Expert: 20% oil royalty not good for Sabah

Petronas can be reduced to being one of the oil contractors in Sabah instead of calling the shots in the oil and gas sector

KOTA KINABALU: The Sabah Government can generate RM7.2 billion a year from wielding ownership of the state’s oil and gas resources under the Federal Constitution Schedule 10 (Part V)(3) compared with the 5 per cent oil royalty of RM1 billion a year. “In fact, the oil royalty was no royalty at all but cash payment.”

Parti Kerjasama Rakyat (Pakar) Secretary-General Zainnal Ajamain was getting to the point that he wanted to make i.e. begging Petronas and the Federal Government for 20 per cent oil royalty, up from the measly present 5 per cent, should not arise. “The emergency laws were repealed on 24 November 2011. This means that we can exercise ownership of our oil and gas resources but provided we give up the 5 per cent so-called royalty option.”

Zainnal recalled that Chief Minister Musa Aman confirmed in the Sabah Assembly last year, in response to a question from Kapayan assemblyman Edwin Bosi, that all land matters within the state’s territorial waters automatically reverted to the Sabah Government following the repeal of emergency laws.

Both the Continental Shelf Act 1969 and the Petroleum Mining Act 1966 ceased to have effect within six months of the emergency laws being repealed on 24 November 2011.

“The Acts are no longer applicable to Sabah as they were extended to the state by virtue of the Emergency Ordinance 1969 after the 13 May incident in the peninsula,” explained Zainnal. “What this means is that the Sabah Government can deal directly with the oil contractors now reporting to Petronas.”

“The national oil corporation would be reduced to being just one of the contractors in Sabah instead of calling the shots in the state.”

Taking the 5 per cent means not exercising ownership of our oil and gas resources, reiterated Zainnal. However, he said, the Sabah Government prefers to take the RM1 billion under the five per cent oil royalty, because under Schedule 10, the 10 per cent export duty on petroleum products will give the state only RM50 million a year, based on an export market of RM500 million a year.

“They just see the RM1billion and forget about the need to establish ownership of the oil and gas resources to get a bigger share of the revenue through joint-ventures, above and beyond the 10 per cent export duty.”

He conceded that RM50 million was a pittance compared with RM1 billion but argued that reclaiming the 10 per cent export duty option, would help establish the state’s ownership of oil and gas resources, and this would enable the Sabah Government to decide on joint-ventures with oil and gas companies working the fields in the state.

“Oil and gas generates about RM18 billion a year and if Sabah opted for the 10 per cent export duty option, which gives it the ownership of the oil and gas resources, the state government can net about RM7.2 billion or 40 per cent of the RM18 billion,” he pointed out. “What’s a billion ringgit compared with RM7.2 billion?”

He lamented that because the state opted for the 5 per cent oil royalty, blinded by the immediate RM 1 billion cash payment a year, the Sabah Government has been reduced to begging the Federal Government to allow it to participate in joint-ventures in upstream and downstream activities in the oil and gas sector.

“Again, this is because by opting for the 5 per cent, we no longer exercise ownership of our own oil and gas resources.”