Datuk Abd Karim Rahman Hamzah
KUCHING: Parti Pesaka Bumiputera Bersatu (PBB) vice president Datuk Abd Karim Rahman Hamzah says the federal Pakatan Harapan (PH) government is beating around the bush, and back-peddling from one of the election manifestos – giving 20 per cent oil royalty to Sarawak.
Abd Karim, who is Minister of Tourism, Arts, Culture, Youth and Sports said he wanted the PH government to be specific on its promise to give Sarawak 20 per cent oil royalty.
He said if the regulatory laws on the oil royalty is defective then it should be amended.
“Just be specific. If the law needs amendment, then amend it. Don’t beat around the bush. Your promise in the manifesto is 20 per cent royalty. It’s not 20 per cent profit sharing.
“First, it’s 20 per cent royalty on production, then it’s 20 per cent on profit. Now, the 20 per cent is not possible because the Petroleum Development Act 1974 only allows10 per cent, and the Act needs to be amended first.
“Why is the PH government putting us on a wild goose chase? Or, are they trying to hoodwink us that they are not able to commit to their election manifesto pledge by giving us so many excuses?.
“Be a gentleman. Sarawak is not a small child for you to dangle carrot and goodies to. Sarawak needs lots of fund to develop its infrastructure, repair the hundreds of dilapidated schools, rural clinics, water and electricity supplies, communication system and roads. These are fair requests,” said the Asajaya assemblyman.
“We are not asking for proceeds of oil and gas extracted from Terengganu or Kelantan waters to be given to Sarawak. What we want is a bigger allocation of our own oil and gas extracted from our territory to be given back to us.
“The balance can be used to develop other Malayan states and Sabah. We don’t ask for all oil and gas from Sarawak to be given to Sarawak only. We understand that other states in Malaysia need to be developed too.”
Abd Karim was responding to Economic Affairs Minister Mohamed Azmin Ali’s warning to the people yesterday that Petroliam Nasional Berhad (Petronas) might cease operations if it acceded to demands for the 20 per cent oil royalty to be paid based on gross production to oil-producing states, instead of net profit.
Meanwhile, Ayer Hitam MP Wee Ka Siong later panned Azmin when the former was speaking to journalists at the parliament lobby in Kuala Lumpur yesterday.
Wee said it was widely accepted that the definition of oil royalty is based on gross production.
“After having made a promise, don’t change the definition because you are finding it tough to implement. You should just admit and be frank (that it cannot be done),” Wee said.
Azmin said: “Our position is, if you pay 20 per cent based on gross value, then we have to cease the operations of Petronas. We can’t afford to do this because this is the national oil company.”
The proposed 20 per cent oil royalty payment to producing states cannot be implemented yet as it contravenes the Petroleum Development Act 1974, Azmin said, adding that the implementation of the proposal would take time as the provisions of the Act need to be amended first.
“If Petronas is required to increase oil royalty to 20 per cent of gross production to oil-producing states, it would have serious implications on the financial position of Petronas and the federal government,” Azmin said.
Mustapha Mohamed (BN-Jeli) also raised a similar issue in parliament when he pointed out that the oil-producing states had expected the promised 20 per cent to be based on production and not profit.
To this, Azmin said when PH drafted its manifesto, the 20 per cent was based on net profit.
“It (the 20 per cent of net profit figure) was arrived at after we analysed the cost structure,” he said.
However, Azmin promised to engage the oil-producing states over the matter.
“Whether it will be 20 per cent of net profit or gross value, we will discuss with the relevant state governments,” he said.
Azmin also said that the PH’s Blue Book merely promised a fair distribution of oil royalty to these states.
“At this time, Petronas needs to pay 10 per cent cash payment of gross production in oil and gas to the federal government. From this amount, five per cent each is taken by the federal government and state government.”
“Petronas makes this payment twice a year, in February and August. The 10 per cent cash payment is the gross value per barrel at market value. Payment is made regardless of whether oil production at the (drilling) site is profitable or not. From this value per barrel, 70 per cent from the gross production of oil and gas is actually the cost of recovery that is borne by Petronas.”
Azmin added that the oil company is further saddled by other necessary payments like the Petroleum Income Tax Act, and that the PDA74 clearly states that the giving of royalty requires an agreement from oil-producing states.