PENAMPANG 13/10/2012: A local community leader has expressed his disappointment over Petronas’ statement with regards to the higher oil royalty payment to oil producing states in the country.
Jeoffrey Ekol, a member of UPKO, said that he was also perplexed by Petronas’ statement that it is against higher oil royalty to oil producing states.
He was of the opinion that it was naive for Petronas to come up with such a statement as it is just a company and it has no right at all to say such a thing as it should be the Government making a decision on oil royalty payment.
Jeoffrey was commenting on Petronas’ statement that sustainability of its ability to contribute to the nation will come into question royalty payments to the states were increased from the present five per cent to 20 per cent.
Petronas, in a statement on Thursday, said this increase would result in lower petroleum income tax payments.
It said the company’s profits would also be reduced, thereby potentially affecting its ability to pay dividends to its shareholders.
According to Jeoffrey, continued sustainability to contribute to the nation is secondary.
“It (Petronas) has nothing to worry on that. Instead it should be worrying if all the oil producing states disallow it to extract the fossil fuel. Petronas is very rude to say that it is against the higher oil loyalty to the state that owns oil.
“What profit Petronas is talking about and the fear of inability to pay dividends to its shareholders? We only ask for a review of the oil royalty and if 20 per cent affects its business then this should be done according to its business capacity as per its agreement with the oil investors,” he stressed.
Jwofrrey also felt that Petronas’planned projects worth RM170 billion over the next five years have no risk of being cancelled.
All claims and fear by Petronas are unfounded as it should be more worried about the oil producing states’ requests than the investors, he said.
Petronas had said the increase in royalty payments will also reduce the profitability and economic viability of all current and future oil and gas projects under development.
This, in turn, will deter Petronas and production sharing contract (PSC) contractors from further investing in these projects.
“Over the next five years, planned projects with a total capital expenditure of about RM170 billion are at risk of being cancelled.
“Coupled with declining production from maturing domestic fields, this will actually result in lower royalty payments to the states over time,” said the state-owned oil company.
It said a reduction in the oil and gas production will also threaten the energy security of the nation.
Apart from this direct impact, the resulting slowdown will have an adverse multiplier effect on the domestic oil and gas industries such as service companies as well as spin-off industries, leading to a reduction in employment opportunities for the people residing in the oil producing states.