"THE ISSUE NOW IS WHETHER THE PETROLEUM IS FROM STATE WATERS OR OUTSIDE...THAT'S THE ISSUE NOW,"

Oil Royalty Payment Must Be Looked From Various Legal Perspectives

KUALA LUMPUR, Feb 6 (Bernama) -- The question of oil royalty payment by Petronas has to be viewed from various legal perspectives related to it, so said a legal practitioner.

Datuk Mohd Hafarizam Harun said the question of who was entitled to the five per cent of the money from the petroleum sourced by Petronas, either the federal government or the state government involved, was not based merely on the Petroleum Development Act 1974 (PDA).

He said the provision of Section 4 of the PDA that provides for the cash payment by Petronas to the federal and state governments needed to be read together with several other laws.

This included the Emergency (Essential Powers) Ordinance 1969, the National Land Code 1965 and the Federal Constitution that clearly outlines the territorial rights of states and the federal government, he told Bernama Saturday.

Other provisions included the Continental Shelf Act 1966 as well as the United Nations Convention on the Law of the Sea (UNCLOS) 1982, said Mohd Hafarizam who is a senior partner in the law firm of Hafarizam, Wan and Aishah Mubarak.

"The issue now is whether the petroleum is from state waters or outside...that's the issue now," he said.

Touching on the claim raised by the Kelantan state government, especially its right on petroleum exploration as a joint venture of the Malaysian and Thailand government in the Gulf of Siam, he said although it was only 150km from Kota Baharu and 180km from Patani, Thailand, the area was outside three nautical miles equivalent to 5.5km which was the state's border.

"For the Kelantan government to make a claim for oil royalty, it must not exceed three nautical miles, that is the state's border, and outside three nautical miles to 200 nautical miles is the Malaysian government's exclusive economic zone," he said.

"So the royalty claim for petroleum exploration in the area comes under the Continental Shelf Act 1966 that clearly states that all rights for exploration and exploitation of natural resources including petroleum in Malaysia would be done by the Malaysian government," he said.

Malaysia and Thailand signed an agreement in 1979 to set up the  'Malaysia-Thailand Joint Development Area (MTJDA)' to develop the "overlapping continental shelf by both countries" of 7,259 sq.km in the Gulf of Siam in the South China Sea and the proceeds were to be shared 50-50.

On Jan 26, Minister of International Trade and Industry, Datuk Seri Mustapa Mohamed, said the federal government had decided on RM20 million compassionate payment for Kelantan to be paid in March from oil and gas production from the South Earth Platform Block PM301 explored under the MTJDA.

The amount was determined after discussions between the federal government and Petronas and was five per cent of the total production in the block since May 2008, he said.

However, on the same day the Kelantan PAS government questioned the amount and asked the federal government to review it.

Datuk Husam Musa, State Economic Planning, Finance and Welfare Committee chairman, said the amount that the state should receive based on discussions with Petronas should be RM40 million and not RM20 million.

Husam, who is also Kelantan PAS deputy commissioner II, said through discussions with Petronas chairman Tan Sri Mohd Hassan Merican on Jan 8, he was told of the RM40 million amount and the amount did not include claims on the Star Platform overlapping in Terengganu-Kelantan waters.

Kelantan last year put forward to the federal government royalty claims of RM2 billion for drilling operations in its waters and the state was found not to be entitled to the oil royalty as two oil wells under contention were located 150 nautical miles from the state's waters.

Meanwhile in BACHOK, Deputy Finance Minister Datuk Dr Awang Adek Hussin said the Kelantan government needed to look at several other acts on the position of the state's water border before accusing the federal government of being unfair regarding its claim to oil royalty.

Awang Adek, who is also deputy chairman of the Kelantan Umno liaison committee, said the state government should not hold on to the Petroleum Development Act only and put aside other acts about the position of the state's waters boundary.

He said PAS purposely twisted the facts to confuse the people of Kelantan to divert their attention from state administrative problems, including that of the Kelantan Menteri Besar Corporation (PMBK).

The Kelantan PAS state government should take the issue to court to determine the actual status of the oil royalty rather than purposely causing an uproar to gain political sympathy from the people, he said.

He said the issue of oil royalty could be seen to be the same as the 'hudud' issue that was PAS' political capital earlier, whereby till now not a single parliamentarian from that party had proposed that the issue be debated in Parliament.