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New Kuching gas hub will boost state, federal coffers

AT 75, Sarawak legal counsel and former state attorney-general Datuk Seri J.C. Fong should be unfazed by most things.

But when this writer met up with him last week, he spoke with undisguised enthusiasm about a new gas hub coming up in Kuching, which he foresees will transform the state capital by the end of the decade.

It is widely acknowledged that the rewriting of the legal underpinnings of Sarawak's hydrocarbon resources has Fong's finger-prints all over it.

He briefly went over with me the intricacies of squaring the Petroleum Development Act (PDA) 1974, which vested in Petronas the role as custodian of the nation's hydrocarbons, with the state's aspirations to be more than just a passive beneficiary of this most valuable of our natural resources.

It all began when the late Tan Sri Adenan Satem took over as chief minister.

The Sarawak state assembly in 2016 passed the Distribution of Gas Ordinance, which regulates and controls downstream gas distribution for sale and distribution in the state.

The assembly in 2023 then passed the Distribution of Gas (Amendment) Bill, providing for the appointment of a gas aggregator.

State-owned Petros, incorporated in 2017, was appointed sole gas aggregator in 2024.

There seems to be uncertainty about the implications, in particular for Petronas and its investments in the Bintulu LNG (liquefied natural gas) Complex.

Petros clarified this in comments made available to this writer: "Petronas' role under the PDA is not affected by Petros' appointment as gas aggregator.

"Petronas is still managing upstream petroleum arrangement contractors (PACs).

"There is nothing that impedes Petronas from encouraging investors to continue investing in exploration and development of oil and gas resources in Sarawak.

"On the contrary, the active participation of Petros in the oil and gas value chain has created more opportunities for investors.

"Previously, PACs could not consider investment opportunities that integrate upstream resources with downstream development."

In other words, Petros is in the business of adding value to the good work Petronas has done and will continue to do with upstream development in Sarawak.

This is where the new gas hub in Kuching comes into the picture. It will leverage new gas fields to be developed offshore in western Sarawak.

While the Bintulu LNG Complex focuses on gas exports to East Asian countries, the Kuching gas hub will focus on supplying local needs and those of foreign investors in the state.

Why was the PDA 1974 crafted the way it was? Fong allows that noble national aspirations were in play: the hydrocarbon largesse ought not to just benefit the states where it is found.

But if it is accepted that the continental shelf off Sarawak is an extension of its territory, what is found in it will logically belong to Sarawak and be subject to state laws.

A compromise has been struck where Petronas retains its upstream development role while Petros works on downstream development.

If the latter function results in foreign investors streaming into Sarawak to take advantage of readily available gas supply onshore, the nation's coffers will also reap additional revenues from corporate tax.

Sarawakians will appreciate seeing more benefits accruing to them from its status as the main oil and gas producer in the country. Their sense of alienation from the rest of the country should also lessen over time.

But with greater wealth comes greater responsibility in nation-building.

Sarawak will gradually assume a role that commensurates with its new-found significance and heft in the nation's political, social and economic scheme of things.


The writer views developments in the nation, region and wider world from his vantage point in Kuching

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