Court of Appeal clarifies payment order in high-stakes gas dispute involving Petronas, Shell MDS and Petros

KUCHING (Feb 5): The Court of Appeal in Kuala Lumpur has issued a clarification on a payment order in the ongoing gas supply dispute involving Petroliam Nasional Bhd (Petronas), Shell MDS (Malaysia) Sdn Bhd and Petroleum Sarawak Bhd (Petros).

The clarification concerns the wording of a “draft order” — the legal directive instructing Shell MDS to pay for gas supplied by Petronas after an injunction was lifted in September 2025.

The injunction had paused payments following competing invoice claims from Petros, according to a report by The Edge.

The dispute began in late 2024 when Shell MDS received invoices from both Petronas and Petros for the same gas supply.

To avoid double payment or operational disruption at its Bintulu plant, Shell MDS applied to the courts to suspend payments to both parties until the rightful recipient was determined.

While the High Court initially allowed Shell MDS to withhold payment, the Court of Appeal overturned the decision on Sept 22, 2025, ruling that Petronas must be paid to prevent a “risk of injustice”.

The court directed Shell MDS to settle all outstanding sums owed to Petronas from August 2024 up to Oct 5, 2025, with payment due by Oct 6, 2025.

During proceedings, Shell MDS’ counsel Christopher Leong stressed the need for precise wording in the formal order for corporate governance purposes, noting that Shell MDS represents several other companies.

A clear directive was deemed necessary to justify transferring nearly RM1 billion in outstanding payments and interest to Petronas while the dispute with Petros remains unresolved.

Petronas’ counsel Khoo Guan Huat confirmed that although all parties had agreed in principle to a draft order, disagreements persisted over phrasing, particularly regarding interest calculations and future payments.

A three-member bench led by Federal Court judge Datuk Azimah Omar agreed to amend the order to remove ambiguity.

Under the revised directive, Shell MDS must pay, by 5pm on Oct 6, 2025, all sums due and payable (including accrued interest) under the PETRONAS Gas Supply Agreement 2020; and Shell MDS must continue paying Petronas for future gas supplies in accordance with the same agreement.

Meanwhile, the broader legal dispute over gas ownership rights in Sarawak remains before the High Court in Kuala Lumpur.

High Court judge Mahazan Mat Taib had earlier ruled that a full trial with witnesses was unnecessary, as the case primarily involves legal questions rather than factual disputes.

Leong informed the court that a hearing date is yet to be fixed as parties are still exchanging affidavits. The Court of Appeal has ordered that the matter be expedited.

Pending the High Court’s final ruling, Shell MDS will continue making monthly payments to Petronas, estimated at RM70 million to RM80 million.