The chances of Petronas agreeing to state’s request for oil royalty hike dims as outcome of its meeting with Chief Minister remains under wraps
KUCHING: The chances of Petronas acceding to Sarawak’s request for oil royalty hike from the present five to 20 per cent seems to be fading as the silence on the issue by both the state and national oil company drags on.
On June 30 top Petronas officials gave a briefing on its operations and revenue to Chief Minister Tan Sri Datuk Amar Adenan Satem and his state cabinet ministers.
What transpired during the briefing on June 30 in response to the state’s request is still under wraps despite a promise to the local media of an official press statement from the Chief Minister – as was conveyed by the state ministers who accompanied him at the meeting.
The pessimism over the success of the state’s request was fueled by an article in the Edge Malaysia on July 7 titled ‘Alternatives to the oil royalty hike’, which deliberated at length on the issue, quoting various unnamed sources close to the matter to back up its arguments.
It is likely that sources which supplied the information for the article are from Petronas in its effort to rationalise its stand on the oil royalty hike.
The article said Petronas is seen to be open to alternative options in order not to go against the Petroleum Development Act 1974 – a law agreed upon by Petronas, the federal government and the states.
It added that an increase in oil royalty is more or less out of the question and one option is for the state government to become an investor in Petronas’ activities in Sarawak.
“This means the state will get a five per cent oil royalty as well as a percentage of the profit from every barrel of oil Petronas produces in Sarawak.”
The article quoted sources familiar with the issue as also saying the state government understood the impact of an oil royalty hike and that it could be detrimental to the national oil company.
The article said it is not known whether the state government “will press on with its demand.”
Meanwhile, Land Development Minister Tan Sri Datuk Amar Dr James Masing, when contacted by thesundaypost, concurred that Petronas may not find it practical to accede to the royalty hike.
“Petronas may find the 20 per cent demand for oil royalty by Sarawak not practical as it may affect the product sharing contract (PSC) with other oil companies,” he noted.
Masing believed the increase in oil royalty could be compensated through other means.
“Petronas is looking at other modes of compenstations – through increase in job opportunities, contracts and PSC in other gas fields with state-owned companies. The sum total may be equivalent to the percentage of what we have requested,” he said.
The Minister personally believed the state’s demand for 20 per cent in oil revenue is not so much the quantum per se.
“It reflects the frustrations of Sarawakians that we feel we have been short-changed in our oil revenue earnings.
“We have been short-changed in our infrastructure and public amenities development, among others.
“If our infrastructure and other development are on par with peninsular Malaysia, then our feelings of being short-changed from our oil and gas earnings will be minimised and the demand for 20 per cent will become irrelevant and later disappear,” he said in a strongly worded statement.
He pointed out that the federal government and Petronas must understand the rationale behind Sarawak’s request for a hike in oil and gas royalty.
Commenting on the issue, PKR state vice president See Chee How said Petronas was subtly trying to whitewash the royalty hike issue through some media.
He pointed out that based on the article by the Edge, they were trying to project that after the dialogue with the state government, the latter now understood the situation and the national oil company was now looking at other forms of financial investments and grants for Sarawak – with the possibility that the state government will “no longer press on the royalty hike demands.”
See who is also Batu Lintang Assemblyman pointed out that they then fed the media with figures like giving 73.4 billion to the state governmentt last year when in actual fact, only 1.65 billion went to Sarawak,
“Petronas’ capital expenditure towards the ‘cost oil’ is a gross misrepresentation (to the media) that it is injecting a lot into the PSC in Sarawak,” he said.