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Friday, November 2, 2012

Who Owns the Oil in Sabah & Sarawak?

The retired Judge of the Court of Appeal explains the problem faced by Sabah and Sarawak, and suggests a radical solution to the East Malaysian states’ oil woes.

Initially, if oil was found within the boundaries of a State in the Federation of Malaysia, it is owned by the State. J.C Fong in his book Constitutional Federalism in Malaysia, wrote, on p. 98:

“But, the subject of ownership of petroleum (today, an important source of national wealth with current high global energy prices), found both on land and in the continental shelf of the States of Sabah and Sarawak which lies within the boundaries of Sarawak, was never a matter brought up to the Inter-Governmental Committee and hence, not included in its Report. Prior to Malaysia Day, the Borneo States exercised powers over petroleum found within its extended boundaries, i.e. the seabed and subsoil which lies beneath the high seas contiguous to the territorial waters of the respective states. With their boundaries maintained by virtue of Article 1(3) of the Federal Constitution, after Malaysia Day, the two states continued to exercise rights over petroleum found within its territories, including those found offshore.”

You will note that this passage I have quoted from J.C Fong’s book says “… the continent shelf of the States of Sabah and Sarawak which lies within the boundaries of Sarawak“. The footnote for this sentence is:

“20. See Sarawak (Alteration of Boundaries) Order 1954. A similar Order was made for North Borneo by the Queen in Council as both North Borneo (now Sabah) and Sarawak were colonies of Britain.”
Section 2 of the Sarawak (Alteration of Boundaries) Order in Council reads:

“2. The boundaries of the Colony of Sarawak are hereby extended to include the area of the continental shelf being the seabed and its subsoil which lies beneath the high seas contiguous to the territorial waters of Sarawak.”
The subject of ownership of petroleum was not thought of in the Malaysia Agreement, with the result that no safeguards were written into the Constitution of the Federation of Malaysia on the ownership of oil of these two East Malaysian States.

In the meantime, this happy state of abundant financial affluence was enjoyed by East Malaysia until the Petroleum Development Act 1974 was passed by the Federal Government.

Section 2 of this Act states:

“2.(1) The entire ownership in, and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether on-shore or off-shore of Malaysia shall be vested in a Corporation to be incorporated under the Companies Act 1965, or under the law relating to incorporation of companies.
(2)  …
(3) The ownership and the exclusive rights, powers, liberties and privileges vested shall be irrevocable and shall enure for the benefit of the Corporation and its successor.”
Section 3 is as follows:

3.(1) …
(2) The Corporation shall be subject to the control and direction of the Prime Minister who may from time to time issue such direction as he may deem fit.
(3) Notwithstanding the provisions of the Companies Act 1965, or any other written law to the contrary, the direction so issued shall be binding on the Corporation.
Section 4 is particularly interesting:

4. In return for the ownership and the rights, powers, liberties and privileges vested in it by virtue of this Act, the Corporation shall make to the Government of the Federation and the Government of any relevant State such cash payment as may be agreed between the parties concerned.
And section 5 provides as follows:

5.(1) There shall be established a Council to be known as the National Petroleum Advisory Council consisting of such persons including those from the relevant States as the Prime Minister may appoint.”
The corporation referred to in s. 2(1) of the Petroleum Development Act 1974 is, of course, the National Petroleum Corporation (PETRONAS). It is unproductive to muse over who is the chairman – whether former or incumbent – of Petronas. The point is, it is a creature of the ruling government which is the owner of all the oil in the country and the prime minister decides how the cake is to be shared.

Now you know why the BN cannot afford to lose the next general election.

Although Petronas owns the oil in Malaysia by virtue of the Act, surely it must still buy the land where the oil is found. I doubt Petronas had done that with offshore oil from the States in East Malaysia, probably on the assumption that the continental shelf is on the seabed – even though it is within the boundaries of Sarawak and Sabah – so that there would be no one for Petronas to buy it from, forgetting (as pointed out earlier in the passage from J.C. Fong’s book) that the East Malaysian States own the seabeds as well as the area within their own boundaries.

The distressing part is, the Petroleum Development Act 1974 itself cannot be challenged in a court of law because of the doctrine of separation of powers between the judiciary and the legislature which is fundamental in a parliamentary democracy (see Pickin v. British Railways Board [1974] AC 765). Unless, of course, the Act is intrinsically unconstitutional vis-a-vis the Federal Constitution which it is not.

The only way, it seems to me, is to kill the goose that lays the golden eggs – i.e repeal this Act of Parliament.

Posted by NH Chan

61 comments:

  1. Petronas paid Sabah RM941.25 million in oil royalty this year, the highest amount ever in the State's history

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    1. The amount also exceeded the State Government's initial estimate of RM774.6 million, said Musa.

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    2. it should be RM3.65 billion under PR deal of 20%. afterall PM can decide to increase the oil royalty. so how? increase royalty or keep BN and pesuade Najib to match Anwar's offer. STAR prefers to fight for autonomy and take back the oil altogether.

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    3. DIFFERENCE OF OPINION

      (NH CHAN is a retired judge)

      Your Honour, I beg to disagree vehemently!

      With due respect, the PDA flagrantly infringes the 18/20 Points Agreement which specifically say that the countries of Sabah and Sarawak retained control of their finances and resources reflecting the Sabah Sarawak fears of being re-colonised and the need to safeguard their national rights and resources. .

      (What "national rights"? Please be reminded that Sarawak was an independent self governing nation and country from 1841 to 1941 and was recognised as such by the USA since 1850! It regain independence nominally on 22 July 1963).

      Thus because of such concerns the Malayan constitution was amended to mention some special relationship clauses with the 2 countries. However other than that the amendment merely legalised the annexation of Sabah and Sarawak as the 12th and 13th states of Malaya. We did not even get a new Constitution which was agreed to be done.

      Currently the legitimacy of Malaysian Constitution and the various Agreemenys are being challenged by the Sabah and Sarawak people as null and void.

      The 18/20 Points are therefore absolutely relevant to the interpretation of all subsequent legislations by the Malayan Parliament. as they reflect the concerns of the Sabah and Sarawak

      The literal interpretation of the Points Agreements is that we retained control of our territorial sovereignty under the agreement whereby we controlled immigration into Sabah and Sarawak.

      "Resources" cover our off shore oil fields (which UMNO recently illegally gave away some "blocks" to Brunei).

      If Malaya has not paid for the land then what they are doing is definitely ILLEGAL!

      The PDA in essence took away our oil rights! Sabah and Sarawak have been re-colonised and raped of their oil resources to develop Malaya and make many UMNO members and cronies billionaires from the rich contracts associated with Petronas.

      Let us not kid ourselves that Malaysia was created for Sabah and Sarawak's benefit. It was for UMNO Malaya's benefit!

      Sabah and Sarawak have been made the new colonies of Malaya! There were forcibly annexed as part of Malaya under the pretext of suppressing the Brunei Uprising and Sarawak guerrrilla independence war.

      But Sabah and Sarawak physically cultural and historically remain far far apart from Malaya!

      Annexation and colonisation is confirmed by the 49 years of looting Sabah Sarawak oil and making them the poorest states while Malaya was developed at their expense.

      This is "independence in Malaysia", a ponzi scheme designed by Britain in cahoots with their annointed Malayan successors. UMNO comfortably stepped into British colonial jackboots and stomped all over our rights including oil rights. They take all our oil and give back nothing. We have to beg for funds!

      The looting of our oil must be seen as defining the colonial relationship between Malaya and Sabah and Sarawak. The ruler and the colonised subjects.

      COMMENT POSTED BY SARAWAK NATIONALIST IN LOYAR BUROK·

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  2. Federal Government was now taking a look at the Petronas oil royalty issue and is expected to give its feedback at an appropriate time

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    1. the federal govt can give Sabah 20% oil royalty without anymore allocation from the federal development budget. in budget 2013, a sum of M2.9billion is to be allocated for Sabah for development budget

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  3. State Government was confident it would be able to provide sufficient allocation when it is time to pay the bond

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    1. don't trust it...

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    2. what bond that we are talking about here. the RM500m bond?

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  4. It is a typical opposition ploy to always deny the successes and achievements of the Government

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    Replies
    1. well it is wrong to denied the good deeds of the govt, but the oppositions are good at it. its a dirty political strategy. nevertheless its work.

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  5. Opposition by refusing to look and listen they continue to tell the people that the Barisan Nasional Government is incompetent, incapable and not struggling for the rakyat

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    1. lets the rakyat judge for themselves. I don't buy the opposition lies at face value. I worry about the unbalanced infrastructural developments between east and west malaysia though.

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  6. The POINT of the report is WHO really is OWNER of the Oils in Sabah and Sarawak,that in the END tells why these two states are below par in terms of development compared with Malaya,whist in fact are RICH in reserves,where and why are they left to BAG for what actually are theirs ...........

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    Replies
    1. is the oil revenue sharing structure based on international standard? how does the revenue sharing works in other countries?

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  7. The POINT of the report is WHO really is OWNER of the Oils in Sabah and Sarawak,that in the END tells why these two states are below par in terms of development compared with Malaya,whist in fact are RICH in reserves,where and why are they left to BAG for what actually are theirs ...........

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  8. BN should just give 20% ol royalty to Sabah and make everybody happy.

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  9. Sabah was paid by petronas one of the highest amount ever in history.

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  10. What is the feedback of the federal government looking into the petronas oil royalty issue?

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  11. It is noted that the amount also exceeded the state government's initial estimate.

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  12. I hope the government will provide sufficient allocation when paying the bond as proposed.

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  13. The opposition are always against the success of the government

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  14. Sabah menerima bayaran royalti minyak petroleum tahun ini sebanyak RM941.25 juta daripada syarikat Petroliam Nasional Bhd (Petronas), yang melebihi sasaran asal kerajaan negeri.

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  15. Ketua Menteri Sabah Datuk Seri Musa Aman, yang juga Menteri Kewangan Negeri, berkata kerajaan negeri menyasarkan RM774.6 juta untuk pembayaran royalti minyak tahun ini.

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  16. Jumlah yang diterima ini merupakan jumlah yang tertinggi dalam sejarah Sabah.

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  17. Jangan jadi hipokrit dan buta disebabkan otak kamu sudah kenah Brainwashed oleh BN UMNO.5 Peratus itu besar jika semua wang tersebut tidak singgah mana mana poket BN UMNO.Sabah yang kaya dengan hasil buminya jadi miskin sebab gara gara BN UMNO.Contoh: mana Musa dapat derma RM 40 juta jika tiada imbalan? Mana Musa dapat wang yang berada di Swiss Bank yang bernilai BERBILLION US DOLLARS.????


    Yang rakyat biasa dapat apa untuk 5 tahun??? BRIM RM 500?Tangki yang bernilai RM 250 jadi RM 2500?? atau tong gas? Kalau bukan disebabkan TEKANAN Pembangkang,KASTAM,JPN atau Immigresen ini dapatkah diberi kepada orang Sabah? Kalau BN UMNO kata YA,bererti BN UMNO ini penipu besar.

    Pernah namapat Istana Musa di Sandakan??? Kalau belum pergilah tengok sendiri...

    Untuk senang dan mewah,joint BN UMNO,.Dalam UMNO BN semua HALAL...


    Gonzales Lasak
    Ex 1 MSSR

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  18. Sabah has become the first state in Malaysia to supply compressed natural gas (CNG) via a virtual pipeline system.

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    1. Chief Minister Datuk Seri Musa Haji Aman said the approach undertaken by Sabah Energy Corporation (SEC) would enable a wide spectrum of users to benefit from the project.

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    2. The project is accessible to users who are located up to 70km from SEC's station at the Kota Kinabalu Industrial Park.

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    3. SEC is also currently exploring the possibility of bringing CNG to the east coast of Sabah and the Sipitang area.

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    4. As SEC would offer the gas cheaper than other fuels, Musa said it would complement the state's effort to make business activities in Sabah more cost competitive.

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    5. He also said CNG was a cleaner burning fuel compared to other types of fossil fuel and reduced pollution.

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    6. This is very important when viewed from the context of the state government's focus towards ensuring that our growth sectors practice initiatives that stress on environmental protection and sustainability.

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    7. Such a move also fits in with our focus on promoting Sabah as an eco-tourism destination.

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    8. Meanwhile, the Chief Minister urged industries that used highly polluting fuels to seriously consider switching to natural gas so that everyone could enjoy a cleaner environment.

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    9. He also said he was pleased that SEC has signed an engineering, procurement, construction and commissioning (EPCC) contract with Galileo of Argentina and Frugas Synergy Sdn Bhd.

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    10. In addition, SEC also signed two natural gas sales and purchase agreements with Ching Kuan Holdings Sdn Bhd and Colourcoil Industries Sdn Bhd.

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    11. There was a lot of effort put into this matter ensuring all required issues were resolved to the satisfaction of all parties concerned.

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    12. The Chief Minister added that currently the natural gas market handled by SEC was small and geographically scattered.

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    13. Due to these factors, it is not economical for SEC to distribute natural gas through the conventional way of underground pipelines.

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    14. This virtual pipeline is an alternative, and t was noted that SEC has taken the initiative to introduce this technology in Malaysia.

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    15. SEC is currently exploring the possibility of bringing natural gas to the east coast of Sabah, and south to the Sipitang area.

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    16. Musa encourageSEC to actively pursue these options as he is optimistic to seethe benefits of natural gas made available throughout the state.

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    17. From a macro level, he said oil that commanded a premium prices in the overseas market could be exported to bring in more foreign exchange to the country.

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    18. On the issue of oil and gas reserves, he noted that that in the case of our timber sector, Sabah did not take full advantage of the resource and instead focused on exporting round logs.

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    19. He admited that in the past, the state government did not place enough emphasis on adding value to timber, which could have created untold spinoffs for the state and the people.

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    20. Today, the focus, he said, has shifted to the oil and gas sector and therefore motioned that all concerned do not miss the opportunity of leveraging on benefits of these two resources through the creation of value-added sectors locally.

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    21. Musa meanwhile stressed that the state government was committed to making the best use of oil and gas reserves found offshore of Sabah.

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    22. In order to achieve this goal, he said the state government was collaborating with Petronas to channel the benefit of oil and gas in invigorating the local economy where efforts were already materialising through several projects such as the Sabah Oil and Gas Terminal, the Sabah-Sarawak Gas Pipeline, Sabah Ammonia Urea Project (SAMUR) and the Sipitang Oil and Gas Industrial Park.

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    23. To meet the demand for electricity and to ensure that it comes from cleaner resources, gas-fired power plants costing billions of ringgit are coming up in Kimanis and Lahad Datu, each with 300mw capacities.

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    24. Musa also said oil and gas was an exciting industry and urged those keen to participate to play an active role as there were many opportunities - key among them would come from the downstream sector.

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    25. It is in Musa wishes that locals would gained from quality employment and the creation of new entrepreneurs as the sector grows in years to come.

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    26. He added that SEC has been given the task to be a key facilitator in Sabah's efforts to maximise local participation in the oil and gas industry.

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    27. For the SAMUR initiative, SEC which had transformed into a dynamic and credible company since its establishment in 1981, has been appointed as an associate to the consortium running the project.

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    28. With SEC proven track record, the Chief minister is confident that SEC will play a significant role in Sabah's efforts to maximise local participation in the oil and gas industry.

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    29. For the SAMUR initiative, SEC which had transformed into a dynamic and credible company since its establishments in 1981, has been appointed as an associate to the consortium running the project.

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    30. "With your track record, I am confident that you will play a significant role in Sabah's future growth, specifically through the oil and gas sector. I am also happy to note that SEC has also consistently declared dividends to the state government and I wish you continued success," said Musa.

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    31. The Chief Minister also encouraged SEC and other government-linked companies to constantly think out of the box and create ventured that would enhance their worth.

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    32. Globalisation demands that we keep up with a fast paced world in order to remain competitive and relevant, he said matter-of-factly.

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    33. Also present at the function were Deputy Chief Minister Datuk Dr Yee Moh Chai, SEC chairman Au Kam Wah and SEC executive officer Dato' Harun Ismail.

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  19. “But, the subject of ownership of petroleum (today, an important source of national wealth with current high global energy prices), found both on land and in the continental shelf of the States of Sabah and Sarawak which lies within the boundaries of Sarawak, was never a matter brought up to the Inter-Governmental Committee and hence, not included in its Report. "

    Please correct the above statement. Petroleum and minerals attached to land belongs to Sabah and are matters brought under point no. 20 ;

    Which reads :-
    Point 20: Land, Forests, Local Government, etc.
    The provisions in the Constitution of the Federation in respect of the powers of the National Land Council should not apply in North Borneo. Likewise, the National Council for Local Government should not apply in North Borneo.[8][9]

    SABAH TODAY :
    wwwsabahtoday.blogspot.com

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