Murky oil blocks deal could cost Sabah billions of ringgit

Sabah should have earned at least US$5 billion (RM16 billion) from the production of oil from Blocks L and M ceded to Brunei, based on its agreement with Petronas, said former chief minister Harris Salleh.

The veteran politician, however, said that the state may no longer have the right to demand the amount since both blocks have been ceded to Brunei.

"To my knowledge, Murphy Sabah Co Ltd was awarded the two blocks in 2003 worth more than US$100 billion in oil revenue and Sabah is entitled to 5%.

"Now that the blocks have been ceded and Petronas has the right to jointly develop the fields with Brunei, is Sabah still entitled to the oil royalty or profits from Petronas?" he asked.

He said that if the area was indeed historically and legally part of Brunei, both the state and federal governments should follow procedures to formalise the matter.

However, he said that in his opinion if Limbang in Sarawak is historically part of Brunei, then the Malaysian government should find a solution to the matter without further delay.

Sabahans have been concerned since the controversial deal was revealed by former prime minister Dr Mahathir Mohamad who said his successor (Abdullah Ahmad Badawi) had relinquished the two blocks to Brunei.

Abdullah subsequently confirmed that Blocks L and M now belonged to Brunei but the agreement provided that Malaysia would be allowed to take part in joint development of oil and gas on a commercial basis in the two areas for 40 years.

"The financial and operational modalities for giving effect to this arrangement will be further discussed by the two sides.

"This means that in so far as the oil and gas resources are concerned, the agreement is not a loss for Malaysia," said Abdullah, who visited Bandar Seri Begawan on March 15 and 16 last year before he stepped down as prime minister two weeks later on April 3.

Trade-off for Limbang

Mahathir had also said Abdullah had surrendered the two blocks in negotiations with the Sultan of Brunei in exchange for Limbang, which straddles the Sarawak-Brunei border.

Blocks L and M are not far from the Sabah coast. Block L alone is projected to produce more than 150,000 to 200,000 barrels per day, which could double Brunei’s oil production.

Prior to the agreement ,Murphy Sabah held a 60% stake in Block L and a 70% stake in Block M.

According to Mahathir, in return for surrendering the two blocks, Abdullah negotiated with the Sultan of Brunei to get back Limbang.

Limbang was, however, reportedly not mentioned by name in the letters of exchange.

“No Petronas representatives were present, only foreign office staff and the foreign affairs adviser to the PM,” wrote Mahathir.

Mahathir himself was at one time reportedly trying to settle the dispute over Limbang.

The Far Eastern Economic Review was sued in 1987 during the Mahathir administration for suggesting that there could be a “possible sale” of Limbang to Brunei.

courtesy of FMT