Oil royalty dispute: Crucial for Putrajaya, Sarawak to sit down and do the maths

Datuk Sharifah Hasidah Sayeed Aman Ghazali

KUCHING, July 26: Sarawak has called on all stakeholders to refrain from unilaterally dictating or exercising any ownership rights to Sarawak’s oil and gas resources, including distribution of revenues, unless and otherwise prescribed under Sarawak’s Oil Mining Ordinance (Amendment) Bill 2018.

In stating this, Assistant Minister of Law, State-Federal Relations and Project Monitoring Sharifah Hasidah Sayeed Aman Ghazali reiterated Sarawak’s ownership and regulatory rights over all oil and gas resources and activities in Sarawak effective July 1, 2018, as prescribed under the newly amended OMO Bill.

She added that while the above Bill came into effect on July 1, 2018, Sarawak was giving all stakeholders until the end of 2019 to comply with the new regulations.

Sharifah Hasidah was commenting on Economics Affairs Minister Dato Seri Mohamed Azmin Ali’s statement in Parliament yesterday about increasing the oil and gas “royalty” from the current five per cent to 20 per cent.

In a statement today, she said the 20 per cent refers to the percentage of net profit; it is not the percentage of royalty as commonly described in the oil and gas industry, including as prescribed in the Petroleum Development Act (PDA) 1974.


“This includes the presumptions that any percentage of royalty or percentage of net profits, for that matter, is equitable and enforceable in the current effort by the federal government to redress the allocation of revenue (ironically termed by YB Dato Seri Azmin Ali as ‘distributive justice’), specifically to Sarawak.

“This is indeed a departure from what was stated in their (PH) manifesto as contained in ‘Buku Harapan’.”

On Azmin’s statement that any proposed change in the distribution of revenue to the oil-producing states could only be implemented after the PDA 74 was amended, Sharifah Hasidah cautioned the federal government that any terms of such agreement must be determined by and with the rightful owner of the oil and gas resources.

“In the same vein, it is also presumptuous to assume that any remedy in the distribution of revenues between Sarawak and the federal government will have an adverse impact on any of the stakeholders, including Petronas, without firstly taking into consideration adjustments to the stakeholders’ contributions to the federal government in terms of existing royalty, profits, taxes and dividends, which effectively give the federal government 92 per cent of all oil and gas-derived revenues, and Sarawak only gets one per cent.”

She opined that an increase from five per cent to 20 per cent of the gross production would only mean five per cent of total oil and gas revenues to Sarawak, with 88 per cent still going to Petronas and the federal government. This is clearly inequitable.

E11 Platform Complex, Baronia oilfield in Miri. — file pic

The Sarawak government further reminded the federal government on the need for sustainability and ‘robust economic multiplier’ effects of national oil and gas exploitation policies and strategies in relation to Sarawak.

Sharifah Hasidah pointed out that after 42 years of one-sided exploitation, Sarawak needed a holistic approach to redress imbalances of inequitable sharing and distribution and poor value creation for Sarawak.

“This requires adjustments to legal, policy and eco-system synergy, i.e. more equitable participation among federal- and state-level entities. Otherwise, the federal government’s so-called ‘distributive justice’ will only be a meaningless catch-phrase.

“It is also extremely disheartening to be informed that the federal government’s manifesto was devised based on the analysis of cost structures that was constrained by limitations of available oil and gas data (presumably from Petronas).”

Thus, Sarawak urged the federal government, through Petronas, to give the relevant stakeholders access to such data in order to analyse and devise the equitable distribution of oil and gas revenue to its stakeholders.

On the same issue, Sharifah Hasidah said Sarawak was not against sharing its oil and gas resources with the rest of the nation. In fact, the state had done so without complaint for the last 42 years, since the formation of Petronas.

“But the federal government must realise that Sarawak needs to develop its own ‘In-Country Value Creation Model’ and endeavour to apply it for a more generative formula to create healthier participation by Sarawak companies so that not all business opportunities are channeled to Malayan-based companies by way of huge ‘Umbrella Contracts’ currently awarded by Petronas.”

Sarawak, she emphasised, felt very strongly that the current Petronas model of ‘federalising’ the economic perspective towards maximising revenue collection for the federal coffers did not work.

“This approach has proven to impoverish the states with the oil and gas resources, and there has been no coherent master plan in place even until today to ensure the growth of a healthy state oil and gas sector,” she stressed.

Meanwhile, Sharifah Hasidah said Sarawakians’ economic interests had been sidelined for too long, and the state was not solely to be blamed for this situation. This is because Petronas had been playing the role of an ‘exploiter’ rather than a sustaining ‘value-creator’.

“It is sad to note that the recent move by Petronas, and now the new federal government itself, hardly seems to indicate any different thinking or change to this stance. This is unacceptable. Sarawakians can no longer tolerate such economic inequity and imbalance, especially with Sarawak being the real owner of the oil and gas resources.

“Before the situation escalates out of control, it is imperative that the federal and the Sarawak governments now seek a ‘win-win’ solution that will address (1) the ownership issues of Sarawak’s oil and gas resources, and (2) redress the economic parity in the distribution and sharing of revenues derived from those resources within the ambit of the Malaysian context, in the true spirit and intent of MA63,” she stressed. — DayakDaily