Gas Ordinance repealed to give state more stake in downstream gas business

THE Sarawak Gas Supply Services (Operating Company) Ordinance, 1995 will be repealed to create more opportunities for Sarawakians and Sarawak companies to participate in the business activities in gas distribution in the state.

However, action taken under the Ordinance, including the vesting of assets and properties in Sarawak Gas Distribution Sdn Bhd (SGD) shall not be affected by the repeal of that law.

Minister of Public Utilities Dato Sri Stephen Rundi Utom said SGD, currently supplying piped gas to over 22,000 domestic, commercial and industrial consumers in Miri, will continue to service these consumers under current tariff rates and in accordance with agreements or arrangements entered between SGD and these consumers.

“SGD will continue to play an important role in the distribution of gas in Sarawak,” he said when tabling the second reading of the Distribution of Gas Bill, 2016 at the state legislative assembly sitting.

The Distribution of Gas Bill, 2016 was passed yesterday.

Rundi said with the repeal of the Ordinance, Petronas, as a producer and supplier of gas for distribution in Sarawak, would be subject to the new law.

Thus, in undertaking the activities stipulated in Clause 7 of the Bill, he said Petronas had to be licensed under this new law.

However, he said in exercising this power to legislate the distribution of gas did not mean that the state government was overlooking the fact that there is a Petroleum Agreement signed on March 27, 1975 between the state government and Petronas whereby in return for “ownership rights and privileges of petroleum” vested in Petronas, an annual cash payment of five per cent of the value of the petroleum extracted from areas in Sarawak shall be paid to Sarawak.

He noted that this Agreement and the payment of the ‘royalty’ relate to upstream resources and activities must still be regulated under the Sarawak Oil Mining Ordinance and other laws relating to petroleum in Sarawak.

Rundi said the state government had not under the Petroleum Agreement granted exclusive rights to Petronas to carry out downstream activities, such as the distribution of gas (including those which are part of the gas distribution system) in the state.

“Further, payment of the royalty under that Agreement does not cover rights to downstream activities in Sarawak.

“For these reason, the state maintains that Section of the Petroleum Development Act, 1974 which purports to protect the exclusive rights of Petronas to undertake downstream activities associated with the distribution of gas in Sarawak, cannot and should not be used to exclude other parties, particularly Sarawakians, from carrying on the business of distribution of gas in Sarawak unless with the written permission of the Prime Minister,” he said.

He pointed out that the state government recognised the role of Petronas as the national oil corporation in the development of the oil and gas industry in Malaysia and its contributions to the national economy.

He said the state government, however, in safeguarding the economic interests of this state wants to ensure that important resources like natural gas are available to boost the industrial development of the state.

“The state government also wants to see the growth of the gas industry in Sarawak, with more Sarawak companies involved.

“All these efforts would not jeopardise Petronas’ operations and business in the state but the state government wants Petronas to be mindful of the aspirations and needs of Sarawakians and that it should operate in an environment where Petronas like all other parties involved in the gas supply industry, are subjected to state laws,” he added.

The minister said the new law would come into force as soon as the regulatory structure of gas distribution in Sarawak is in place and the director of gas distribution appointed.