Petronas confirms subsidiaries seized, but assets already divested, proceeds repatriated

Petroliam Nasional Berhad (Petronas) logo

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KUCHING, July 13: Petroliam Nasional Berhad (Petronas) has confirmed that two of its subsidiaries, which could be worth more than US$2 billion, have been seized by the heirs of the last sultan of Sulu. 

In a statement issued today, Petronas said that two of its subsidiaries have been served with ‘Saisie-arret’ (seizure order) on July 11, 2022.

“Petronas wishes to clarify that these subsidiaries, Petronas Azerbaijan (Shah Deniz) S.à r.l. and Petronas South Caucasus S.à r.l., have previously divested its entire assets in the Republic of Azerbaijan and the proceeds from the exercise have been duly repatriated,” it added. 

The Malaysian state oil company stressed that it views the actions taken against it as baseless and is working vigorously to defend its legal position on this matter.

According to a report by the Financial Times (FT) yesterday (July 12), two Luxembourg subsidiaries which managed Petronas’ gas interests in Azerbaijan have been seized by the descendants of a late sultan as part of a dramatic escalation of a US$15 billion legal dispute linked to an agreement signed 144 years ago.

The  move, the report said, was a first attempt since legal efforts were launched in 2017 by the Sulu heirs to win compensation over land in Sabah that they claimed their ancestor leased to a British trading company in 1878, before the discovery of vast natural resources in the area. 

In addition, a French arbitration court has also ruled in March this year that Malaysia, which inherited the obligations of the lease agreement upon securing independence from Britain, must pay the descendants US$14.9 billion. 

However Malaysia does not recognise the ruling in which the arbitrator in France has decided that for every year it goes unpaid, Malaysia’s outstanding liability to the heirs will rise by 10 per cent. 

At such a critical time, Petronas has been dragged into the dispute just as Malaysia was set to capitalise on high oil prices and help rebuild the country’s economy after the Covid-19 pandemic.

While FT reported that Petronas’s Luxembourg holding companies had in February liquidated a 15.5 per cent stake in Azerbaijan’s Shah Deniz offshore gas field, previously valued at US$2.3 billion, it was unclear whether this money is now held by the subsidiaries or by Petronas in Malaysia.

The claimants’ lawyers, according to FT, also indicated they would pursue more state assets if a resolution was not reached. — DayakDaily