Oil royalty based on profit – PM

PM defines oil and gas royalty as a percentage of the profit made from the sale of the natural resources

Tun Dr Mahathir Mohamad

KUCHING: Prime Minister Tun Dr Mahathir Mohamad defines oil and gas royalty as a percentage of the profit made by Petronas paid to the states from where the natural resources were extracted.

He gave this explanation during a press conference in Kuala Lumpur after chairing a Parti Pribumi Bersatu Malaysia Supreme Council meeting yesterday.

Dr Mahathir in the Parliamentary sitting on Thursday said the PH government would fulfil its promise to give 20 per cent oil royalty to the oil-producing states including Sarawak.

However, he seemed to clarify his earlier statement later when speaking to reporters outside the Parliament house by saying that the 20 per cent payment will be based on profit instead of production.

Yesterday, responding to a question from a reporter at the press conference on the two different statements he made on payment of oil and gas royalty he said, “Royalty is from profit, if you make 100 million, 20 million will be the royalty. It is based on the profit made by Petronas in that area. What we collect in Terengganu we will not pay to Sarawak or Sabah.”

Earlier, Minister of Tourism, Arts, Culture, Youth and Sports Datuk Abdul Karim Rahman Hamzah in response to Dr Mahathir’s statements on Thursday said the payment of 20 per cent oil royalty promised by the Pakatan Harapan (PH) federal government to Sarawak should be based on the value of the production instead of profits.

Abdul Karim pointed out that there is a huge difference between 20 per cent of production value and profits.

He said if payments were based on profit, Sarawak is likely to receive lower sum than the current five per cent in royalty after taking into account the production costs.

“What Prime Minister Tun Dr Mahathir Mohamad said is
not clear as he at one time mentioned 20 per cent oil royalty and on another occasion he said 20 per cent of the profits.

“There is a big difference in this matter and if royalties are paid based on profits, world oil prices and high production costs, the 20 per cent profit can be lower than the current five per cent royalty,” he said.

He said this when met by reporters after a press conference on the 2018 Stage Malay Dance and Malay Song Competition at Rumah Sarawak here yesterday.

Abdul Karim said Sarawak’s stand was clear, that was to claim 20 per cent royalty based on the value of the production.

This royalty payment is vital for Sarawak to carry out the development in the state.

“This is our resources, which have been given to other states and although Sarawak is not under PH it is wrong for PH government to treat Sarawak that way,” he said.

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