Sarawak gas deal has limited impact on Petronas earnings, analyst says

Petros Petropoulos SA

07/02/2025 09:12

KUALA LUMPUR, Feb 7 (Reuters) - A deal between
Malaysia's state energy firm Petronas and the Sarawak government
on local gas distribution is likely to dent Petronas' earnings
by no more than 11%, less than previously expected, research
firm CreditSights said.
    The analyst said, however, the case set a precedent that
could lead Sarawak to seek additional rights, and for other
states to follow, potentially deterring investors.
    Petronas and Sarawak's Petros did not immediately respond to
a Reuters request for comment.    
    The negotiations between Petronas and Petros last year
raised concerns over the impact on Petronas, which is a major
contributor to federal coffers, and its operations in Sarawak,
which holds over 60% of Malaysia's gas reserves.
    In a note made public on Friday, CreditSights estimated the
impact to be in the single-digit to 11% range as most of
Petronas' gas revenue comes from liquefied natural gas (LNG),
rather than local gas distribution. The Sarawak LNG complex
accounts for 73% of Petronas’ total LNG sales.
    "We view the outcome favourably for Petronas, which was more
benign than we had expected given that Sarawak had contested for
full control over its gas distribution rights," CreditSights
said. 
    "We continue to expect Petronas to maintain its net cash
position and for its gross leverage to worsen slightly in 2024,
albeit from very healthy levels."
    Malaysian Prime Minister Anwar Ibrahim said in January the
deal would allow Petronas to retain its authority over oil and
gas distribution in the country even as Petros gains control of
the gas distribution rights in Sarawak. 
    Malaysia's Law Minister Azalina Othman in a written reply in
parliament on Wednesday said Petros is the state's gas
distributor, but that excluded LNG distribution.
    Under the Malaysia Agreement 1963, Sarawak was granted
special autonomy rights, including on natural resources and
immigration. Sarawak has long sought greater control of its
natural resources, and the state government last February
appointed Petros to manage its natural gas distribution and
sales in the state. 
    The Sarawak state premier's office declined to comment on
Friday. 

 (Reporting by Ashley Tang; editing by Barbara Lewis)
 ((ashley.tang@thomsonreuters.com;))