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Saturday, July 19, 2014

Federal and Petronas Sidestepping Oil Rights

KOTA KINABALU - “The Sabah government, by all means, should participate in the oil and gas industry but should not be fooled by the Petronas briefing that oil prospecting and production is all about risks and costs and not profits, with false and inflated costs and down-played profitability,” said Datuk Dr. Jeffrey Kitingan, State Assemblyman for Bingkor cum STAR Sabah Chairman.

It is clear that the Petronas delegation was sent by the federal government to hoodwink the Sabah and Sarawak governments and to stop the people of Sabah and Sarawak’s calls for review to increase the oil cash payments or more commonly and erroneously referred to as “oil royalties”.

This Petronas move is totally against PM Najib’s reply to the Sarawak Chief Minister at the National Gawai celebrations in Miri, Sarawak, that the federal government will serious consider the request for higher oil royalty payments.  It also reveals PM Najib’s insincerity towards the people of Sabah and Sarawak.

To accept Petronas’ explanation is to deny technological advancement in the oil and gas exploration and prospecting that no longer rely on wildcat prospecting but by the use of satellites and advanced technological imagery.

“If it is all about risk and cost sharing and not profits, there would be no thriving oil and gas business in the world today and Petronas would not be a world Fortune 500 company”, he argued.

Dr. Jeffrey was responding to the Minister in the Chief Minister’s Department, Datuk Teo Chee Kang’s, statement at the State Assembly’s question and answer session which appeared in the various media yesterday that there is a misconception that the federal government and Petronas gets 95% of the oil revenues leaving the State with only 5%.

From reliable sources, Petronas used to have PSCs where the oil companies would drill and explore and be entitled to 70% of output and 30% goes to Petronas as nett profits without any costs of exploration as all costs are borne by the oil company.    This 70% was later reduced to 30% to 55% with Petronas getting up to 70%.

Oil companies only getting 30% stake in oilfields can be evidenced with the latest move by Murphy Oil of USA intending to sell their 30% stake in Malaysian oilfields that has attracted interests globally including Mitsubishi and Oil India.

Lately, it has been the move of Petronas to own 100% of the oilfields.   This can be seen in the proposed opening for production of the 16 new oilfields in which the Chief Minister has said that the Sabah government intends to seek shares in some marginal oilfields off Sandakan.

That Petronas is doing its own drilling and exploration and owning the oilwells 100% can also be supported by the news of Perisai Petroleum Teknologi Bhd being awarded a 3-years US$158 million (RM502.4 million) drilling contract from Petronas Carigali Sdn Bhd.

Minister Teo’s explanation that exploration costs of between 50% to 70% or the exploration exercise costs RM8 billion to RM12 billion is pure hogwash and government propaganda to hoodwink the people.

For the benefit of Minister Teo, if the exploration drilling costs RM500 million and a production platform of RM2 billion, which Petronas is building 4 huge platforms at a total cost of RM8 billion, it would not even cost RM3 billion to start commercial production.

Upon commercial production, there is minimal production costs as the main capital costs are already in the RM3 billion.  How much would salaries and daily operational and maintenance costs compared to income of 100,000 barrels per day or RM11.68 billion per year at USD100 per barrel?

It is inconceivable that the Sabah government and its Ministers would conspire with the federal government and Petronas to deny the people of Sabah their legitimate rights to the oil and gas resources which come out from Sabah’s soil.

There is no denying that when the Land Ordinance was passed in 1930, the oil and gas resources belonged to the Sabah government under Section 24 which also confers the right to the government to impose oil royalties from the oil extracted.

The late Tun Razak, PM Najib’s father, had no lawful right to sign the Vesting Order on 26 March 1975 pursuant to the Petroleum Development Act 1974 (PDA74) and unlawfully vesting the oil and gas ownership rights in Petronas in perpetuity.

As a trained lawyer, Minister Teo should have known better than to give an answer to mislead Sabahans that Section 24 of the Land Ordinance is not applicable when under Article 74 and the State List in the Ninth Schedule of the Federal Constitution, land is a State matter.  Accordingly, the federal Parliament had no authority to legislate the PDA74.

It is no longer conscionable for Petronas and the federal government to seize ownerships of the oil and gas and giving back 5% of the exploited revenue to Sabah and Sarawak.   In 2014, Sarawak will contribute about RM50 billion and Sabah another RM26.6 billion, and which will rise to RM50 billion in another year or so, to Petronas and the federal government while Sabahans and Sarawakians languish as the poorest and second poorest in Malaysia.

What more when Petronas is planning to start production in another 16 new oilfields in Sabah in the immediate future?

As it is Sabahans and Sarawakians are clamouring to leave Malaysia due to the non-compliance with the Malaysia Agreement 1963 and the continued unfair and unjust treatment of Sabah and Sarawak who contribute some 40-45% of the national revenues.

The continued rejection by the federal government on the people’s calls to review the oil ownership rights and royalties is just going to add more fuel to the fires of nationalism in the Borneo States and departure from Malaysia.    The Prime Minister and the federal should take serious steps to Save Malaysia rather than contribute to its disintegration which is already at an advanced stage with racial and religious bigotry and extremism.

As for Sabahan BN leaders, they should do some soul-searching whether they should do the right thing and put things right for the benefit of Sabah and Sabahans or to continue to be subservient and kow-tow to the federal leaders from Malaya.   For those Sabah BN leaders who wish to look after the interests of Sabah, they should review their position and take steps to revoke the PDA74 and restore Sabah’s oil and gas ownership or to leave BN for the better good of Sabah and Sabahans.

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