KUALA LUMPUR September 25, 2012: The federal government does not intend to increase the royalty payments to the various oil-producing states.
Prime Minister Najib Tun Razak confirmed this in Parliament in a written response to a query by PAS-Rantau Panjang MP Siti Zailah Mohd Yusoff over the matter.
“The [federal] government has no intention to review the petroleum product payment to the state governments, including that of Sabah and Sarawak,” he said.
State governments currently get 5% from oil royalties, a result of an agreement made over 40 years ago.
Najib added that the allocations through the payment of petroleum products to the federal and state governments were set according to a Production Sharing Contract (PSC).
This contract, he said, was signed between Petronas and its (foreign) PSC partners such as Shell, Exxonmobil and so forth.
Amending the product rate, Najib added, would mean that there would have to be a re-negotiation between Petronas and its PSC partners.
He warned that as the contract was enforced for a certain time period, any attempt to amend its criteria would destroy the interests and confidence of these foreign oil companies.
Even so, he said that even without an oil royalty hike, the federal government had contributed far more to its states than what it got out of its petroleum.
Pressure is currently on Najib’s administration to review the oil royalty arrangments.
The PAS-led Kelantan state government is not the only one which has petitioned Putrajaya for a greater cut of oil mined from its territories.
Both Sabah and Sarawak Chief Ministers Musa Aman and Taib Mahmud have respectively expressed their wishes for the oil royalty matter to be reviewed.
In early August, the government said that it would form a special committee to study the petroleum royalties to Peninsular east coast states.