KOTA KINABALU August 23, 2012: STAR Sabah chairman Dr Jeffrey Kitingan has urged the state government take this golden opportunity to demand and sign a better oil agreement with Petronas and the federal government.
“If the Chief Minister is truly a Sabahan at heart, this is the most opportune time to not only seek a review but to demand and negotiate a new deal for Sabah’s oil and gas resources for the benefit of Sabah and its future.
“It cannot be denied that any increase in the oil revenue including the offer of 20% by Pakatan Rakyat is definitely for the benefit of Sabah and Sabahans,” he said in a statement yesterday.
Jeffrey, who was commenting on the statement by Chief Minister Datuk Seri Musa Aman that Sabah’s 5% petroleum royalty review issue is open for amicable discussions with the federal government, said the existing oil agreement is nearly four decades old and a new oil deal is certainly needed for the future of Sabah.
“The so-called review will also test the sincerity of the federal government and the Sabah leaders as well as the extent of the federal-state relationship,” he said.
Moreover, Jeffrey said, it is important to realize that the seat of government in Putrajaya is now likely to be decided by Sabah and Sarawak.
“Therefore, the Sabah and Sarawak leaders must leverage on their role as kingmakers. Sabah and Sarawak leaders must ensure that the rights and interests of Sabah and Sarawak come first.
“And, if the federal government does not agree to increase the share of oil revenue for Sabah and Sarawak, the Sabah and Sarawak leaders, as kingmakers, should just change the federal government,” he said.
Jeffrey suggested that the state government should also adopt a holistic approach to the old oil agreement in seeking a new deal.
He said many are of the opinion that the existing oil agreement is unconstitutional and invalid because it is not only unfair but infringes on a fundamental state rights.
“The terms of the agreement are not only loop-sided but grossly unfair to the oil-producing states,” he contended.
In view of that Jeffery reckoned the present Chief Minister also needs to better understand the existing oil agreement.
He said: “Firstly, the current 5% is a cash payment payable by Petronas under Section 4 of the Petroleum Development Act, 1974 in return for the ownership and the rights, powers, liberties and privileges of the oil and gas resources vested to Petronas by the state, and it is not royalty at all.
“Furthermore, Section 4 provides that the cash payment is to be agreed between the parties, and not imposed upon.
“There was unlikely to have been any negotiations in 1976 for the amount of the cash payment. If it had been properly negotiated, it would not have ended up at a mere 5% for transfer of ownership of the oil and gas resources to Petronas.
“In fact, the then Chief Minster had recently stated that the state was forced to accept the 5% cash payment.
“Secondly, very few people know that in fact under Clause 4 of the 1976 agreement that was signed 8 days after the Double Six Tragedy, the state government was also asked to agree to waive or to reject Sabah’s rights to royalties on the oil and gas resources.
“Therefore, in the new deal, the Chief Minister should seek the restoration of Sabah’s rights to impose oil royalties which are provided under the State List of the Federal Constitution and Section 24 of the Land Ordinance, Sabah Cap. 68.
“Thirdly, as explained, the current 5% oil revenue receivable by the state is cash payment under Section 4 of the Petroleum Development Act and nothing to do with royalties.”
Jeffrey noted that in a video recording done in 1975, Tengku Razaleigh Hamzah, who was then Minister of Finance and President of Petronas explained that royalty entitlements of the states was 12% for up to 3 miles from the shoreline, and with the federal government getting 10% for up to 10 miles and 8% to the federal government for up to the international boundary.
“Assuming that this was implemented, Sabah would have gotten or received a total of at least 17% in oil revenue with 12% in royalties and 5% cash payment.”
Jeffrey said it is STAR’s view that Sabah should receive at least 30% in royalties because Sabah’s boundary is the same as the international boundary as Sabah gained independence on 31 August 1963 thereby establishing its international boundary as a nation.
He said this meant Malaysia’s international boundary coincides with Sabab’s international boundary.
As part of STAR Sabah’s causes and aspirations for Sabah, STAR is seeking an increase in the oil revenue to 50% nett revenue, excluding royalties which are payable even if the ownership is transferred to Petronas.
He said this is set out in STAR’s Petroleum Masterplan which is comprehensive and covers a wide range of policies for Sabah’s oil and gas beneficial to Sabah and Sabahans.
He said it is also STAR’s view that Sabah’s or Sarawak’s oil rights cannot be transferred as it belongs to the states but can only be leased or assigned for a specific period.
“An increase from 5% to 50% will bring in an additional amount of at least about RM7 billion a year for Sabah.
“It will definitely help Sabahans and alleviate if not eliminate poverty totally in Sabah.
“The additional RM7 billion will be proof that the federal and state governments are sincere in resolving the oil issue and talk of asking for a review is not just mere election gimmick,” Jeffrey said.