I was looking at the documents as below

A careful look at the deed will show that this is a State government trying to grant POWER to a Corporation (created by parliament). There is also a clear ADMISSION by the Federal govt at that time that this resources and power fell under the exclusivity of the State.

The problem here is that whether a State government could validate this Act merely by a GRANT under the Petroleum Development Act (PDA). In short, whether the PDA (not being a Federal government entity but a separate entity in the form of a Corporation) is capable of being granted such power, resources by an Act of Parliament.

There is also the issue of the word “Malaysia” which is beyond the power of the State government as its Constitution is only limited to within said State boundaries (whether onshore or off-shore).

Look at the Federal Constitution

74. Subject matter of federal and State laws.

(1) Without prejudice to any power to make laws conferred on it by any other Article, Parliament may make laws with respect to any of the matters enumerated in the Federal List or the Concurrent List (that is to say, the First or Third List set out in the Ninth Schedule).

(2) Without prejudice to any power to make laws conferred on it by any other Article, the Legislature of a State may make laws with respect to any of the matters enumerated in the State List (that is to say, the Second List set out in the Ninth Schedule) or the Concurrent List.

(3) The power to make laws conferred by this Article is exercisable subject to any conditions or restrictions imposed with respect to any particular matter by this Constitution.

(4) Where general as well as specific expressions are used in describing any of the matter enumerated in the Lists set out in the Ninth Schedule the generality of the former shall not be taken to be limited by the latter.

77. Residual power of legislation.

The Legislature of a State shall have power to make laws with respect to any matter not enumerated in any of the Lists set out in the Ninth Schedule, not being a matter in respect of which Parliament has power to make laws.

Under the CURRENT schedule 9 of the Federal Constitution

The federal govt is in charge of

4. Civil and criminal law and procedure and the administration of justice, including -

(j) Admiralty Jurisdiction;

8. Trade, commerce and industry, including -

(j) Subject to item 2 (c) in the State List: Development of mineral resources; mines, mining, minerals and mineral ores; oils and oilfields; purchase, sale, import and export of minerals and mineral ores; petroleum products; regulation of labour and safety in mines and oilfields;

9. Shipping, navigation and fisheries, including -

(a) Shipping and navigation on the high seas and in tidal and inland waters;

(b) Ports and harbours; foreshores;

(c) Lighthouses and other provisions for the safety of navigation;

(d) Maritime and estuarine fishing and fisheries, excluding turtles;

(e) Light dues; and

(f) Wrecks and salvage.

Now in the State list at 2(c) it says

(c) Permits and licences for prospecting for mines; mining leases and certificates;

Other than the admission above, common sense must prevail as these petroleum resources would be hidden under the sea (in the seabed) which are still State matters (being not in the Fed nor State list above). So while the Federal govt has power to legislate the development of the natural resources, it does not have the power to legislate the territories (sea-beds) where these resources are found.

And even assuming this Power is granted to Petronas, it is wrong to grant this in perpetuity (or irrevocable) as this is a state power and will prejudice the rights of the inhabitants of the State in the same way as usurping the territorial rights of the state government to an non-governmental entity (ie Petronas) which’s only concern is exploiting the resources.

The alternative view is that the State still has this power as it could not validly be granted to a corporation (even by an act of Federal Parliament as this power is a RESIDUAL power beyond the Federal being one that is not assignable or grantable) and as such the State still possess the power to make laws as to its sea-beds including all natural resources therein underground, ie petroleum.

More important if you must ask the obvious, is that there is NOTHING in the Federal constitution which expressly allow the granting of residual power to an non-government entity – ?? … Ops did Petronas know this ?
The other obvious question is what was the motive for state governments to grant away their natural resources for almost nothing ?

So what has this got to do with Sabah you asked ? Well, think about this for a while as this could be sensitive ?