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Iman Muttaqin Yusof

A constitutional battle for control over Malaysian Borneo’s energy wealth has moved to the country’s highest court, delivering a fresh test of whether Prime Minister Anwar Ibrahim can hold together a ruling coalition of disparate interests.
The state of Sarawak, whose governing coalition is a key ally in Anwar’s federal unity government, announced on Monday it had filed a petition in the Federal Court challenging the constitutional validity of three federal petroleum laws that provide the legal foundation for Petronas’ decades-long domination of Malaysia’s oil and gas sector.
The filing deepens a stand-off between the government-controlled energy company and the resource-rich state on Borneo island over offshore petroleum, raising questions about whether a political settlement brokered last year has already unravelled.
Sarawak holds more than 60 per cent of Malaysia’s natural gas and sits at the heart of the country’s energy plans. Petronas, meanwhile, is a cornerstone of federal revenues.
This is a fight not only over money, but also state sovereignty and the constitutional bargains that have held Malaysia together since 1963, when Malaya, Sabah, Sarawak and – briefly – Singapore formed the federation under that year’s Malaysia Agreement.
Petros vs Petronas
The three statutes Sarawak has in its sights – the Petroleum Development Act 1974, the Continental Shelf Act 1966 and the Petroleum Mining Act 1966 – form the federal legal framework under which Petronas has long claimed ultimate authority over the country’s petroleum resources, including those off Sarawak’s northwest coast.
Deputy minister in the Sarawak state premier’s department, Sharifah Hasidah Sayeed Aman Ghazali, has said those laws “adversely affect and deprive” Malaysia’s largest state of its rights over offshore petroleum within its boundaries.
She said a court ruling would also provide clarity for investors, adding that Sarawak was open to “constructive discussions” with Putrajaya.

Monday’s filing was a direct response to Petronas’ own move in January, when the Malaysian state-owned enterprise applied to the Federal Court for legal clarity over the framework that governs its operation in Sarawak, citing “uncertainty” over its compliance obligations. A hearing is set for March 16.
The dispute has been building since 2024, when Sarawak moved to position Petroleum Sarawak, or Petros, as the primary gas distributor within the 124,450 sq km (38,050 square-mile) state’s borders, putting it on a collision course with Petronas over overlapping regulatory claims.
But Anwar appeared to broker a compromise last year with a settlement that would have Petronas retain national authority under the 1974 Act, while Petros would serve as the gas aggregator in Sarawak – a political fix announced after the prime minister’s meeting in early 2025 with Sarawak state premier, Abang Johari Openg.
Analysts said that uneasy truce was never more than surface-level – and when Petronas filed its court challenge in January anyway, Sarawak concluded the deal had been abandoned.
Sarawak was very, very angry when Petronas went ahead with the lawsuit
James Chin, political analyst
“To understand Sarawak’s action, you need to understand that Sarawak was very, very angry when Petronas went ahead with the lawsuit despite the personal meeting between Abang Johari Openg and Anwar last year, where they sought out a political settlement,” said political analyst James Chin, a professor of Asian studies at the University of Tasmania.
“From the Sarawak side, they really don’t understand why Anwar does not tell Petronas to drop the lawsuit and go ahead with the political settlement.”
Chin also warned that revisiting the 1974 Act in open court could revive uncomfortable questions about how petroleum control was originally consolidated under federal law.
“The more you dig up the PDA 1974, the more trouble the federal government will get,” he said.

‘The kingmaker advantage’
Given the commercial stakes and depth of disagreement, legal escalation was unsurprising, said Hafidzi Razali of political risk and policy advisory firm Strategic Counsel.
The case could produce a definitive ruling on how far federal petroleum laws applied to Sarawak, he said, adding that the disadvantage of the political settlement for both sides was that it could be interpreted as backing down.
Gabungan Parti Sarawak, the state’s ruling coalition, is one of the anchor blocs in Anwar’s unity government. Sabah and Sarawak together hold 56 of Malaysia’s 222 parliamentary seats – a share large enough to determine the fate of federal governments in close contests.
The “perception of being underleveraged” was something Anwar would be keen to avoid, Hafidzi said, “especially with Sarawak having the kingmaker advantage”.


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Sarawak state is challenging oil giant Petronas’ dominance in the highest court, in a test for the prime minister’s unity coalition


Sarawak state is challenging oil giant Petronas’ dominance in the highest court, in a test for the prime minister’s unity coalition.


Anwar Ibrahim

Petronas

Energy

Sarawak’s energy feud with Petronas gives Malaysia’s Anwar a legal headache

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Sarawak state is challenging oil giant Petronas’ dominance in the highest court, in a test for the prime minister’s unity coalition

Sarawak state is challenging oil giant Petronas’ dominance in the highest court, in a test for the prime minister’s unity coalition