KUCHING: The High Court will deliver its judgment on January 30 next year in the case involving Petroleum Sarawak Bhd’s (PETROS’) bid to challenge Petroliam Nasional Bhd’s (PETRONAS’) call on a Bank Guarantee issued by Maybank Islamic Bank.
Judge Datuk Faridz Gohim Abdullah will deliver the judgement after hearing further arguments in PETROS’ application seeking a declaration that PETRONAS’ move in calling on the guarantee was unconscionable, unlawful, null and void.
The guarantee was invoked after PETROS refused to pay for gas delivered by PETRONAS in August 2024, citing PETRONAS’ failure to obtain a licence under Sarawak’s Distribution of Gas Ordinance (DGO).
During proceedings, the court granted the request by PETRONAS’ counsel, Datuk Cyrus Das, and the Senior Federal Counsel representing the federal government, to file additional submissions by November 28.
PETROS and the Sarawak Government were allowed to file their final reply submissions by December 14.
Earlier in his submission on behalf of the Sarawak Government, State Legal Counsel, Datuk Seri JC Fong, said that based on the evidence, the unconscionable conduct of PETRONAS were as follows:
(1) Despite having agreed to comply with all written laws under Article 24.2 of the Sarawak Gas Sales Agreement (SGSA), PETRONAS refused to comply with a validly enacted state law, the DGO, which requires PETRONAS to be licensed in order to supply gas in Sarawak;
(2) Preventing other upstream gas producers like Petroleum Sarawak Exploration and Production Sdn Bhd, who were licensed under DGO, to sell gas to PETROS, the gas aggregator;
(3) Insisting on delivering gas to PETROS after the SGSA had become frustrated, in contravention of the DGO; and
(4) By such conduct, PETRONAS undermined the DGO which was passed pursuant to an Order made under Article 95C of the Federal Constitution as recommended by the Inter-Governmental Committee (IGC) Report.
Fong said the state government has a duty to ensure that laws passed by the legislature, for the benefit of the people, are duly complied with by PETRONAS.
The refusal by PETRONAS to comply with the licensing requirements of the DGO is unconscionable conduct and totally unacceptable.
Hence the Sarawak Government supports PETROS’ claim for a court declaration that PETRONAS’ call on the Bank Guarantee, to recover price of gas supplied, without licence or illegally, as unconscionable and unlawful.
Fong added that once the court finds that there had been unconscionable conduct on the part of PETRONAS, it is irrelevant whether the Bank Guarantee is an “on demand guarantee” or a “conditional or unconditional guarantee”. Unconscionability makes the call on a guarantee, unlawful.
Submitting for PETROS, Tan Sri Cecil Abraham reiterated that the DGO and its amendments in 2023 were passed within the legislative competence of the state government
He refuted PETRONAS’ allegations that PETROS had launched a collateral attack on the validity and constitutionality of the Petroleum Development Act (PDA) 1974.
PETROS contended that the PDA does not exempt PETRONAS from complying with any written law such as the DGO, and that after the passing of the Gas Supply Act, 1993 (GSA) (which applies only to Peninsular Malaysia), any inconsistency between the PDA and the GSA, the GSA shall prevail.
Cecil further argued that if PETRONAS has to be licensed under section 11 of GSA to supply gas in Peninsular Malaysia, despite the PDA, how can PETRONAS maintain that it has a more privileged position in Sarawak, that it does not need a license in Sarawak?
He added, therefore, PETRONAS needs a licence under the DGO, which is the legislation governing distribution of gas in Sarawak, in order to undertake the distribution of gas in Sarawak.
