum.

“For this reason, I initiated a high value proposition last year.

“The state is taking an unprecedented move to build, operate and maintain a 5,000 mtpd methanol production facility in Bintulu, expected to be commissioned by first quarter of 2021,” he said.

“This proposition by the state entities, the economic spin-offs and benefits to all Sarawakians and fellow Malaysians will be tremendous and overwhelming,” he added.

With renewed emerging opportunities in the global upstream sector and the state’s focus on downstream activities, he pointed to the need for Sarawakian oil and gas companies to review their strategies.

“All industry players will need to either explore overseas market, or diversify into other domestic growth segments like speciality chemicals such as methanol derivatives and new alternative energy such as hydrogen production which the state is embarking,” he said.

“I note that all parties in the oil and gas industry are aligned with the intent to moderate the market’s impact to the industry’s accumulated capabilities, while at the same time I am encouraging the emergence of leaner and stronger industry players from Sarawak,” he added.

To prepare for the future, he reassured that the state government will continue to work with all relevant stakeholders to preserve existing value and open up more opportunities within the industry.

“Having said that, nonetheless, it is not all gloom and doom for local Sarawakian oil and gas upstream companies specifically. Petros has been granted rights to mine oil and natural gas in the state and such a licence has already been issued to Petros. In performing its mandated roles, the state has delegated its oil and gas regulatory and supervisory authority to Petros,” he said.

To ensure that Petros perform its mandated roles in a prudent manner, he added that it is required to seek guidance from the Sarawak government for broad policy direction in the execution of its strategic roles and responsibilities.

“Once all things are in place, Petros will open up doors of opportunities to serious and competent Sarawakian contractors and their partners for new and upcoming Production Sharing Contracts (PSC) in a transparent and open manner,” he said of the contracts which were typically meant for the upstream sector.

Petros, he added, would definitely provide a boost to any Malaysian and aspiring Sarawakian upstream service providers.

“This is the Sarawak we are forging – a state that fully grasps the possibilities of the economy of the future, and is embracing them as we speak.

“Where transparency and efficiency will be our watchwords in both the public and the private sectors,” he emphasised.

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