By Stephanie Sta Maria
KUALA LUMPUR: Tengku Razaleigh Hamzah, the first chairman of national oil giant Petronas, is incensed that his views on the oil royalty row never makes it to print in the government-controlled media.
The veteran politician of royal descent has been ruffling feathers in his party Umno with his vocal stand on this issue.
Speaking at a forum in Kuala Lumpur over the weekend, the Gua Musang MP vented his frustration.
“I don’t understand why people are saying that I am disputing the very law I created. Although I have been constantly speaking on this issue, my views don’t seem to make it into the press and my voice isn’t being heard,” he said.
Taking the audience down memory lane, Tengku Razaleigh revealed how he was summoned by second prime minister Abdul Razak Hussein to wrest back control of oil from the British.
The Kelantan-born former finance minister also related how this eventually led to the formation of Petronas and the enactment of the Petroleum Development Act (PDA).
“His (Razak's) motive for establishing Petronas was very clear and straightforward. He wanted to use the oil money to develop the east coast states, particularly Pahang. The PDA was drafted to meet this mandate,” he said.
Tengku Razaleigh, or Ku Li as he is fondly known, also expressed bewilderment over the oil royalty controversy, arguing that the PDA is crystal clear in its terms and agreement.
The Pasir Puteh Umno division in Kelantan today sent a protest note to Tengku Razaleigh over the latter's support for the PAS-led Kelantan government in its dispute with the federal government on the oil royalty issue.
Its chairman, Zawawi Othman, said the division was disappointed that Tengku Razaleigh did not concur with the federal government on Kelantan's ineligibility to receive any oil royalty.
Yesterday, former law minister Zaid Ibrahim accused the government of attempting to hoodwink the people, and challenged it to reveal the three-page oil agreement between Petronas, Terengganu and Kelantan.
'Some aspects of PDA unconstitutional'
Meanwhile, senior law professor Shad Saleem Faruqi, who was also a panellist at the forum, said that some aspects of the PDA may be unconstitutional.
“The PDA says that all oil is the monopoly of Petronas. In return for the oil, Petronas and the state government will sign a vesting agreement giving Petronas such cash payments that may be agreed upon. But that’s not my reading of the constitution.
“My reading is that if you own something, then that thing can be personally acquired from you with adequate compensation, not in cash payments, that are agreed upon.
“There are clear problems of unconstitutionality in nationalising all oil owned by the state onshore and promising the state such cash payments,” he added.
Shad also highlighted a phrase in the PDA which he deemed is the root of the problem -- “oil lying onshore or offshore off Malaysia”.
He explained that legally an agreement with Petronas and the state government should refer only to onshore petroleum, but if the federal government is involved then the agreement should refer to onshore or offshore petroleum.
“But according to the agreement between Petronas and Kelantan, the latter assigns to Petronas ownership of all petroleum whether lying onshore or offshore off Malaysia.
“Kelantan doesn’t own the offshore off Malaysia. The blueprint should have been looked at more carefully to avoid controversies like what we are facing now,” he said.
'No rights beyond territorial waters'
To senior lawyer Cecil Abraham, the question is -- what property rights belong to the federal government and what belongs to the state?
“If petroleum belongs to the federation, the states have no right to the said petroleum and cannot be expected to be paid cash payments for the transfer of the rights of such petroleum to Petronas.
“And where petroleum belongs to the state, the federal government cannot expect to be paid cash payments for the transfer of the right to such petroleum to Petronas,” he said.
However, he said that according to the current legislative and constitutional frameworks, all west Malaysian states do not have rights over the sea or submerged land beyond the territorial waters.
Citing Kelantan as an example, Abraham said that under the PDA, Petronas will pay the federal government five percent in oil royalty of the value of petroleum won and saved in the state.
“The words ‘won and 'saved’ should be given the ordinary and natural meaning. So unless the legislation is amended, west Malaysian states have little or no right to oil that is discovered off shore,” he explained.
'This is a political spat'
Leading constitutional lawyer Tommy Thomas told the audience that the current spat is motivated by political differences.
Calling territorial waters a red herring, he said that it has nothing to do with the ownership of oil.
He also reminded the audience that the question of territorial waters never arose until PAS took over Terengganu and subsequently began receiving “wang ehsan” (goodwill payment) instead of oil royalties.
“Territorial waters are not mentioned anywhere in the PDA or in the 14 agreements and grants signed between Petronas and the federal and state governments,” he said.
“It was only when we filed a suit against Petronas and the federal government for ceasing oil royalties to Terengganu that it became clear that both parties were relying on the three-mile argument about territorial waters. This is a classic lawyer’s afterthought argument to help save a political party,” he said.
Tommy drew laughter and applause when he used Tengku Razakeigh's constituency of Gua Musang to further drive home his point.
“If oil is discovered in Gua Musang, ownership would belong to Petronas under the PDA. Ninety percent of royalties would go to Petronas, five percent to Kelantan and five percent to the federal government.
“If not for the PDA, the federal government would not receive any payments because up to 1974 it never enjoyed any right of minerals over land onshore.
“So what is so terrible about Kelantan and Terengganu receiving five percent when it has no legal basis for oil outside three miles when the federal government will enjoy five percent in any of the 13 states on land?” he asked.
The forum, entitled “Oil Royalties: Is It A Constitutional Right?”, was organised by the Bar Council.
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