Sunday, July 12

Bandar Kuching MP’s oily profits


NOWADAYS, it has become increasingly difficult to have faith or belief in what politicians, especially the PH Sarawak variety, say or promise. They amaze me with their total lack of conviction in what they say or perhaps they think that we, the voters, are intellectual fools. They show total absence of contrition when they break their electoral promises and put up the most unconvincing arguments for not being able to provide Sarawak with 20 per cent oil royalty as highlighted in their GE14 manifesto.

Take for instance, the statement by Bandar Kuching MP Kelvin Yii on a news portal (Aug 3) – ‘PH’s oil royalty deal way better than BN’s’. He said, “Under PH’s GE14 election manifesto, oil royalties worth 20 per cent of the gross value of oil plus 50 per cent of tax revenue collected in Sarawak was promised to the state government.”

The promises

First, reading the PH’s GE14 manifesto, the promises made therein were made to us, the voters, and not to the then Sarawak BN government. The PH’s GE14 manifesto was distributed and published to the people of Sarawak to plead for the support of those Sarawakians who are registered voters. Based on the promises, Kelvin Yii was elected overwhelming with a 33,000-vote majority as MP for Bandar Kuching.

Upon when elected, nothing was heard from him about the 50 per cent of tax revenue collected in Sarawak being given back to the state, and it is even unclear if he brought up this issue in Parliament. To rub salt into wounds, he now says that the new offer of 20 per cent of profits from oil produced in Sarawak is better than what BN had offered previously. What was offered by BN is irrelevant. What PH Sarawak promised is most important.

Define 20 per cent of profits

MP Kelvin Yii gave no facts and figures to show how good a deal the 20 per cent of profits from oil produced in Sarawak would be. Just pure assertions like puffs of hot air.

Everyone understands that ‘profit’ is, in simple language, revenue/income less operating and other expenses. In the case of oil production from Sarawak, how much profit made depends on production and operating expenses, which include depreciation and costs of exploration. The MP offers no clue as to how much Petronas’ cost of production is and what costs would be allowable for deduction from revenues. If the production costs incurred by Petronas are very high because they chose to pay higher contract fees to their Production Sharing Contractors, the profit margin would be lower and the 20 per cent could add up to only a miserly amount.

Also Kelvin Yii might want to explain what would happen if the price of oil falls below US$40 per barrel and Petronas’ costs of production, known in the industry, are higher than that sum. Will there be any profit at all?


Kelvin Yii must also explain whether by the term ‘profits’ PH meant Profit Before Tax (PBT) or Profit After Tax (PAT).

If it is PAT, Petronas has to pay tax to the federal government under the Petroleum (Income Tax) Act 1967 (revised 1995). This tax, known as PITA, is based upon 38 per cent of Petronas’ annual chargeable income. The rate could be increased by the PH government. If the 20 per cent is based on PAT (this is after payment of income tax to federal government), I can assure Kelvin Yii, the distributable profits (for which Sarawak will get only 20 per cent), will be very low.

He must also explain why the federal government gets 38 per cent from gross revenue in the form of PITA and Sarawak only gets 20 per cent of PAT, leaving Petronas and the federal government to share 80 per cent of PAT. Additionally, under the existing arrangements, the federal government also gets 5 per cent oil royalty, which is the same as that paid by Petronas to Sarawak, plus customs duties of RM2 per barrel of crude oil exported. In summary, under the new deal proclaimed as a “good deal” by Kelvin Yii, what the federal government and the Sarawak government get respectively will be as seen in the table (top right).

In the circumstances, Kelvin Yii must now convince Sarawakians that PH is giving Sarawak what he claims to be a “good deal”. Should he fail to do so, he better not contest in the next parliamentary election and Sarawak voters would surely know what to do with the PH candidates in the next Sarawak election due by 2021.

New proposal for PITA

I’ll give Kelvin Yii and his PH colleagues some clues on how to redeem their reputations. Ask the federal government to share the 38 per cent PITA with Sarawak on a 50-50 basis. Royalty should be paid only to Sarawak, where the oil and gas resources are taken based on Section 4 of the Petroleum Development Act, 1974. Therefore, there is no legal basis for the federal government to claim the 5 per cent royalty from Petronas. The royalty of 5 per cent currently received by the federal government should be paid over to Sarawak so that we get a total of 10 per cent royalty.

Since Kelvin Yii is part of the PH federal government, he and his PH Sarawak MPs must seek an equal share of PITA and ask the federal government to assign the 5 per cent royalty that it is currently getting from Petronas to Sarawak. This would be a fairer and more equitable distribution of the wealth from our oil and gas produced in Sarawak’s territory between the state and the Federation.

Kelvin Yii, the ball is now in your court. This is your KPI.

Chong Siew Chiang’s role

The MP for Bandar Kuching should not blame the BN government of the 1970s for “signing away oil rights in 1974”. In fact, the Petroleum Agreement and Vesting Order, to vest the petroleum rights on Petronas, were signed by the then Chief Minister in March 1975.

In 1974/1975, when the oil rights were “signed away”, the BN-SUPP assemblyman for Repok was Chong Siew Chiang – the father of Chong Chieng Jen, the MP for Stampin, and founder of DAP Sarawak. The Council Negri records show Chong Siew Chiang, then of BN-SUPP, never raised any objection, in the Dewan, to the “signing away” of Sarawak’s oil rights when he was the honourable member for Repok from 1974 to 1979. Was Chong Siew Chiang not part of the then BN government, which Kelvin Yii now complains about being responsible for “signing away” Sarawak’s oil rights? I leave it to the MPs for Stampin and Bandar Kuching to explain and the people of Sarawak to judge.

As a person now at the ripe age of almost 70 years, let me offer our newbie MP from Bandar Kuching some good fatherly advice. Have your facts and figures and history right before you speak publicly and remember these oft spoken words by the late Pehin Sri Adenan Satem, “You may fool some people some of the time, but you cannot fool all the people all the time.” If you should attempt to do so, you will soon find your reputation/integrity rating declining rapidly to 0 per cent.