Can Sarawak impose RM120m penalties on Petronas subsidiaries?

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Sarawak's Imposition of RM120 Million in Penalties on Petronas Subsidiaries is Under Judicial Review

Five subsidiaries of Petronas are seeking a judicial review to challenge the RM120 million in penalties imposed by Sarawak authorities. The penalties stem from alleged failures to obtain licenses for operating within Sarawak under the state's Distribution of Gas Ordinance (DGO) 2016. The Kuching High Court is set to decide on granting leave for this review, with a ruling scheduled for February 3.
Legal Challenge Against State Penalties

The legal challenge has been brought forth by Malaysia LNG Sdn Bhd, Malaysia LNG Dua Sdn Bhd, Malaysia LNG Tiga Sdn Bhd, Petronas Carigali Sdn Bhd, and Petronas LNG 9 Sdn Bhd. These entities were issued eight notices, each carrying a RM15 million penalty, totalling RM120 million. The basis for these penalties is the alleged failure to apply for necessary licenses under Section 7 of the DGO 2016, with the maximum penalty per case stipulated at RM20 million under Section 21A of the same ordinance.
Arguments Regarding Applicability of State Law

The applicants' legal team has argued that the DGO 2016 is not applicable to their operations. They contend that the Sarawak State Legislature may have exceeded its legislative powers by requiring licenses for activities such as gas treatment, processing, separation, and transportation. Furthermore, the subsidiaries assert that as operational arms of Petronas, their activities should be governed by the federal Petroleum Development Act 1974 (PDA74), not state legislation.
State's Position on Subsidiary Compliance

In response, Sarawak authorities, represented by the State Legal Counsel, argued that Petronas subsidiaries are distinct legal entities and must adhere to state laws concerning gas supply and distribution. They maintain that these subsidiaries require licensing under the DGO 2016. The respondents cited a Federal Court decision to support their assertion that the scope of "distribution of gas" encompasses ancillary activities, and that the subsidiaries were engaged in such activities without the requisite license.
Court's Decision on Leave and Stay

The judge, Dean Wayne Daly, has fixed February 3 for his decision on whether to grant leave for the judicial review. Importantly, the judge denied the applicants' request for an interim stay of the penalties while the judicial review process is pending, indicating that any potential refund would be considered if the court ultimately rules in favour of the subsidiaries.

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Can Sarawak impose RM120m penalties on Petronas subsidiaries?

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