WHAT HAPPENED TO PETROLEUM ROYALTIES?

By : STEVE YAMAN

IN EARLY August 2012 Prime Minister Datuk Seri Najib announced that a special committee be set up to carry out a comprehensive study of the petroleum royalty payments involving the eastern states of Peninsula Malaysia.

Putrajaya has pledged to look into a mechanism that will ensure a fair distribution of oil and gas revenue to producing states in West Malaysia. Najib said that the special committee would report their findings in six months.

It is now passed more than six months since his announcement and nothing seems to be forth-coming. Is this another election talk just to test the voters’ reactions?

The committee is chaired by former chief justice Tun Abdul Hamid Mohamad with members of legal experts from within and outside the country as well as representative from Terengganu, Kelantan and Pahang governments.

So far no detail has been released and one wonders why the committee’s scope covers only the eastern states of West Malaysia and does not include Sabah and Sarawak.

After the PM announcement, Sarawak CM Tan Sri Abdul Taib Mahmud was quoted as saying the State Government would discuss the need to review the 5 per cent petroleum royalty paid to Sarawak with the Federal Government.

Admitting that State Government and opposition leaders in the State have reached a consensus on the issue, Taib said both parties needed to meet and discuss the matter.

Sabah CM Datuk Seri Musa Aman at that time said that he believed that the State’s 5 per cent petroleum royalty issue is open for amicable discussions with the Federal Government.

Musa said that the good relationship between the State and Federal governments will benefit the Sabahans through large allocations which will propel the State forward. And he believed that this issue was opened for discussion and what’s important is that they will scrutinize the matter and reach the best decision for the mutual benefit of all concerned.

There is at present a 5% royalty for Sabah and Sarawak the people are not very happy about it. In the first place, what does the 5% represent? There is no proper basis being transparently revealed on the actual accounting and production records. You can make simple earning calculations from the daily metering records of incoming oil and gas from production fields to tank farms and outgoing to export sales.

So, what are the actual oil and gas production of the fields in Sabah, Sarawak, Kelantan and Terengganu? What are the total costs of production and sales for Petronas? We would then easily derive the income, gross and net profits, taxations and other breakdowns.

If the government is transparent and fair enough, the people would be provided with the profit and loss account, and other accounting statements. Otherwise, it has been many years since Malaysians have been kept in the dark.

There are four states in Malaysia that produce oil and gas, namely, Sarawak, Sabah, Terengganu and Kelantan. Sarawak was the first to produce oil since 1910 followed by Sabah. Petronas was established by the Petroleum Development Act 1974 (PDA).

The PDA ended Shell’s monopoly of the Sarawak and Sabah petroleum fields resulting in a mass retrenchment of workers and the demolishing of a small refinery in Miri, Sarawak. After that Sabah and Sarawak do not have any refinery despite being two of the largest oil and gas producing states in Malaysia making up more than 65% of total production.

The petroleum royalty issue in Terengganu was stopped in 1999 after Terengganu fell to PAS at the time of the premiership of Tun Mahathir. Instead of 5% paying royalties, Terengganu was paid “wang ehsan” or goodwill payments which opposition leaders and some BN politicians claimed were abused for wasteful projects.

In 2008, the 'wang ehsan' issue was hotly debated during the time of former PM Tun Abdullah A. Badawi. What really happened after that is still unknown today and conveniently forgotten until PM Najib suddenly came up with the idea to open the petroleum royalty issue for the east coast states.

The big tussle over whether Kelantan should be paid oil royalty is yet another example of politicians’ childishness in their public discussion of issues. Instead of laying out the facts and law objectively and comprehensively, our politicians seem more focused on outdoing each other, leaving the public in a haze of rhetoric and factional discourse.

Perhaps this is why the former chief justice and legal experts are appointed into the special committee reviewing the oil and gas royalty for the eastern states of West Malaysia.

There is no oil refinery in Sarawak or Sabah – all the refineries are located in West Malaysia states. Sarawak and Sabah are dependent on refined petroleum products from West Malaysia.

Top quality Malaysian crude oil and gas are exported directly overseas while we import low quality high sulphur content crude oil from the Middle East. Malacca and Negeri Sembilan (non-petroleum producing states) have refineries that supply some of the refined petroleum products we consume daily.

With the PM August 2012 announcement, what will be fair and transparent because everything seems very quiet and forgotten for now? The announcement was made involving the eastern states of Peninsula Malaysia.

The chief ministers of Sarawak and Sabah had jumped onto the issue so as not to be shelved aside and left behind in the study and discussions. Perhaps this was just another election announcement for Kelantan and Terengganu just to appease the people.

Everybody was happy with the PM’s announcement and is waiting for the result of the six months given for the special committee to study the issue before submitting its proposal to the Federal Government. Sarawak and Sabah state Barisan National component parties had all agreed to the idea and so have all the opposition parties that have been clamoring for a fair share of the petroleum returns and royalties.

Everybody in the eastern states of West Malaysia is also waiting see “what is in the bag” for them. For the people of Sabah and Sarawak, it looks like the chief ministers were obviously just trying to pretend that they are concerned but in fact they are just thinking of how much the “oil and gas” auto teller machines have for them.

These kinds of announcements had usually come at a time close to a General Election. In coming up with the PDA since 1974, the Federal Government had promised to be just, fair and transparent. It seemed that Petronas and the government had continuously fooled us into believing that they have done their best for the people. In doing their best, they have hidden so much information from the people. Why is so difficult to be transparent?

As we are getting so close to the 13th General Election, it is now time for us to make the right decision to appoint the government that is just, fair and transparent. Is it time to give the Pakatan Rakyat a “5 years trail mandate”? Petroleum royalty is one of the major issues for Sabah and Sarawak amongst others.