Saturday, September 18

Laws covering oil and gas industry in Sarawak upstream and downstream


Constitutional position

Sarawak boundaries

Article 1(3) FC stipulates that territory of Sarawak would be the territory immediately before Malaysia Day and Sarawak’s boundaries shall not be altered except by a law passed by the State Legislature.

State legislative powers to issue permits and licenses for prospecting for mines; mining leases and certificates. Sarawak government and not federal Parliament or the federal government has the executive powers to issue such permits, licenses or leases for petroleum exploration, prospecting or mining.

Federal laws

Continental Shelf Act 1966 (Act 83) & Petroleum Mining Act 1966 (Act 95)

Extended to Sarawak vide Emergency (Essential Powers) Ordinance No. 10 1969 with effect from 8.1.1969 after the Proclamation of Emergency in May 1969.

This proclamation was annulled by both Parliament House in December 2011.

Under Article 150 (7) of the Constitution, EO ceases to have effect six months after the Proclamation was annulled. Therefore, both Act 83 and 95 to Sarawak ceased in June 2012.

The only law currently governing the mining of petroleum in Sarawak after the annulment of the Proclamation is the Oil Mining Ordinance 1958.

Petroleum Development Act 1974 (PDA)

PDA provides that the entire ownership in and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia shall be vested on Petronas. The vesting of such ownership, rights, powers, liberties and privileges would take effect on the execution of an instrument in the form contained in the Schedule to the Act. That instrument is not a mining lease as Parliament has no constitutional authority to pass laws relating to the issuance of mining leases.

Section 6 of PDA, unlike Section 2, states that “notwithstanding the provisions of any other written law”, no business of processing or refining of petroleum or manufacturing of petro-chemical products from petroleum, may be carried out by any person other than Petronas unless there is in respect of any such business a permission given by the Prime Minister.

Section 8 of PDA does not exempt Petronas from complying with the state laws, such as Oil Mining Ordinance 1958 and the Land Code of Sarawak.