Win-win for Petronas, Petros must pass commercial test

A Petronas-Petros settlement may not be as mutually beneficial as it appears if commercial consequences are overlooked, according to one analyst. Sarawak Senator Datuk Ahmad Ibrahim has argued that commercial considerations should not supersede Sarawak's constitutional rights, in response to former Law Minister Datuk Zaid Ibrahim's warning about potential business losses for Petronas.

However, this argument is based on a legal situation that has not yet been determined by the courts, with a Federal Court hearing set for January 2027.

In May 2025, the federal and Sarawak governments agreed to recognize Petros as Sarawak's gas aggregator while preserving Petronas' existing role and responsibilities under the 1974 Petroleum Development Act. The declaration also stated that Petronas' existing LNG arrangements with third parties would remain unaffected.

Analyst Samirul Ariff Othman from Global Asia Consulting argues that dismissing commercial considerations entirely is not the same as saying they don't matter. He emphasizes that the agreement reached by both governments should be respected, as it provides a framework for sharing profits and risks in the petroleum industry. He suggests that a more equitable partnership could involve increased equity participation, co-investment, joint ventures, and infrastructure ownership, as well as Sarawak taking a larger role in the investment and risks associated with petroleum development.

Samirul believes that such a model would enable both sides to share gains and risks, rather than treating them as mutually exclusive. He stresses that Petronas must retain sufficient commercial authority and economic return to maintain its wider responsibilities, including upstream investment, production, LNG commitments, and national energy security.

The ongoing dispute should not be seen as a trade-off between a stronger Sarawak petroleum industry and a strong Petronas, but rather as a matter of aligning control, capital, risk, and returns to maintain a robust business model.