KOTA KINABALU: A Sabahan activist says there is no reason – not even low global oil prices – for the Sabah government to not pursue oil and gas rights belonging to the state.
In an interview with FMT, Malaysia Agreement 1963 (MA63) activist, Zainnal Ajamain said the Federal Constitution had clearly outlined the state’s oil and gas rights including the collection of export tax on crude petroleum, oil royalties and ownership of oil fields.
State rights especially in relation to oil and gas, have always been a sore point for Sabahans and Sarawakians.
In recent times, the Sarawak government, which has pledged to pursue its request for higher oil and gas royalty, has put on hold further talks with Putrajaya until global crude oil prices – which plunged from US$107 per barrel in January 2014 to US$52 per barrel three years later – recover.
In 2014, the state BN, led by the late chief minister Adenan Satem, had supported a motion, originally tabled by Sarawak DAP leader Chong Chieng Jen, calling for the oil royalty paid by Petronas to the state to be increased from the existing 5% to 20%.
Following the slump in oil prices, Adenan eased up on the demand but said the state would pursue the matter later.
After Adenan died in January from heart failure, his successor Abang Johari Openg pledged to continue Adenan’s struggles including the pursuit of an increase in oil royalties.
Sarawak has recently said it would establish a state-owned oil and gas company to take part in upstream and downstream oil and gas exploration activities.
What are Sabah’s oil and gas rights?
Zainnal said that the Sabah government should pursue its oil and gas rights, the 40% net revenue of taxes derived from the state, with such taxes including corporate tax imposed on oil and gas companies operating in Sabah, export tax on crude petroleum, import tax on petroleum products and dividends from Petronas’ revenue derived from its Sabah operations.
“The state’s right to collect our 40% of nett revenue as well as the collection of export and import taxes are guaranteed under Schedule 10 of the Federal Constitution but we’ve been shortchanged on this.”
By his estimates, Zainnal who is an economist, said that for every ringgit of petrol derived from Sabah, the state should get 38 sen.
He said his estimation is based on the price of oil in Brunei – which isn’t subject to any import duty – being 38% cheaper than Malaysia.
So Zainnal said Sabah is rightfully entitled to collect export tax on oil exported outside of the state.
This he said, included oil exported to Sarawak through the 512km-long onshore pipeline from Kimanis to Bintulu, Sarawak, as well as oil from oil fields which are received and exported from Labuan.
“Since Labuan is a federal territory and not part of Sabah, there is no reason why Sabah shouldn’t collect export tax on oil stored and exported from Labuan, as this oil comes from oil-fields off Sabah’s waters.”
Zainnal also said Sabah was entitled to oil royalties instead of cash payments which had often been confused for oil royalties.
Under the Petroleum Development Act 1974 (PDA), Zainnal said Petronas was obliged to give the Sabah government cash payments, but in actuality, it was Sabah’s right to collect oil royalties as the owner of the resources.
“Many of the Sabah and Sarawak lawmakers are confusing the 5% as royalties whereas it is actually cash payment,” he said, adding that Petronas can’t pay royalties and only cash payments as per Section 4 of the PDA.
“Article 112C (4)(b) of the Federal Constitution clearly states that parliament cannot make any law to deny Sabah and Sarawak from imposing royalty.”
Zainnal also said Sabah should also stake its claim to oil and gas resources located up to 350 nautical miles of the state’s low water line.
Currently, he said the Territorial Sea Act 2012 (TSA) limited the state’s jurisdiction to three nautical miles from the low water line.
He said the act was unconstitutional as it seeks to take power over land, pointing to the wordings of the act which according to him is “eerily identical” to the wordings of the Emergency Ordinance.
The Emergency Ordinance he said, suspended the state’s jurisdiction of its waters as determined under the North Borneo (Alteration of Boundaries) Order in Council 1954, which is part of MA63 as well as Article 169 of the Federal Constitution.
Zainnal said the Emergency Ordinance was lifted by Prime Minister Najib Razak in 2011, but the TSA sought to reinforce the power of the Emergency Ordinance.
What is the Sabah government doing about TSA?
Parti Warisan Sabah (Warisan) deputy president Darell Leiking told FMT they fully support the “Borneo Awakening” as shown by Sarawak by opposing the TSA which robbed Sabah of its rights.
Leiking, who is Penampang MP, said he also wants to know what the Sabah government is doing about the TSA and whether the BN-led state government is taking the same stance as Sarawak.
He said Sabahans are blessed with huge oil reserves but couldn’t fully benefit from them as Petronas was “happily pumping out” the oil by relying on the TSA.
“The TSA is hampering Sabah from having total control over our own resources .
“When the Emergency was lifted, Sabah and Sarawak should have been entitled to our respective continental shelves, which include the seabed and subsoil beneath the high seas contiguous to our territorial waters.”
Leiking said he couldn’t remember which Sabah MPs supported or objected to the TSA when it was tabled in Parliament and that Putrajaya also hasn’t responded clearly to his question whether Sabah adopted the TSA.
“The Sabah government should enlighten us on its stand on the TSA and whether we have adopted it.
“If the state doesn’t recognise it, what is it doing about it? If it does, it needs to explain why when we shouldn’t have to.
Leiking said the TSA has to be debated along with Article 8 of the MA63 in a specially convened State Assembly meeting.
Article 8 of MA63 refers to Chapter 3 of the Inter-Governmental Committee (IGC) report and Annexe A of the IGC which outlines the separation of powers between the Federal Government and Sabah and Sarawak, as well as the rights of the two states which have been agreed on.
He added that Adenan had previously made Sarawak’s stand on the TSA clear and that Sabah should also do the same.
“Sabah Chief Minister Musa Aman says Prime Minister Najib Razak always listens to Sabah’s requests for bigger allocations, so he should also be ‘requesting’ for our rights to be returned. If he can’t do it, Warisan will do it as we are already demanding for our rights now.”
In March, Musa – who is Sabah’s longest serving chief minister – praised Najib for always listening to Sabah’s requests for bigger allocations to meet the state’s socio-economic development needs.
“When we come to power, we will use all available avenues to demand for Sabah’s rights,” Leiking said.
FMT has attempted to get the Sabah government’s feedback on Sabah’s oil and gas rights and is awaiting a response.