Petronas has today been denied leave by the Federal Court to challenge the constitutionality of the Sarawak state government requiring the national oil company to register with Petroleum Sarawak Bhd (Petros) under the Oil Mining Ordinance 1958 (OMO).

Chief Judge of Malaya Ahmad Ma'arop in dismissing the application today said Petronas application did not fall under Article 4(3) and 4(4) of the Federal Constitution where it did not seek to declare OMO as invalid.

"The Sarawak state government also did not say that the Petroleum Development Act 1974 did not go against the ordinance.

"Hence, the Petronas motion for leave for the matter to be heard at this court (Federal Court) on its substantive is dismissed," he said.

"The application by Petronas can be heard at the High Court," the Chief Judge of Malaya added. 

The Sarawak government had opposed Petronas' application for leave to bring the matter to the Federal Court, citing that it should be heard by the High Court instead.

Lawyer JC Fong, who is the former Sarawak attorney-general, had argued that Petronas did not meet the threshold for leave to be granted.

Justice Ahmad ordered Petronas to pay RM50,000 costs.

Petronas had complained that under the revived OMO, requires it to register with Petros by July 1 this year.

It had argued that under the PDA it had been given the powers for exploration and exploitation rights be it onshore or offshore in Peninsular Malaysia and also in Sabah and Sarawak.

Petronas had filed the notice of motion on May 31, that the requirement for it to register goes against the PDA. 

Commenting on today's decision, lawyer Malik Imtiaz Sarwar said they would seek further instructions from Petronas on whether to file the application at the High Court or file a fresh application (that specifies the relief sought to declare OMO invalid).

'There will be grace period'

Sarawak attorney-general Talat Mahmood Abdul Rashid told reporters that despite the requirement for all oil companies to register by July 1, there is a grace period for them to do so.

"They have until Dec 30 next year to get themselves registered with Petros which is the body or agency handling the matter and this would depend on the Sarawak ministry.

"The July 1 deadline is for the state to ensure that the law is implemented properly on the stakeholders. There is a grace period imposed until end of 2019," he said.

Talat said those companies which are already operating in the state may be given an interim license by the (Sarawak) ministry for them to continue to operate.

"Petronas can continue to operate in the oil industry there but this would depend on the ministry. We (the state) would not interfere in the present arrangement," he said.

Fong, when met, agreed that there will be a grace period imposed on oil companies. 

The requirement for oil companies to register was made by Sarawak Chief Minister Abang Johari Openg when launching Petros earlier this year, where it was reported by the Borneo Post that by July this year, the state will assume full regulatory control over the upstream and downstream aspects of the oil and gas industry in Sarawak. 

Abang Johari further said that through Petros, the state was enforcing its rights through the Oil Mining Ordinance, 1958, which stipulates that prospecting, exploration and mining of petroleum both on land and in the Continental Shelf required a licence or lease issued by the Governor in Council (state cabinet) under that ordinance.

The state cabinet has approved a bill to amend this ordinance, to update its provisions and provide for better enforcement of this state law.

He pointed out rightly that under Item 2(c) of the State List in the Ninth Schedule of the Federal Constitution, only the state legislature can legislate on the subjects of prospecting licences and permits or mining leases. Executive authority over the grant of such licences and leases rest with the state government by reason of Article 80.

The chief minister called upon all industry players operating in Sarawak to comply with the said ordinance and other state laws such as the Gas Distribution Ordinance and the Land Code (where use and occupation of land – including in the Continental Shelf, is involved), the Borneo Post further reported.