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Kelantan losing out from ambiguities in Petroleum Act

 | September 27, 2014

An oil and gas expert says ambiguous laws have allowed the federal government to discriminate against oil producing states.

Kelantan oilPETALING JAYA: Oil and gas expert Anas Alam Faizli said ambiguities in the Petroleum Development Act of 1974 (PDA) must be sorted out, as different parties were interpreting it differently.

Speaking to FMT, Anas said, “There are now a host of different interpretations and ambiguities in relation to what documents can be applied to resolve the issue which is the main cause of concern. If this is not addressed there will be no end to this.

Anas said this in regard to Kelantan’s oil royalty dispute in which one party claimed there was no need for royalty payments to Kelantan.

Explaining it in greater detail, Anas said, ”Others may argue, that the Assignment Deed, and the Vesting Grant 1975/1976 supersedes the law, which then conflicts with views by other experts who may interpret it differently based on their perspective of the Federal Constitution or the Petroleum Act.”

When asked about the recent findings of the Special Committee to Determine Cash Payments from Petroleum in the East Coast of Peninsular Malaysia, Anas said the Federal government had been using the ‘three nautical mile’ argument against Kelantan from day one.

“I remember Prime Minister Najib Razak promising Pahang a payment of 5% of Petronas’ oil and gas gross annual revenue returns as oil royalty upon the discovery of the Bertam field at block PM307 in 2012, which is 86 nautical miles off Kuantan, before any yield was obtained,” Anas said.

He also explained that Article 8 in the Federal Constitution guaranteed equal treatment and non-discrimination of all the states in Malaysia.

“If you can promise Pahang the 5% royalty, for a discovery 86 miles off Pahang, and resume payments to Terengganu after stopping for a while, why can’t Kelantan be treated the same?” asked Anas.

Anas added that Petronas and by extension, the federal government should be fair, consistent and non-discriminatory when it comes to awarding royalties to oil producing states in Malaysia.

He was also confident that Kelantan’s lawsuit against the federal government would proceed and eventually help bring about a judgment or a standard interpretation of existing laws.

“The judgement would then set a precedent as to whether all states get royalty payments, or none at all,” he said, adding that if the government opted for non-payment to all, it would be a betrayal of the confidence of the states.

”The states had given up their mineral rights to the government which allowed the latter to produce oil and gas,” he explained.

Anas also proposed that instead of royalty payments, oil-producing states could be given stakes in Petronas and act as a sleeping partner, as the national oil company was consistently churning out RM30 billion in dividend payments yearly.

On Wednesday, a six-member committee concluded that Petronas was not bound by law to make cash payments to any state in the East Coast of Peninsular Malaysia.


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