WHY PETRONAS JUMP THE GUN?

By : EDWARD EWOL MUJIE

PETRONAS is saying that with the increase in royalty payment there will be lower petroleum income tax payment, dividends to shareholders, reduce profitability and investments. Petronas is not in business to be concerned about the petroleum producing states of Sabah, Sarawak, Terengganu and Kelantan.

Petronas is now No.68 in the Fortune Global 500 companies in the world with total assets of about RM500 billion and 2012 total revenues of US$97.355 billion and profits of US$21.915 billion.

Its RM170 billion planned projects over the next 5 years are mostly in production sharing contracts (PSC) with petroleum companies with certain terms and conditions.

It is not like Petronas is putting the investments on its own. PSC contractors such as Shell and Esso have never been deterred from investing in the 4 states as they have been in Malaysia long before Petronas was formed by the Petroleum Act 1974. There are many more companies who would come due to the availability of petroleum resources even if Petronas does not exist.

Petronas role had been put in place by the Act of Parliament. Therefore, it was created by parliament to manage the petroleum natural resources assets of the country. It is NOT like Shell and Esso that are private business entities.

They seemed to have forgotten their roles as a national oil company formed by parliament. So, the right persons to make any comment would be the Minister in charge of petroleum resources or the Prime Minister.

Petronas is only thinking of their own pockets because the states are not given fair and equitable returns of their source of revenue. Petronas is no better than the Anglo-Dutch company of foreigners who 'exploited' our wealth for many decades even before Malaysia was formed.

Petronas was sitting pretty in Kuala Lumpur getting petroleum returns from the 4 states because of the act of parliament. PSC contractors like Shell and Esso had to toil, explore and develop most of the oil fields for Petronas picking after about 15 years PSC.

In the 1980’s Petronas was just picking and taking over developed fields and slowly learning in the process. In those days young Petronas petroleum engineers were tagging along on offshore drilling operations. The comments (in those days for East Malaysians) were that it was a handover from “orang putih” to “orang Malaya”. So, we are just outsiders in our own backyards, and even now oil/gas from Sabah has to be piped to Bintulu for 'orang Malaya' to pick up!

Sarawak started producing oil from 1910 with land fields. From the 70’s onwards, all production moved offshore from shallow waters to deep waters more than 1000 meters. In the past, we were talking about 40 percent petroleum recovery rate of the oil fields.

Today, as much as 70-80 percent is recoverable according to the latest technology by Shell in the shallow waters off Sabah and Sarawak. So, the maturing fields arguments “do not hold water” because the potential is still very big. The only question is transparency.

There is insufficient transparency in the declaration and basis of income and returns from our petroleum resources. This has been going on since the British. The 5 percent for Sabah and Sarawak is not even transparently accounted for. Who are we to say anything as Sabahans and Sarawakians as this has been going for many decades? That is why the question of “Transparency” was raised in the oil royalty accounting in the Daily Express on Sunday, September 2, 2012.

PM Datuk Sri Najib already announced in August 2012 that a special committee be set up to study and review the petroleum royalty payments involving the eastern states of Peninsula Malaysia, in a fair and transparent manner with no mention of Sabah and Sarawak.

Sarawak CM Tan Sri Abdul Taib Mahmud was later quoted as saying the State Government would discuss the need to review the 5 per cent petroleum royalty paid to Sarawak with the Federal Government. Then, Sabah CM Datuk Seri Musa Aman believed that the State’s 5 per cent petroleum royalty issue is open for amicable discussions with the Federal Government.

So, why would Petronas “jump the gun” and make a very irresponsible statement ahead of the result of the Prime Minister’s 6-months planned study and review?

With the recent Petronas perspective, is the petroleum royalty issue really open for discussion? Will the petroleum producing states really mutually benefit from their position as the source of the petroleum resources? Or is this just “election lip service”?

Sarawak and Sabah accounted for more than 80 percent of Malaysia’s oil and gas production which attributes to more than 40 percent of Federal Government’s annual revenue. Sarawak GDP is the second highest in the nation. So, how can Sabah and Sarawak be among the poorest in Malaysia according to the World Bank report? Something must have gone terribly wrong some where. Can we right the wrong?

For Sabah and Sarawak, is it okay for West Malaysia to be highly developed at their expense? Petroleum is just one of the many products that Sabah and Sarawak produce. It is only natural for Petronas to fight for itself and to divert the 80 percent oil and gas revenue to West Malaysia. Oil and gas are even conveniently diverted from Sabah to Bintulu right under our eyes as if Sabah has no space to put up a refinery.

The Ministry of International Trade and Industry Malaysia (MITI) had announced that LNG (RM49.96 billion or 7.2 percent) and refined petroleum products (RM36.53 billion or 5.3 percent) make up two of the top five export commodities totaling RM86.49 billion or 12.5 percent of RM694.55 total exports in 2011. What happened to crude oil export – where is it?

Sarawak is the biggest exporter of LNG in the world and one of the biggest revenue earners in Malaysia. How is it that MITI report last year that LNG contributes to only 7.2 percent of total export revenue? Where has the accounting gone wrong? Is this why the production of Sabah is diverted to Sarawak to bury the issue?

While in August 2012 everybody is happy with the PM’s announcement and is waiting for the result of the six months given for the special committee to study the issue before submitting its proposal to the Federal Government. The Sarawak and Sabah state Barisan National component parties have all agreed to the idea and so have all the opposition parties that have been clamoring for a fair share of the petroleum returns and royalties. The question is, “what are the basis of transparency in the petroleum returns and royalties?”

So, with Petronas recent press statement, we are still watching out to see “what is in the bag” for us in Sabah and Sarawak.

The 13th General Election is just round the corner. Will Sabah and Sarawak residents take heed and tack on the winds of change that is blowing in the Malaysian politics and usher in the change they so desire?