Friday, June 25

O&G industry under state law


Contractors, vendors to face action if they operate without state licence from July 1

Abang Johari being briefed on the integrated supply base facilities at Bintulu Port. Also seen are Hadzari (left) and Ismawi (second left).

KUCHING: Actions and penalties will be taken against any person or company including its contractors, sub-contractors and vendors operating in Sarawak without licences issued by the state government when the new regulatory framework over the oil and gas industry comes into force effective this July 1.

In order to ensure an orderly implementation of these new policies by the state government, Chief Minister Datuk Patinggi Abang Johari Tun Openg said an engagement with all industry players including Petronas will be held in the middle of next month (May).

“This is to inform them (industry players) about the state’s new regulatory framework over the upstream and downstream aspects of the oil and gas industry in Sarawak,” he told a press conference after witnessing the signing of a land lease agreement for the development of an integrated supply base at Bintulu Port in a leading hotel here yesterday.

He emphasised that when the state assumes full regulatory authority, all persons and companies involved in the oil and gas industry in Sarawak must have the necessary licences, permits, leases and approvals required under either the Oil Mining Ordinance (OMO) or the Gas Distribution Ordinance (GDO).

“This is necessary because the rights enabling them to operate in our state belong to the Sarawak government. It is very important so that their operations are regularised and activities comply with all state laws including those relating to the use and occupation of land,” he said.

“If not, they become illegal and will be penalised based on our regulations. There are already some applications. That’s why the state government is organising an engagement with all industry players first to explain and give them opportunities (to comply) in advance,” he added.

“We will explain to them how to apply for the licence, what areas needed and all that within the framework, e-filing and so forth. It is not fair to penalise them when they are not aware of the guidelines,” he elaborated.

Earlier on, Abang Johari assured that the enforcement of the state laws will not jeopardise the interests or investments of Petronas and other companies already involved in the oil and gas industry in Sarawak, whether upstream or downstream.

“But, their business and operational activities must be aligned with the state’s laws and regulations,” he stressed.

Abang Johari (centre) addresses the press conference. Also seen are Zulkurnain (right) and Hadzari.

The forthcoming amendments to the Oil Mining Ordinance, 1958 (OMO) to be tabled in the State Legislative Assembly, he reiterated, will require all oil and gas industry players in Sarawak to comply with OMO, including Petronas.

“The Section 2 read with Section 6, and Section 8 of Petroleum Development Act, 1974 (PDA) undoubtedly confirm that all industry players must comply with OMO and other state laws including the Land Code of Sarawak in regard to the land use and occupation in the state,” he elaborated.

“I have noted that under Section 8 of the PDA, only the Petroleum Mining Act, 1966 (except Section 14 thereof) is not applicable to Petronas,” he said.

“Section 14 of the Petroleum Mining Act, 1966 (which no longer applies to Sarawak) requires Petronas to seek permission to use and occupy land needed for its activities,” he continued.

Accordingly, Abang Johari pointed out, Petronas is not exempted by the PDA from compliance with the Land Code of Sarawak, must have licences or leases to use and occupy land, including land in the Continental Shelf, for the production of oil and gas, in accordance with the Land Code.

He said under Item 2(c) of List II of State List Ninth Schedule Federal Constitution Sarawak has the constitutional authority to issue exploration and prospecting licences and mining leases for petroleum (including natural gas) both onshore and off-shore, within the boundaries of the state.

“The state government has decided to issue mining leases to Petros, thus vesting of mining rights unto Petros who would work out fair and equitable arrangements with Petronas and other companies relating to the mining of oil and gas from the areas covered by the mining leases,” he pointed out.

In regulating the upstream oil and gas production, Abang Johari informed that Petronas must only deal with Petros to produce or extract oil and gas from beneath land within the state’s boundaries.

“Petros, under direction from the state government, will then enter into Mining and Production Sharing Agreements with Petronas and other major industry players,” he said.

“For Petros to work alongside with Petronas, certain statutory powers conferred by OMO to the State Minerals Management Authority (SMMA) or the Minister, will be delegated via statutory instrument to Petros,” he added.

As Sarawak will also regulate the gas distribution in Sarawak through GDO, he reminded that anyone or companies undertaking the distribution of gas, including the establishment of gas processing or separation or regasification plants and pipelines, will be required to obtain a licence to be issued under GDO.

With the introduction of the GDO, he thus hopes to see more local companies getting involved or investing in this important sector of the state’s economy.

“In regulating the distribution of gas under the GDO, the state expects to secure more gas necessary to expand its electricity generation capacity and accelerate industrial growth in Sarawak,” he said.

The government, he added, wants to put an end to the present scenario whereby Sarawak has abundant gas for export to countries like Japan and Korea, but not enough gas for its own domestic use or to propel its industrialisation agenda.

“The Gas Distribution (Licence) Regulations 2018 would set out the procedures for applying for licence and fees payable by licensees. For instance, the distribution of gas to any customers (intermediate and end-users) in the state, from any gas processing plant in Sarawak (both onshore and offshore) by way of pipelines would require a licence,” he said.

“Petros would be granted licence by the state to distribute gas from Petronas processing separation plant at Tanjung Kidurong. In this instance, the Principle Agreement between State Government of Sarawak and Petronas for supply of gas for power and non-power sector could be assigned by the state government to Petros,” he explained.

Abang Johari said this is a systematic approach towards the state’s equitable participation in the oil and gas sector to benefit the people and enhance the participation of Sarawakians in the oil and gas industry.

“Given the undivided effort by the Barisan Nasional (BN) government, I trust that our local industry players are ready to work towards the goal of becoming a major player in providing first class oil and gas participation,” he said.

“I urge everyone to work together as a team. I believe that no challenge is too big if we could only work together,” he emphasised.

Bintulu Port Authority (BPA) chairman Hadzari Abang, its general manager Zulkurnain Ayub, Bintulu Supply Base (BSB) chairman Ahmadi Yusoff, its director Datuk Ahmad Redza Abdullah, Regional Corridor Development Authority (Recoda) chief executive officer Datu Ismawi Ismuni and founder and adviser of OBYU Holdings Sdn Bhd Tan Sri Bustari Yusof were present.