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Jeffrey: Beware oil ‘slick’ trap by Sabah BN

 | August 23, 2012

Chief Minister Musa Aman must "better understand" the existing oil agreement before any 'amicable discussions' with Putrajaya, advises STAR.

KOTA KINABALU: Maverick politician Jeffrey Kitingan warned the ruling Umno-BN state government not to use Sabah’s oil riches as an election gimmick to gain favour with the electorate.

He said the “so-called review will test the sincerity” of the federal government and the Sabah leaders as well as the “extent of the federal-state relationship.”

“If Musa is truly a Sabahan at heart, this is the most opportune time to not only seek a review but to demand and negotiate a new deal for Sabah’s oil and gas resources for the benefit of Sabah and its future.

“But Chief Minister Musa (Aman) needs to better understand the existing oil agreement. The (current) terms of the agreement are not only lopsided but grossly unfair to the oil-producing states (including Sabah).

“(As such) the state government should also adopt a holistic approach to the old oil agreement in seeking a new deal,” said Jeffrey.

Jeffrey was commenting on Musa’s statement on Tuesday that the state government would open “amicable discussions” with the federal government to increase the petroleum royalty payment from the current 5%.

He said Musa needs to first understand that the current 5% is a cash payment payable by Petronas under Section 4 of the Petroleum Development Act, 1974 and had nothing to do with royalties.

The cash payment was  in return for the ownership and the rights, powers, liberties and privileges of the oil and gas resources vested to Petronas by the State.

Furthermore, Section 4 provides that the cash payment is to be agreed between the parties, and not imposed upon.

Jeffrey, the younger brother of deputy chief minister Joseph Pairin, said many are of the opinion that the existing oil agreement is unconstitutional and invalid because it is not only unfair but infringes on fundamental state rights.

He said many were of the opinion that there was unlikely to have been any negotiations in 1976 for the amount of the cash payment.

If terms had been properly negotiated, Sabah would not have ended up at a mere 5% for transfer of ownership of the oil and gas resources to Petronas.

Sabah forced to sign

Jeffrey said many were also questioning the authority and the manner of the then chief minister in signing away the oil rights without approval from the State Legislative Assembly.

Then Chief Minister Harris Salleh, who signed the oil royalty agreement in 1976, recently stated that the Sabah was forced to accept the 5% cash payment.

Jeffrey said few people know that under Clause 4 of the 1976 agreement that was signed eight days after the plane crash that killed newly elected chief minister Fuad Stephens and several members of his cabinet, the state government was also asked to waive or to reject Sabah’s rights to royalties on the oil and gas resources.

As such, he said, in the new deal, the state government should seek the restoration of Sabah’s rights to impose oil royalties which are provided under the State List of the Federal Constitution and Section 24 of the Land Ordinance, Sabah Cap. 68.

He also reminded that in a video recording made in 1975, Tengku Razaleigh Hamzah, who was then Minister of Finance and headed Petronas explained that royalties entitlements of the states was 12% for up to three (3) miles from the shoreline with the federal government getting 10% for up to 10 miles and 8% to the federal government up to the international boundary.

Under this scenario, Sabah should have received a total of at least 17% in oil revenue with 12% in royalties and 5% cash payment.

Jeffrey, who heads the Sabah chapter of the State Reform Party, said it was his party’s view that Sabah should receive at least 30% in royalties because Sabah’s boundary is the same as the international boundary as Sabah gained independence on Aug 31, 1963 thereby establishing its international boundary as a nation.

He said this meant Malaysia’s international boundary coincides with Sabah’s international boundary.

As part of STAR Sabah’s causes and aspirations for Sabah, the party is seeking an increase of the oil revenue to 50% nett revenue excluding royalties which are payable even if the ownership is transferred to Petronas.

This is set out in STAR’s Petroleum Masterplan which is comprehensive and covers a wide range of policies for Sabah’s oil and gas beneficial to Sabah and Sabahans.

‘Sabah, Sarawak will unite’

It is also STAR’s view that Sabah’s or Sarawak’s oil rights cannot be transferred as it belongs to the states but can only be leased or assigned for a specific period.

Jeffrey said an increase from 5% to 50% will bring in an additional amount of at least about RM7 billion a year for Sabah which could be used to help eliminate poverty in Sabah.

The additional RM7 billion would also be proof that the federal and state governments are sincere in resolving the oil issue and talk of asking for a review is not a mere election gimmick to hoodwink the voters in Sabah, Jeffrey said.

He warned that if the federal government and Petronas did not agree to a new deal for Sabah and Sarawak, the Bornean states should stand united for their own good and change the federal government.

Jeffrey also said it was important for all to realise that the seat of government in Putrajaya is now likely to be decided by Sabah and Sarawak.

“Therefore, the Sabah and Sarawak leaders must leverage their role as kingmakers. Sabah and Sarawak leaders must ensure that the rights and interests of Sabah and Sarawak come first.

“And, if the federal government does not agree to increase the share of oil revenue for Sabah and Sarawak, the Sabah and Sarawak leaders, as kingmakers, should just change the federal government.


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