Sabah State Government assumes regulatory power for gas supply in Sabah

On 21 December 2022, the Prime Minister of Malaysia, Datuk Seri Anwar Ibrahim, announced that the Federal Government will hand over the power to regulate gas supply in the State of Sabah to the State Government of Sabah. According to the Prime Minister, the move is part of the Federal Government’s effort to honour the Malaysia Agreement 19631.2 
To give effect to the devolution of regulatory power for gas supply to the Sabah Government, three statutory orders (collectively the ‘Orders’) were issued on 4 January 2023, namely: 
  • the Gas Supply (Suspension of Operation of the Act for Sabah) Order 2023 [P.U.(A) 3/2023], which suspends the operation of the Gas Supply Act 19933 for Sabah; 

  • the Energy Commission (Suspension of Operation of the Act for Sabah) Order 2023 [P.U.(A) 4/2023], which suspends the operation of section 2 (interpretation) and section 14 (functions and powers of the Energy Commission) of the Energy Commission Act 2001 in relation to gas supply for Sabah; and 

  • the Borneo States (Legislative Powers) (Amendment) Order 2023 [P.U.(A) 4/2023] which amends the Borneo States (Legislative Powers) Order 2963 [LN 17/1963] which confers power of passing laws for the distribution of gas to the Sabah State Legislative Assembly. 
The Orders come into force today, 10 January 2023.
In a key related development, the State Energy Commission Bill 2023 and the State Gas Supply Bill 2023 that will provide the framework to regulate gas supply in the State of Sabah have been passed by the Sabah State Legislative Assembly today.4 The Chief Minister of Sabah, Datuk Seri Panglima Hajiji Noor has said that after the bill is enacted, the Energy Commission of Sabah will take over all regulatory power for onshore gas supply (regasification, transmission, distribution, use of gas by private licensees and retail) in Sabah with immediate effect.5
With the issue of the Orders and the passing of the gas supply bills by the Sabah State Legislative Assembly, the legal framework for the transfer of the powers to regulate gas supply in Sabah to the Sabah Government is complete. The final steps that remain are for the Sabah Government to operationalise the Energy Commission of Sabah and ensure a robust infrastructure is in place to facilitate the transfer of regulatory power.
Alert by Fariz Abdul Aziz (Partner) and Tan Wei Xian (Senior Associate) of the Oil and Gas and Energy Practice of Skrine.

1 The Malaysia Agreement 1963 was signed on 9 July 1963 between the United Kingdom, the Federation of Malaya, North Borneo (Sabah), Sarawak and Singapore. The agreement, inter alia, resulted in the formation of Malaysia comprising Peninsular Malaysia, Sabah, Sarawak and Singapore. Singapore left Malaysia in 1965.
2 PM: Government to hand over gas supply to regulatory power to Sabah,, 21 December 2022.
3 The Gas Supply Act 1993 provides, inter alia, for the licensing of the import into regasification terminal, regasification, shipping, transportation, distribution, retail or use of gas in the supply of gas through pipelines, the control of gas supply pipelines and installations.
4 Sabah passes two bills related to transfer of gas supply regulatory power,, 10 January 2023.
5 Sabah to approve gas supply bill soon, says CM,, 21 December 2022.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact