Court says no to PETRONAS’ push for full trial in Shell gas payment dispute with PETROS

By DayakDaily Team

KUCHING, Oct 8: The Kuala Lumpur High Court has rejected Petroliam Nasional Bhd’s (PETRONAS) request to turn Shell MDS (Malaysia) Sdn Bhd’s gas payment dispute into a full trial with witnesses and cross-examination, ruling that the dispute between PETRONAS and Petroleum Sarawak Berhad (PETROS) concerns issues of legal entitlement rather than factual controversy.

In a statement, the Premier of Sarawak’s Office said the Court dismissed PETRONAS’ application (Enclosure 84) to convert the ongoing interpleader proceedings in Originating Summons No. WA-24NCvC-4367-11/2024 into a writ action.

The Court held that an Originating Summons under Order 17 of the Rules of Court 2012 (ROC) is a self-contained process designed to resolve competing claims against a neutral party. Converting it into a writ action would fundamentally alter its nature and defeat the very purpose of an interpleader proceeding.

The interpleader case was initiated by Shell MDS (Malaysia) Sdn Bhd to determine to whom payments should properly be made following overlapping claims from PETRONAS and PETROS for the supply of gas.

PETRONAS had sought to convert the Originating Summons into a writ action on grounds that the matter involved complex factual disputes requiring oral evidence and cross-examination.

Both PETROS and the Sarawak government opposed the application, arguing that Order 17 already provides a complete procedural framework to determine both factual and legal questions without changing the nature of the proceeding.

They also contended that PETRONAS’ bid would only serve to complicate and delay the resolution process.

In its decision, the High Court agreed with Sarawak’s argument that Order 17 proceedings are specifically designed for neutral stakeholders like Shell MDS who face competing claims over the same payment.

The Court found that converting the case into a writ action would turn it into a fully adversarial proceeding, undermining the objective of an interpleader process.

It further held that PETRONAS’ attempt to broaden the dispute beyond the question of entitlement, particularly into constitutional matters, was impermissible under Order 17, as the scope of such proceedings is limited to determining to whom payment should be made, not to reopen wider constitutional or policy questions.

The Court also noted that the dispute could be resolved through documentary evidence without the need for oral testimony, as it involves legal entitlement rather than factual controversy.

The case has been fixed for case management via e-review on Nov 10, 2025.

According to The Edge Malaysia, the proceedings were also observed by federal government representative federal counsel Muhammad Muhairi Mohamad Noh, PETROS counsel Foo Joon Liang and Sarawak legal advisor Datuk JC Foong.

Shell MDS, represented by counsels Christopher Leong and Janet Chai Pei Ying, filed the OS against PETRONAS and PETROS in November 2024, seeking a court ruling on whether payments for gas supplied to its Bintulu plant should be made to PETRONAS or PETROS after it received invoices from both companies.

The company had entered into a gas supply agreement with PETRONAS in 2020 and subsequently signed another with PETROS in 2024, following Sarawak’s declaration of PETROS as the State’s sole gas aggregator.

Shell MDS later obtained a court order to temporarily suspend payments to both entities while ensuring the continued supply of gas. PETRONAS, however, challenged the suspension, leading the Court of Appeal to direct Shell MDS to make payment to PETRONAS and to expedite the resolution of the dispute.

Shell MDS reportedly owes PETRONAS close to RM1 billion, with payment initially due on Monday, Oct 6.

Separately, PETROS has initiated legal proceedings against PETRONAS in the Kuching High Court to prevent the national oil company from drawing on PETROS’ bank guarantee for gas payments, contending that PETRONAS lacks a valid operating licence under Sarawak’s laws. — DayakDaily

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