Putrajaya seeking ‘backdoor’ legitimacy to Petroleum Act, says Sarawak

State tourism minister Abdul Karim Rahman Hamzah says the exploration of oil and gas must go through Sabah and Sarawak legislative assemblies. (AFP pic)

KUCHING: A Sarawak minister said Putrajaya’s proposal to sell a stake in Petronas to Sabah and Sarawak could provide “backdoor” legitimacy to the Petroleum Development Act (PDA) 1974.

State tourism minister Abdul Karim Rahman Hamzah said Petronas and PDA 1974 were both set up and enacted following the Emergency Ordinance 1969.

“The PDA 1974, which was introduced under it (Emergency Ordinance), has a legitimacy issue.

“Could it be that Prime Minister Dr Mahathir Mohamad is seeking ‘backdoor’ legitimacy to the PDA 1974?

Sarawak Tourism Minister Abdul Karim Rahman Hamzah.

“In the event Sabah and Sarawak agree to ‘buy’ the stakes offered, it would be an implied acceptance by the two states of the PDA 1974, which Sarawak does not recognise,” he told FMT.

It was previously reported that Sarawak Chief Minister Abang Johari Openg said the PDA 1974 was not relevant in the state as it was never endorsed by the Sarawak state legislative assembly.

Karim said anything that encroached into Sabah and Sarawak territories, including the exploration of oil and gas, must go through Sabah and Sarawak legislative assemblies.

He said back then, Putrajaya had not sought Sabah and Sarawak’s consent and the setting up of Petronas and the enactment of PDA 1974 were bulldozed via the Emergency Ordinance.

Therefore, he said the federal government could not just sell the stakes in Petronas as they pleased because they must first seek the consent of Sabah and Sarawak for the mining and extraction of oil and gas in both states.

Karim was commenting on Mahathir’s statement that the federal government would consider selling Petronas stakes to Sabah and Sarawak after the two states demanded a bigger share of the revenue from oil extracted in their territories.

The prime minister said Putrajaya could not meet the states’ demand to increase the royalties paid by Petronas to 20%.

On Dec 7, Petronas CEO Wan Zulkiflee Wan Ariffin said that a 20% royalty to oil-and-gas producing states was not possible as production costs are high and profit margins low.

He said Petronas, which is Putrajaya’s biggest source of income, makes only 3.7% profit from local oil production, with 70% of oil revenue going towards production costs. These costs are higher when ultra-deep-water oil production is involved, he added.

Batang Sadong MP Nancy Shukri.

Batang Sadong MP Nancy Shukri had said Sarawak DAP chairman Chong Chieng Jen had made promises before the last general election to give 20% oil royalty to Sarawak with 10% of the revenue to be declared as petro cash dividends.

“He even mentioned that the state government didn’t need to beg from the federal government if they were to win the general election.

“All these promises were made prior to the election to win Sarawak voters. Now that they have taken over Putrajaya, it is for them (federal government) to work it out and not for the Petronas CEO to comment,” she told FMT.

Muara Tuang assemblyman Idris Buang said although the idea (of selling Petronas stakes to Sabah and Sarawak) was worth considering, the issue concerning oil royalty must be settled as a separate matter.

He told FMT that Sarawak should also be given slots on the board of the national oil giant.

“But under no circumstances shall Sarawak’s special rights under Malaysia Agreement 1963 and under the Federal Constitution be compromised.

“This includes the state’s rights to enforce its own laws over its territory under the Sarawak Land Code, Oil Mining Ordinance 1958 and Sarawak sales tax, among others.”

On Mahathir’s statement that increasing the royalties paid to Sabah and Sarawak from 5% to 20% could “kill” the oil company, Idris said that was the federal government’s “excuse”.

“Petronas easily gave the federal government RM82 billion with just a stroke of a pen last year, a sum which is far more than all the total ‘cash payments’ that Sarawak received from Petronas over the last 40-over years.

“They (federal government) should know very well that as the true sovereign owner of the natural resources, Sarawak has every legal and moral right to ask what’s reasonably equitable.

“Petronas has extracted our resources for more than 40 years by giving us merely ‘peanuts’.”

He said Sarawak’s “contributions” had assisted Petronas in developing into a national oil company.

“Knowing very well now that Sarawak needs to develop itself and has lots of catching up to do for the benefit of its people, Petronas and the federal government should now accede to the state’s needs.”

This is also consonant with the principle established in the United Nations via its general assembly resolution 1803 (XVII) of Dec 14, 1962 on permanent sovereignty over natural resources, he said.

Meanwhile, Sarawak DAP assemblyman Violet Yong said she would urge the state government to buy the stakes in Petronas.

She said this is because Petronas is the 158th largest company in the world this year with AAA brand strength index (BSI) rating and has many businesses across 35 countries.

However, she said the selling price for the stakes must be right.

Yong claimed the federal government had offered to give 20% oil royalty but it would have to be channelled for the development of education and healthcare in the state.

“This offer has been rejected by the ruling Gabungan Parti Sarawak (GPS) because they only want money.”

On the 5% sales tax on petroleum products, Yong said Petronas should pay the Sarawak government if the courts decide that the oil giant must do so.