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Understanding the Petroleum Development Act of 1974

Posted on January 27, 2022 in

The long, deep history of the Petroleum Development Act (PDA) of 1974 continues to regulate the gas industry worldwide today.

The act passed by the Malaysian government is twofold in purpose: to provide the exploration of petroleum onshore and offshore, as well as to control all downstream activities and development relating to petroleum and its product. The act also vested the entire ownership in and exclusive rights to one corporation, PETRONAS (Petroliam Nasional Berhad).

We did a deeper dive into this nearly 50-year act to break it further down into a few more comprehensive details and understanding.

Why Was PETRONAS Formed?

The formation of PETRONAS as a national oil corporation repositioned Malaysia’s control over its petroleum resources. This power shift also evolved from working on concessions into contractual agreements with oil companies worldwide to maximize the value of petroleum. 

Since 1975, the company has grown as an international oil and gas company serving 35 countries.

Because of PETRONAS, 5,943 PDA licenses were issued in 2017 to businesses that market or distribute petroleum or petrochemical products. Out of that total number of licenses, 3,425 were given to retailers and 2,518 were given to commercial companies. Malaysia’s oil, gas, and energy segment of the economy was also forecast to increase the National Gross Income (GNI) and create 52,300 jobs in 2020.

Why Was the PDA Needed?

The petroleum/gas industry is a prominent fixture in Malaysia, benefiting the government by creating jobs, creating a support system for the country’s economy, and significantly improving the government through the act’s taxes and royalties. The industry, in fact, has contributed to one-fifth of the nation’s GDP over the past decade and more than 15 percent of the government’s revenue from 2015 to 2020. 

Because of the PDA in 1974, the Malaysian gas industry has grown to be the third-largest liquified natural gas (LNG) exporter in the world, after Qatar and Australia. Over the last 30 years, Malaysia delivered more than 10,000 cargoes. In 2017, it exported 26.71 tons of LNG, which equals valuable foreign exchange for the country. 

How Does the PDA Benefit the Environment?

The PDA of 1974, along with the Environmental Quality Act (EQA) of 1974 and Petroleum Safety Measures Act (PSMA) of 1984, heavily regulates the oil and gas industry as it relates to the effects on the environment. 

Legislation through the EQA protects pollution of or disposal of waste in Malaysian soil, water, and air. It is prohibited for anyone, unless licensed, to spill any oil or mixture of oil into the country’s water. Licenses are required from the Department of Environment (DOE) and an Environmental Impact Assessment (EIA) is required before any potential project to evaluate its possible impact on the environment.

Because of the passing of the PSMA, laws are consolidated to manage the safe transportation and storage of petroleum by water, roads, railways, and pipelines. Two more regulations in 1985 back up the PSMA: one specifically monitoring pipelines and another managing transportation by water. For more information, contact the Houston explosion accident attorneys at The Doan Law Firm today.