Did Petronas breach its gas supply agreement with Shell MDS?

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Petronas Did Not Breach Its Gas Supply Agreement with Shell MDS, Court of Appeal Rules

The Court of Appeal has determined that Petronas did not breach its gas supply agreement with Shell MDS (Malaysia) Sdn Bhd. The appellate court found that the High Court had erred in its previous decision to grant an injunction that compelled Petronas to continue supplying gas.
High Court Erred in Granting Injunction

Justice Datuk Wong Kian Kheong, in delivering the grounds of judgment, highlighted that the High Court Judicial Commissioner had failed to adequately consider Section 53 of the Specific Relief Act 1950. This legal provision mandates that the party seeking an injunction, in this instance Shell MDS, must first prove a breach of the agreement by the other party, Petronas. Justice Wong explicitly stated that the agreement between Petronas and Shell MDS had not been breached and that Petronas had fulfilled its obligations under the agreement at all relevant times.
Insufficient Case Against Petronas

The Court of Appeal concluded that Shell MDS had not met the stringent requirement of establishing an "unusually strong and clear" case against Petronas. This high threshold is necessary for a court to exercise its discretion in granting an interlocutory mandatory injunction. The appellate court found that the evidence presented by Shell MDS did not satisfy this demanding standard, and therefore, the High Court should not have granted the injunction.
Financial Oppression on Petronas

Furthermore, the Court of Appeal judge pointed out that the injunction compelling Petronas to continue gas supply had resulted in significant financial oppression for the national oil company. Petronas was mandated to supply natural gas without receiving any payment, leading to a substantial financial loss of approximately RM80 million per month since the initial ad interim injunction was granted on December 19 of the previous year. The court acknowledged that this situation altered the status quo to Petronas's financial detriment.
Set Aside of Injunction and Payment Order

Consequently, the Court of Appeal allowed Petronas's appeal to set aside the interim injunction that had been obtained by Shell MDS. This injunction had previously permitted Shell MDS to cease its monthly payments for gas supplied by Petronas to its facility in Bintulu, Sarawak. The appellate court also lifted a separate High Court injunction that had obliged Petronas to continue gas supply while also allowing a bank guarantee to be withheld. In addition, the court ordered Shell MDS to pay Petronas all outstanding amounts owed from August 2024 up to October 5 of the current year, with the payment deadline set for October 6. Shell MDS had reportedly withheld payments due to concerns over receiving duplicate invoices from both Petronas and Petroleum Sarawak (Petros), fearing a risk of making double payments amidst a jurisdictional dispute.

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Did Petronas breach its gas supply agreement with Shell MDS?

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