Sarawak government challenges federal petroleum acts in apex court over offshore resource rights

SARAWAK, MALAYSIA: The Sarawak government has formally filed a petition in the Federal Court to seek a definitive ruling on the constitutional validity and continued applicability of several federal petroleum laws within the state.

The legal action, initiated on 23 February 2026, targets three specific pieces of legislation: the Petroleum Development Act 1974, the Continental Shelf Act 1966, and the Petroleum Mining Act 1966.

According to a statement by Deputy Minister in the Premier's Department (Law, MA63 and State-Federal Relations) Datuk Sharifah Hasidah Sayeed Aman Ghazali, these acts adversely affect Sarawak by depriving the state of its rights to natural resources.

The resources in question include oil and gas located in the seabed of the continental shelf, defined by the Sarawak (Alteration of Boundaries) Order in Council 1954 and the Sarawak (Definition of Boundaries) Order in Council 1958.

Sharifah Hasidah stated that under the Malaysia Agreement 1963 (MA63) and its annexed constitutional instruments, sovereign rights to petroleum resources within Sarawak's boundaries were vested in Sarawak by the British government on Malaysia Day.

She maintained that these rights were never transferred to the Federation or the federal government.

The Deputy Minister further noted that Item 2(c) of the Ninth Schedule of the Federal Constitution grants the state legislative assembly the authority to regulate petroleum rights. This is exercised through the issuance of mining leases, prospecting licences, and certificates.

A significant portion of the legal argument rests on the historical context of the 1969 Proclamation of Emergency.

Sharifah Hasidah explained that the Continental Shelf Act 1966 and the Petroleum Mining Act 1966 were originally applicable only to the States of Malaya. They were extended to Sarawak via legislation enacted during the Emergency.

However, Parliament annulled the Emergency in December 2011.

Under Article 150(7) of the Federal Constitution, the Sarawak government argues that these laws should have ceased to apply to the state by June 2012. The petition seeks to confirm this cessation of applicability.

This move follows a legal challenge by Petroliam Nasional Bhd (Petronas), which filed an application on 10 January to challenge the validity of state laws regulating its business in Sarawak. The Petronas application is scheduled for a hearing on 16 March 2026.

Sharifah Hasidah confirmed that the Sarawak government will object to the Petronas application.

The state contends that the company's challenge does not fall within the exclusive original jurisdiction of the Federal Court under Article 128(1)(a) of the Federal Constitution.

The Deputy Minister emphasised that Sarawak is justified in safeguarding the interests of its people as enshrined in the Federal Constitution. She noted that Articles 4(3) and 4(4) provide the state with the right to seek such a ruling from the apex court.

The determination is expected to provide much-needed clarity for investors in the upstream and downstream oil and gas sectors.

Since 2024, Sarawak has operated its own firm, Petroleum Sarawak Bhd (Petros), to manage natural gas within the state.

Despite the legal proceedings, the Sarawak government expressed a commitment to continued discussions with the federal government.

Sharifah Hasidah stated the state remains open to an amicable resolution that promotes national unity and sustainable resource use.