KUALA LUMPUR (July 23): Petroleum Sarawak Bhd, the state-owned oil and gas company also known as Petros, has signed gas sale agreements (GSAs) with Sarawak Petchem Sdn Bhd and Sarawak Energy Bhd to kick off its role as Sarawak's sole gas aggregator to buy and sell all natural gas in the state.

The GSAs will allow Sarawak Petchem access to gas for its methanol plant and provide fuel for Sarawak Energy's power plants, Petros said in a statement on Monday.

The move is also in line with Petros’ commitment to a strategic and fair allocation of Sarawak’s gas supply, currently largely exported to international markets.

“The continued growth of Sarawak’s economy requires availability of natural gas as fuel for power generation, commercial industries and industrial feedstock,” Petros said in a statement. “It is envisaged that 30% of the gas should be allocated for domestic needs by 2030.”

Sarawak Premier Tan Sri Abang Johari Tun Openg witnessed the exchange of documents for Petros' first two GSAs at the launch of the Sarawak Methanol Complex in Bintulu on Monday.

Commenting on the signings, Petros group chief executive officer Datuk Janin Girie said in the coming months, it looks forward to signing all other gas sales and purchase agreements with upstream gas sellers and downstream gas buyers.

All such agreements are expected to be signed before year end to bring all downstream and upstream gas players in compliance with the distribution gas ordinance 2016 (DGO) under Sarawak state law.

It is understood there are 23 upstream and nine downstream players involved in the process.

The latest development marks another step forward for the Sarawak state-owned entity to take over the gas aggregator’s role from Malaysia’s national oil-and-gas company Petroliam Nasional Bhd (Petronas).

Petros was this year appointed by the state as the sole gas aggregator to procure all natural gas produced in Sarawak by upstream gas producers, for the distribution, supply and sale to all downstream gas buyers.

The appointment follows the passing of the tabulated bill for the amendment to the DGO at the Sarawak State Legislative Assembly in November last year.

Eyes on impact to Petronas

As Petros takes over the role from Petronas, the national oil company may lose a portion of revenue as a result — although the earnings impact remains uncertain — RHB Investment Bank (RHB IB) said in a report.

Depending on the loss, the shift could affect Petronas’ ability to keep up capital spending in the long term, though its current balance sheet remains solid, even with dividend commitment to the federal government, RHB IB noted.

“There has been increasing talk about potential capex cuts by Petronas” ahead of the gas aggregator role takeover by Petros in Sarawak, the research house said, although it still assumes a resolution to be achieved between the two parties.

“We believe [that] ultimately, both parties would want to maximise production, especially when oil prices are expected to remain stable," it said.

The Edge has reached out to Petronas for comment.

Petronas’ gas segment contributed about RM101 billion, or 30% to its revenue in 2023, with Sarawak among its biggest markets. Petronas also delivered 403 liquefied natural gas (LNG) cargoes from its LNG complex, and 38 LNG cargoes from two floating LNGs (FLNG) and 2.2 billion standard cubic feet per day of average sales gas volume in Peninsular Malaysia.

The gas business took up 22% of Petronas’ domestic capital expenditure, and the transfer to Petros may lead to a “more prominent” cut in the segment, RHB IB said.

Back in May, it was reported that Petros and Petronas would be signing a definitive agreement to pave the way for Petros to be the sole gas aggregator in the state.

The agreement would allow Petros to conclude gas purchase agreements with all upstream producers involved in the production of natural gas in Sarawak and gas sales agreements with all downstream buyers.

Consequently, Sarawak's Minister of Utility and Telecommunication Datuk Seri Julaihi Narawi reportedly told the state assembly in May that Petronas will cease all buying and selling activities of the product in the state and hand over its natural gas distribution network and system to Petros.

For future liquefied natural gas (LNG) sales, Julaihi said at the time that Petronas would need to sign new contracts with Petros, especially for LNG supply and delivery activities outside of Sarawak.

In the Monday statement, Petros' Janin said as the gas aggregator, the company is also entrusted with investing in the development, expansion, management and maintenance of critical gas and energy infrastructure state-wide.

Presently, Petros is progressing the development of four gas hubs in Kuching, Miri, Samalaju and Bintulu under the Sarawak Gas Roadmap.

These hubs, serving as central points for gas distribution through the 'hub-and-spoke' delivery model, will enhance access to affordable gas and create industrial investment opportunities.

This includes the new gas trunkline Petros is executing to deliver gas from Kidurong to the Samalaju Industrial Park.

Janin said ongoing implementation of the roadmap and development of carbon capture, utilisation and storage infrastructure will be the engine of growth, uplifting and transforming Sarawak into an economic powerhouse for the nation and the region.

"These new infrastructure and value-adding gas-based projects are expected to collectively create over 100,000 high-quality jobs across the state,” he said.