Legal disputes cast doubt on year-end Petronas-Sarawak settlement

KUALA LUMPUR, Nov 6 — A year-end settlement between Sarawak and Petronas is not possible despite Sarawak Premier Tan Sri Abang Johari Openg expressing confidence that a deal could be reached before the end of the year, a political analyst said.

University of Tasmania’s James Chin said that, based on his knowledge and interactions in Sarawak, such an outcome was unlikely at present because the two sides remained fundamentally different in their interests, which is why they approached the Federal Court to resolve the deadlock in the first place.

“In that interview, although he mentioned that a deal is due by year-end, it is not possible to have the deal because court proceedings are ongoing.

“You cannot get an agreement while these court cases are happening unless Petronas withdraws, or both sides go to the courts and say they want to settle out of court,” Chin said.

Abang Johari told The Edge this week that the Petronas-Petros dispute was in its “last mile” and could be settled before the end of the year.

These negotiations come after two legal developments. Petronas filed its petition in January seeking clarity over the state and federal laws governing its operations in Sarawak. Sarawak then filed its own petition challenging the continued validity and application of several federal petroleum laws to the state.

The Federal Court has fixed Jan 25 to 29 next year to hear the two petitions, which are being kept separate and will be heard in the order in which they were filed.

The year-end target floated by the Sarawak premier also follows several earlier indications that an agreement was close.

In December last year, Deputy Prime Minister Datuk Seri Fadillah Yusof said commercial negotiations were progressing well and that an outcome was expected in early 2026. He had earlier said only administrative and commercial issues remained unresolved.

By June this year, Prime Minister Datuk Seri Anwar Ibrahim said several important issues had been ironed out and a final agreement was expected soon, although analysts later cautioned that the continuing court cases showed that key legal and commercial questions remained unresolved.

Analysts say credibility in a deal could be undermined by continued promises without resolution.

“Missing the year-end target could raise questions about GPS’s credibility, particularly since Sarawak’s government had previously anticipated a commercial agreement by December 2025,” analyst Jamil Ghani said.

“Repeated assurances without tangible outcomes could gradually undermine confidence in the process.”

Universiti Malaya’s Azman Awang Pawi agreed that the deadline had created a benchmark against which the state government’s negotiating effectiveness could be judged.

“If the deadline passes without an agreement, opposition parties could question why a government with such a strong political mandate and considerable influence at the federal level has yet to secure a definitive settlement,” he said.

However, Azman cautioned against treating a missed deadline as a serious political setback in itself.

He said the dispute involved complex constitutional, regulatory and commercial questions which could not necessarily be resolved according to an electoral timetable, with the continuing legal proceedings themselves showing that important jurisdictional questions remained unsettled.

Azman said GPS also entered the election with considerable political capital built up through its wider autonomy agenda, development programmes and stable control of the state government.

A delayed agreement alone was therefore unlikely to seriously weaken the coalition.

“The greater risk emerges if negotiations repeatedly produce optimistic announcements without concrete implementation.”

Azman said Abang Johari’s standing would ultimately depend less on whether an agreement was signed by Dec 31 than on whether Sarawakians believed meaningful progress had been made without compromising the state’s long-term interests.

“If a final agreement is delayed but both sides can demonstrate clear consensus on regulatory responsibilities, commercial arrangements, Petros’s operational role and future revenue opportunities, the political damage may be limited,” he said.

Azman added that Sarawak’s petroleum aspirations and Petronas’s national mandate need not be mutually exclusive.

“The strongest outcome would be an agreement that converts constitutional disagreement into institutional cooperation, commercial certainty and greater economic benefits for Sarawak and Malaysia,” he said.

“That would be a stronger legacy for Abang Johari and GPS than any short-term electoral advantage gained from confrontation.”