Fed gov’t reaps 92 per cent of Malaysia’s O&G revenue

Petronas Twin Towers, a major tourist attraction — DayakDaily.com file pic. // Photo: Pixabay

KUCHING, Dec 26: Suarah Petroleum Group (SPG) said it was a known estimate among oil and gas players that the federal government reaped approximately 92 per cent of the revenues collected from Oil and Gas in Malaysia.

SPG stated that Petronas had been unable to give more to Sarawak because of the “high cost of operation” – the excuse Petronas said it was unable to pay more to Sarawak.

“In reality both the federal government – which for more than 43 years has reaped the lion’s share of revenue from Sarawak’s resources; and Petronas which will never be ready to give more dividends as it is a ‘high cost operator’ – are the real obstacles to finding a common ground and solution to the current conundrum.

“Why do we consider Petronas a ‘high cost operator’? Firstly of course is the fact that the federal government has been heavily reliant for decades on the dividends demanded by it from Petronas. This is self-evident and there should be no doubt about this fact.

“Contributing to the ‘Lion’s Share’ that the federal government gets is also the fact that while it owns Petronas it also gets 5 per cent oil royalty (similar to the oil-producing states, yet it does not own any oil or gas).

“At the same time, it also collects petroleum income tax from both Petronas and other PSC (production sharing contract) companies as well as dividends from Petronas’ profits,” said SPG in a statement today.

SPG said there was doubt that Petronas over the years had really evolved into a truly competitive entity as it had basically generated huge revenues from the ‘free assets’ bequeathed upon it under (Petroleum Development Act 1974 (PDA74).

“These assets comprise offshore blocks in Sabah, Sarawak and Terengganu, already producing in 1974 and also those yet-to-be discovered domestically. Collectively in the 2000s these were termed as Petronas’ ‘Legacy Assets’.

“The so-called Legacy Assets, arguably illegally and unconstitutionally obtained via PDA74, cannot be considered as competitively acquired as there were normatively nil acquisition costs on the part of Petronas.

“In fact, Petronas profited even more by demanding that during exploration phase the contractors allocate a 15 per cent ‘carried interest’ cost for free to Petronas Carigali.

SPG said these ‘carried interests’ arrangements amounting to billions of dollars have no doubt artificially kept Petronas costs down and thereby artificially boosted its own profits to the same extent to enable it to meet the voracious appetite of the federal government for ever-increasing dividend allocation.

SPG added that the states that own the oil and gas did not get a single sen of Petronas’ annual declared dividends.

“In his recent comments, the Petronas CEO talks about the respective governments getting 5 per cent royalty risk-free.

“What risks does Petronas Carigali take for its 15 per cent free carried interest in most, if not all, of the PSCs? Why can’t this 15 per cent free carried interest be given to the petroleum-owning and producing states? In fact what risks does Petronas itself take on its domestic upstream operations?

“In Petronas’ own words ‘Through the use of the Production Sharing Contracts, Petronas is able to insulate itself from capital costs and risk of failure associated with exploration activities while maintaining a significant share in any discovery through its entitlements. Petronas further benefits from the PSC as it owns all exploration and production data and all other assets acquired and used by PSC contractors in the performance of PSCs’.

“In other words, Petronas does not bear any risks or capital costs at all, not with regard to its illegally and unconstitutionally acquired assets from Sarawak and Sabah, nor in respect of its domestic upstream operations.

“The opposite is true of its overseas ventures and forays, where Petronas has exposed itself to all kinds of risks and incurred capital and operational costs that in many cases have led to disastrous losses,” said SPG. —DayakDaily