By Prof. James Chin
AI SUMMARY — 5 KEY POINTS FROM THE ARTICLE
▪️ Strategic Constitutional Test Case
Sarawak’s Federal Court petition challenges long-standing federal petroleum laws, positioning the case as a landmark constitutional test that could redefine resource governance and legal precedent in Malaysia.
▪️ Legal Risk to Petronas’ Exclusive Framework
The move directly questions the legal foundation of the Petroleum Development Act 1974, potentially disrupting Petronas’ exclusive operational structure if the court narrows federal authority over state resources.
▪️ Broader Regulatory and Investment Implications
Beyond oil and gas, the dispute could affect emerging policy areas such as carbon capture and downstream industries, influencing investor sentiment toward Sarawak’s green and energy transition strategies.
▪️ Federalism Reset Narrative
The litigation reflects a wider push by Sarawak to rebalance federal-state relations under MA63, signalling a shift toward greater decentralisation and state-level economic autonomy.
▪️ High-Impact Political and Economic Outcome
A favourable ruling may reshape Malaysia’s fiscal federalism and revenue distribution landscape, with potential spillover implications for Sabah and future federal-state negotiations.
On February 23, 2026, the Sarawak Government made a decisive move by filing a petition in the Federal Court to scrutinize the constitutional validity and ongoing applicability of the Petroleum Development Act 1974 (PDA74), the Continental Shelf Act 1966, and the Petroleum Mining Act 1966 to the state. This action is not merely a legal formality but a calculated strategy to reclaim Sarawak’s rightful control over its oil and gas resources, rooted in the Malaysia Agreement 1963 (MA63) and the Federal Constitution. Here’s why this lawsuit is unequivocally the right course of action.
First and foremost, PDA74 has exploited Sarawak’s oil and gas rights, yet its fundamental legality in the Sarawak context has never been judicially tested. Enacted in 1974, PDA74 grants Petronas exclusive ownership and operational rights over petroleum resources, effectively overriding Sarawak’s pre-Malaysia boundaries as defined by the Sarawak (Alteration of Boundaries) Order in Council 1954 and the Sarawak (Definition of Boundaries) Order in Council 1958. These instruments vested sovereign rights to seabed resources in Sarawak on Malaysia Day, September 16, 1963. The Federal Constitution empowers the Dewan Undangan Negeri (DUN) to regulate mining leases and prospecting licenses.
The absence of a comprehensive legal challenge to PDA74’s validity has allowed this imbalance to persist unchecked. By invoking Articles 4(3) and (4) of the Federal Constitution, Sarawak is compelling the apex court to determine if these laws infringe on Sarawak boundaries and rights. This is essential to halt the ongoing erosion and establish a precedent that protects future generations.
Compounding the urgency is Petronas’ recent lawsuit, filed on January 10, 2026, seeking leave to challenge Sarawak state laws. While ostensibly targeting the Oil Mining Ordinance (OMO) and related regulations for “judicial clarity,” a thorough examination reveals far-reaching implications. Petronas’ application questions the state’s authority over petroleum operations, business activities, and licensing, and jeopardizing innovative legislation like Sarawak’s carbon capture and storage laws. These state enactments are pivotal for transitioning to sustainable energy, attracting green investments, and positioning Sarawak as a leader in downstream industries.
If Petronas succeeds, it could cascade to invalidate other progressive measures, stifling Sarawak’s economic diversification.
By countering with their own petition, Sarawak expands the debate to the core issue: the federal acts’ applicability post the 1969 Emergency’s annulment in 2011. Under Article 150(7), laws extended during that emergency lapsed by June 2012, rendering the Continental Shelf Act and Petroleum Mining Act potentially obsolete in Sarawak. This strategic pivot ensures the court addresses the foundational flaws.
Petronas’ approach betrays an assumption that the law serves only to enforce federal dominance, intimidating Sarawak into submission through legal threats. However, this overlooks a fundamental truth: the legal system is reciprocal. Sarawak can harness the same judicial mechanisms to curb Petronas’ overreach and “bad behavior,” such as imposing unilateral decisions without state consultation. By seeking a Federal Court ruling, the state is not escalating conflict but enforcing accountability. This mirrors how other federations, like Canada or Australia, use courts to resolve resource disputes, fostering fairness. Petronas must recognize that mutual respect, not coercion, sustains national unity.
Sarawakians overwhelmingly demand this legal confrontation in court. Public discourse reveals deep scepticism about PDA74’s legal validity. It was never debated or ratified in the DUN, imposed instead through a federal law. Social media, forums, and community discussions in these few years call for scrutiny, viewing PDA74 as a relic of unequal federalism.
This petition resonates with the aspirations of Sarawakins, channelling grassroots frustration into institutional action. It provides clarity not just for Sarawakians but all Malaysians.
Finally, Sarawak is pioneering the reset of federal overreach that ballooned during the Mahathir era. From the 1980s onward, centralization policies concentrated power in Kuala Lumpur, eroding the federalism promised in MA63, where Sarawak (and Sabah) were equal partners. Mahathir’s administration expanded federal laws like PDA74, diminishing state roles and fostering dependency. This deviated from the 1963 vision of a balanced federation, where states like Sarawak could thrive autonomously.
Today, under Premier Abang Johari Tun Openg, Sarawak is reclaiming that equilibrium. Initiatives like this legal petition, alongside negotiations on MA63 rights, signal a broader movement to decentralize power.
Abang Jo’s actions echo Sarawakians’ mandate: stand tall when core interests are at stake. Oil and gas aren’t mere commodities; they’re the bedrock of Sarawak’s economy, funding education, infrastructure, and welfare. Challenging PDA74 matters profoundly, as it affirms Sarawak’s dignity and self-determination.
A favourable ruling could redefine resource governance and reset the federal-state belance. It will lead to a more democratic federal system.
In essence, this strategy isn’t defiance; it’s principled leadership, ensuring Sarawak’s voice echoes in Malaysia’s halls of power.
End.
James Chin is professor of Asian Studies at the University of Tasmania, and the leading scholar on contemporary Sabah and Sarawak.
(The opinions expressed in this article are those of the author and do not necessarily reflect the views or editorial position of this publication.)
