In 1974 , the Petroleum Development Act was tabled in parliament and approved . PETRONAS was incorporated on 17 August 1974 and Tengku Razaleigh became its inaugural chairman . Initially , Exxon and Shell refused to surrender their concessions and refused to negotiate with PETRONAS . PETRONAS then served a notice to all foreign oil companies that after 1 April 1975 , all the foreign oil companies would be operating illegally in Malaysian waters if they do not start negotiations with PETRONAS . After a few rounds of negotiations , foreign oil companies finally surrendered their concessions to PETRONAS . While all other oil producing states in Malaysia signed the petroleum agreement , Tun Mustapha , the chief minister of Sabah , stubbornly refused to sign the oil agreement , complaining of the meagre 5 % oil royalty . Mustapha requested for 10 to 20 % oil royalty , otherwise he would threaten to pull Sabah out of Malaysia . Tengku Razaleigh refused to bulge in . The Malaysian federal government then make another deal with Datuk Harris Salleh ( who was out of favour with Tun Mustapha ) to establish BERJAYA party and oust Tun Mustapha out of power . However , Harris was reluctant to become chief minister of Sabah and Fuad Stephens was asked to assume to chief minister post if BERJAYA were to come to power . BERJAYA successfully ousted Tun Mustapha in 1976 Sabah state election . One week after the 1976 air crash which killed the chief minister Fuad Stephens and other five state ministers , Harris signed the oil agreement . With Sabah entering the oil agreement , PETRONAS finally has total control of all oil and gas reserves in Malaysia
1976 air crash
1976 Sabah Air GAF Nomad crash
Petronas