Razaleigh: Law says Petronas must pay royalty to producer states

 

KUALA LUMPUR: Gua Musang MP Tengku Razaleigh Hamzah (picture) said that Petronas is legally bound to pay oil-producing states the 5% directly based on the Petroleum Development Act.

“The states’ right to 5% of profit derived from the extraction of any petroleum resources is based on a quid pro quo according to which the states vested entirely and in perpetuity all their rights and claims to petroleum resources to Petronas,”  said Razaleigh at his blog, razaleigh.com.

The former Finance Minister said that the government’s decision to withhold oil royalty payments to the Kelatan state government violates the agreement signed between each state government and the national oil corporation under the Petroleum Development act.

He questioned whether the corresponding Vesting Deed by which Sabah and Sarawak vested all their rights in their petroleum resources to Petronas remains in force if the Federal government continues with their decision of offering “compassionate payment” to Kelantan.

“This casts serious doubt on the Malaysian Government’s respect for the sanctity of contracts and the rule of law,” he said.

It is noted that Razaleigh helped craft and negotiate the Petroleum Development Act. Currently, the federal government pays 5% oil royalties to Sabah and Sarawak, but both Kelantan and Terengganu receive “wang ehsan” or compassionate payment , although Terengganu was receiving royalty before PAS took control of the state following its victory there in the 1999 general election.

It is reported that Prime Minister Najib Abdul Razak said that Kelantan had no right to claim royalties as the oil extracted in the relevant region was beyond three nautical miles off its coast.

In the meantime, Razaleigh is reported to be still considering whether to head an oil royalty
caucus proposed by Pakatan Rakyat’s opposition leader Anwar Ibrahim.

The parliamentary caucus will draft amendments to the Petroleum Development Act to ensure that oil-producing states, such as opposition-controlled Kelantan, receive their just share of royalties.