Kelantan govt to take oil royalty issue to court

The Kelantan PAS government will bring its oil royalty claim from the federal government to court after failing to resolve the issue with Petronas.

State Economic Planning, Finance and Welfare Committee chairman Datuk Husam Musa said the measure would be taken to fulfil the resolution taken by the state government at the last assembly sitting.

He said that at the sitting, the assemblymen agreed that the royalty claim from revenue from oil production in the state’s waters be determined through negotiations with Petronas and if these failed, the state government should proceed with legal action.

“Based on this premise, we would definitely take our oil royalty claim to court. When and how will depend on the situation,” he told reporters after the handing-over of keys to shophouses and offices in Bandar Baharu Tunjung, here on Monday, April 19.

The federal government recently decided not to pay oil royalty to Kelantan but wang ihsan (compassionate payment) for the people instead.

Oil: Tale of greed and dishonour

Oil row: Zaid tells a tale of greed and dishonour
26 Mar 2010 – Free Malaysia Today

KUALA LUMPUR: The federal government had failed to honor the original intention of the oil agreement by sticking its fingers into Petronas’ coffers, said PKR supreme council member Zaid Ibrahim.

Political differences and legal technicalities aside, Zaid said this is the root cause of the dispute concerning oil royalty.

In a recent exclusive interview with FMT, the former law minister noted that the agreement inked between Petronas, the federal government and the state governments stipulated the percentage of revenue that each party would receive from oil found in any of the 13 states.

Petronas would be awarded 90 percent, while the federal and respective state governments would receive five percent each.

Zaid explained that Petronas was given the lion’s share of the revenue so that the state-owned company could invest the money for the nation’s future generations.

“Yet the federal government dipped into its coffers to build the Twin Towers and Putrajaya.

“And in helping itself to more than its allotted five percent, the government dishonoured the intention of the oil agreement,” he added.

This, Zaid stressed, was the crux of the dispute.

“Not the stupid, irrelevant argument about territorial waters, which was not included in the agreement and had no relevance to the ownership of oil,” he added.

Zaid said the current government was attempting to find flaws in the agreement in order to justify its actions, “but none of it holds water when you look at history”.

“The previous governments paid Terengganu for 22 years not because it misunderstood the law but because it honoured the intention of the agreement.”

The former Umno leader also slammed the government for keeping a tight lid on the agreement, and urged it to disclose the document.

“But I doubt it would. Because doing so would mean exposing its abuse of Petronas,” he said.

‘Dr M blatantly abused Petronas’

Meanwhile, Zaid also lambasted former premier Dr Mahathir Mohamad for allegedly abusing the Petroleum Development Act (PDA) and manipulating its original intention to suit his plans.

“Our economy is tottering and all we’ve got is Petronas. Once we lose it, we are finished. And we would lose Petronas if nothing changes.

“When (the country’s second prime minister) Tun (Abdul) Razak created Petronas, he wanted to protect it from internal corruption. Therefore, he crafted the PDA in a way that gave him full control of Petronas.

“But Mahathir saw this as an opportunity to use Petronas for other means without being found out. He blatantly abused the PDA’s noble intention and this is unacceptable,” he said.

…read more (Free Malaysia Today)

Clueless Perkasa blames all but Dr M

Zaid: Clueless Perkasa blames all but Dr M
25 Mar 2010 – Free Malaysia Today

KUALA LUMPUR: Pakatan Rakyat troubleshooter Zaid Ibrahim believes that Malay right-wing pressure group Perkasa and its chairman Ibrahim Ali are trapped in a time warp.

According to the former law minister, the “Umno tentacle” appears to be clueless about the bigger picture, preferring instead to indulge in stone-age politics.

“They are worked up about Malay rights being threatened but do not care about what’s happening to Petronas’ money or about the massive corruption in the system,” he told FMT in a recent exclusive interview.

Zaid lambasted the movement for merely skimming the surface as opposed to diving deep into the issues which the Malay community is confronted with.

“Instead of conducting a serious analysis on the real reasons for the lack of progress among the Malays, they indulge in chest-thumping speeches.

“They blame everyone for the problem except themselves and (former premier Dr) Mahathir (Mohamad),” he said.

However, Zaid is confident that the Malays are much wiser now and will not fall for such political gimmicks.

Creating a sense of alarm

Last week, the PKR leader slammed Perkasa for twisting the facts concerning the special rights of the Malays, and described the movement as irresponsible.

He accused Perkasa of intentionally injecting a sense of alarm into the Malays in order to achieve its political aims.

…read more (Free Malaysia Today)

Where did Malaysia’s oil money go?

Is Petronas on the right track?
March 21, 2010 – the Star

…
Since its incorporation, Petronas has paid RM471bil to the Government, in addition to bearing a cumulative subsidy of RM97bil under the national gas utilisation plan.

As the controversial White Knight: Petronas, as an off-budget agency directly under the Prime Minister, is not without controversy. Its large reserves made it a tempting target for bail-outs. It was asked to bail out Bank Bumiputera in 1985 with an injection of RM2.5bil when the bank collapsed under the weight of loans to the Hong Kong Carrion Property Group. It was again directed to bail out the same bank at RM1bil in 1991. When Bank Bumiputera collapsed for the third time in 1997, was Petronas again asked to come to the rescue? Only the fly at Tan Sri Merican’s (then CEO) office at that time would know. Suffice to say Bank Bumiputera now is part of CIMB.

Petronas also bailed out Konsortium Perkapalan Berhad (KPB), through MISC, which suffered RM2bil losses during the 1997 financial crisis. This, of course, was a subject of much political debate then.

Petronas’ mega projects: At the peak of the Asian Financial Crisis, Petronas went ahead and completed the Petronas Twin Towers (RM6bil) and Putrajaya (RM22bil). At that time it was subjected to much ridicule, with jokes like “we could sell off one tower to Brunei to get some cash…” etc going around.

…read more (the Star)

Petronas formation may be unconstitutional

National oil firm Petronas could be unlawful as its founding law was approved before it signed agreements with all the states, law professor Datuk Dr Shad Saleem Faruqi said today.

He also explained that according to the constitution land belongs to the states, which complicates the provision in the agreement surrendering control of petroleum found onshore under the Petroleum Development Act 1974.

“I think there are some aspects of the Petronas Act that is unconstitutional,” Shad told a forum on oil rights.

Under the agreements signed in the mid-1970s all state governments were promised cash payment or royalty of five per cent for petroleum extracted onshore or offshore in return for surrendering their control of petroleum resources to the national oil company.

Shad also pointed out that the Act was passed before all the states had signed the agreement.

A federation in name only

The constitutional rights of the states are clearly violated in the way petroleum profits are being distributed and managed.

The federal government says Kelantan and Terengganu have no right to the “cash payments” agreed between the states and Petronas. These denials have been published in the newspapers and are repeated by official representatives of the government. The full implications of their denial are not trivial. The Federal government’s authority over these resources, as in all other things, is an authority derived from the original sovereignty of the states. By the Federation Agreement of 1948, the states of the Malayan peninsula came voluntarily into a federation and created a common federal government. As part of that agreement, the Federal government had jurisdiction over waters beyond 3 nautical miles. The states had jurisdiction within 3 nautical miles. Oil had not been discovered in Malaya at the time. Had it been found, however, anything within 3 nautical miles would have belonged in its entirety to the state, and anything beyond that to the federal government. In 1974, we formed Petronas as a common trust between the federal and state governments for all petroleum found anywhere in Malaysia, onshore or offshore. We did this by persuading the states governments, one by one, to vest their entire rights and claims to petroleum, onshore or offshore, in perpetuity to Petronas. The federal government did the same. By design, this obliterated any considerations of whether the oil was found within or beyond 3 or 12 nautical miles. So long as Malaysia had any share in the oil, the profits would be divided between the federal government and the relevant state government according to a simple formula: five percent to each.

Oil royalty ads imply gross deceitfulness

I see the Ministry of Information has taken out full page advertisements in the major Malay newspapers to argue that Kelantan has no right to oil payments under the Petroleum Development Act because the oil resources in question lie outside the 3 nautical mile limit that delimits state versus federal jurisdictions. The advertisement fails to point out that almost all the oil found in Malaysia is located more than 3 nautical miles offshore, and Petronas has nevertheless been making oil payments to the states.

By the argument deployed in the advertisement, Terengganu, Sabah and Sarawak too are not entitled to the “cash payments” of 5% of profit oil (commonly and a little inaccurately referred to as “oil royalties”). Everything is at the arbitrary behest of the Federal Government.

Yet last year, according to its annual report, Petronas paid out RM6.2 Billion in petroleum cash payments, with RM 3Billion to Terengganu, 2.3Billion to Sarawak and 0.9Billion to Sabah. One wonders what basis this payment was made on since none of this was for petroleum found within 3 nautical miles offshore of these states. The argument for depriving Kelantan of 5% cash payments on the basis of its petroleum resources being found beyond 3 nautical miles is an insult to the intelligence.

I have spoken and written at length on this issue and had been reluctant to say more on it. Moreover, as a member of the ruling party I am embarrassed to have to belabour elementary points against the government. This information campaign, whether through a leaflet campaign in the schools or through newspaper advertisements paid for with taxpayer money, implies either culpable stupidity or gross deceitfulness on the part of agents of the Federal Government. I had hoped to avoid that implication.

Federal Arrogance

Federal Arrogance
February 20, 2010 – Straight Talk

Kelantan Umno chief Mustapa Mohamed last night insisted the state is only entitled to compassionate payments rather than oil royalty demanded by its PAS government for energy extracted miles off its coast.

This statement coming from one of the more moderate voices in UMNO reflects the arrogance of federal government. This is another example of encroaching and overarching federal power over states. The answer is more decentralisation from the central government.

Interestingly, Mustapa’s statement contains two major socio-political and moral flaws. First, almost all tax revenues go directly to the federal coffer. It is almost impossible for the states to initiate their own development programmes. Development projects are mostly led and sponsored by the federal government.

Second, there is no federal government without a collection of states agreeing to form a federation. Hence, it is morally and politically wrong to term the oil royalty payment to Kelantan as a compassionate payment. It is morally demeaning that residents of Kelantan need to be treated this way by the federal government.

Mustapa argues that the 2005 oil discovery falls beyond the 3 nautical miles stipulated in the 1974 Petroleum Act and agreement between the state government and Petronas. Hence, the state is not qualified to ask for any royalty. This is a warp logic which depends on a legal interpretation of the contract. Legally, I do not know if Mustapa is right. But it is wrong in the spirit of the federation and national building.

This points to the next question; what has the federal government done to the oil revenue if it does not intend to share it with the states?

If Kelantan’s compassionate payments are not related to the oil royalty, why other states especially the poorer ones e.g. Kedah, Perlis, Pahang and others are not entitled to the same payments?

Mustapa is trying to imply that only BN ruled states deserved to be treated with dignity. Others are subjected to the compassion of the federal government.

…read more (Straight Talk)

Ku Li insists Kelantan gets 5pc oil royalty

Umno veteran Tengku Razaleigh Hamzah has insisted that Kelantan is entitled to a five per cent royalty for oil extracted off its waters, saying it was time to “re-examine the relationship between the states and the federal government”.

The Gua Musang MP told a packed Stadium Sultan Mohamed IV last night that national oil firm Petronas was bound by law to give the money to states where oil is found, adding Kelantan was not interested in compassionate payments.

“Kelantan may be poor. But we are not beggars. We demand what is rightfully ours,” the Kelantan prince said to cheers and cries of “Allahu Akbar (God is great)” at the last night’s gathering organised by the state government over the oil royalty issue.

The PAS government had demanded the oil royalty payment from Petronas last year, after the Statistics Department revealed that Kelantan, together with Sabah and Terengganu, had contributed 62.5 per cent of the oil extracted in Malaysia

The Barisan Nasional-ruled federal government has insisted oil from the joint development area with Thailand was not from part of Kelantan’s waters and has only offered RM20 million as “compassionate payment”.

But Razaleigh, the founding chairman of Petronas, disagreed with the government’s move, saying the formula for oil royalty was first agreed with Sarawak and later extended to all states.

“If Sarawak is due her five per cent royalty, no less is Kelantan, by the same principle,” thundered the Umno politician popularly known as Ku Li.

Razaleigh said he has received the blessings of the Kelantan palace to speak on the issue and also confirmed that he will lead a parliamentary caucus to press the ruling coalition Barisan Nasional to honour the Petronas agreement.