The logo of Malaysian energy group National Petroleum Limited, commonly known as PETRONAS, is displayed at their booth during the LNG 2023 energy trade show in Vancouver, British Columbia, Canada, July 12, 2023.

A deal between Malaysia's state energy firm Petronas and the Sarawak government on local gas distribution is likely to dent Petronas' earnings by no more than 11%, less than previously expected, research firm CreditSights said.

The analyst said, however, the case set a precedent that could lead Sarawak to seek additional rights, and for other states to follow, potentially deterring investors.

Petronas and Sarawak's Petros did not immediately respond to a Reuters request for comment.

The negotiations between Petronas and Petros last year raised concerns over the impact on Petronas, which is a major contributor to federal coffers, and its operations in Sarawak, which holds over 60% of Malaysia's gas reserves.

In a note made public on Friday, CreditSights estimated the impact to be in the single-digit to 11% range as most of Petronas' gas revenue comes from liquefied natural gas (LNG), rather than local gas distribution. The Sarawak LNG complex accounts for 73% of Petronas’ total LNG sales.

"We view the outcome favourably for Petronas, which was more benign than we had expected given that Sarawak had contested for full control over its gas distribution rights," CreditSights said.

"We continue to expect Petronas to maintain its net cash position and for its gross leverage to worsen slightly in 2024, albeit from very healthy levels."

Malaysian Prime Minister Anwar Ibrahim said in January the deal would allow Petronas to retain its authority over oil and gas distribution in the country even as Petros gains control of the gas distribution rights in Sarawak.

Malaysia's Law Minister Azalina Othman in a written reply in parliament on Wednesday said Petros is the state's gas distributor, but that excluded LNG distribution.

Under the Malaysia Agreement 1963, Sarawak was granted special autonomy rights, including on natural resources and immigration. Sarawak has long sought greater control of its natural resources, and the state government last February appointed Petros to manage its natural gas distribution and sales in the state.

The Sarawak state premier's office declined to comment on Friday.