‘People-Power Needed To Push For Oil Royalty Hikes’

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Sabah could earn as much as RM2.4 billion if the federal government agrees to make cash payments equivalent to 15% of royalties, says the opposition.

KOTA KINABALU: Former Sabah chief minister Yong Teck Lee believes a people-power movement can be an effective way for petroleum-producing states such as Sabah, Sarawak and Terengganu to get more royalty payments for the commodity.

He said such a movement could pressure elected representatives to push for these states to
receive 20% of oil royalties. Currently, the states receive only 5%.

Yong, who is opposition Sabah Progressive Party (SAPP) president, said that pressure from a grassroots movement would be effective as seen in the cancellation of a proposed 300mW coal-fired power plant in Sabah’s east coast.

He said that it was imperative for states like Sabah to seek higher returns for resources that were extracted within their areas.

“Petronas has reported profits of nearly RM100 billion, of which RM30 billion had been handed over to the government for dividend payments and another RM27 billion in taxes.

“Sabah, on the other hand, expects to get a mere RM800 million from petroleum royalty payments representing only 5% ,” he added.

He said that Sabah could stand to receive an additional RM2.4 billion a year if the federal government agreed to make cash payments equivalent to 15% of royalties.

Speaking at reporters yesterday, he said that the latest disclosure of Petronas’s profits at RM97.80 billion has added urgency to a fair sharing of Sabah’s oil resources.

“If Sabah fights hard enough, we can succeed… but the Sabah Barisan Nasional (BN) is failing in its duty to Sabah by not claiming 20% oil royalties,” he said.

Petronas Profits

Noting that the agreement between the Sabah government and Petronas signed on June 14, 1976 had fixed the cash payment at 5% of the value of the petroleum extracted from Sabah, Yong said that an increase in the oil royalties could still be obtained.

“At today’s oil prices and production volumes, the 20% in royalties amount to RM3.2 billion, which is well within the ability of Petronas to pay.

“It is also within the capacity of the federal government to give back RM2.4 billion (15% royalties) to Sabah, which is the poorest state in Malaysia.

“After all, Petronas is making huge profits by piping our natural gas to its LNG plant in Bintulu,” Yong said.

With global oil prices staying high in the long term, he sees Petronas being able to pay an annual dividend of RM30 billion to the federal treasury for some time to come.

“In any case, the royalty paid to Sabah and other states is subject to the global prices so, if Petronas’s profits fall due to lower prices, then the payments to the oil-producing states will also be reduced.

“So, there is no real danger that either Petronas or the federal government cannot fulfil the 20% royalties to the oil states,” he said.

Asked why he had not raised this issue when he was the chief minister, he said at that time federal power was at its peak and “neither the timing nor the political environment was conducive to a review of the oil royalties”.

“Like the return of Labuan, any demand would have zero chance of success. Remember that the prime minister was Dr Mahathir (Mohamad) and the deputy prime minister-cum-finance minister was Anwar Ibrahim. In Sabah, we had to settle for more grants that could match the oil
royalties.

“But after the political power equation shifted in favour of Sabah and Sarawak following the 2008 general election, it has become viable to press for more oil royalties and other Sabah rights which are long overdue,” he said.

High Oil Prices

Yong also noted that in the 1980s and 1990s, the 5% royalties payable to the state government amounted to between RM80 million and RM150 million per annum depending on global prices.

“In the 1990s, oil prices were only US$20 to US$35 per barrel. Recent oil prices were US$80 to US$100, sometimes reaching US$140.

“Today, with increased production and higher prices, the 5% royalties amounts to RM800 million.

“Roughly, every one percent of royalties equal to RM160 million. This means 20% royalties amount to RM3.2 billion.

“These are substantial sums that so far have benefited only Petronas,” he said.

He also said that demand for higher oil royalties for Sabah is nothing new, pointing out that in the 1990 general election, the PBS state government had tried it.

“PBS was the only state government in Malaysia to have joined the opposition Gagasan Rakyat coalition led by Tengku Razaleigh Hamzah and Lim Kit Siang. The state government had pushed for an upward revision of the 5% oil royalties.

“I recall that Razaleigh did not agree to Sabah’s demand on the grounds that such a move (to increase Sabah’s oil royalties) would have an adverse impact on federal revenues because oil royalties also involved Sarawak and Trengganu.

“I think Razaleigh promised the return of Labuan to Sabah, but not on oil royalties.”

But Gagasan Rakyat lost the election. Only Kelantan followed Sabah’s move into the opposition. Even Sarawak and Penang returned the BN government. The rest is history,” he said.

Bitter Experience

Yong said that in October 2006, the 20% oil royalty issue was revived by Jeffrey Kitingan in his Tambunan Declaration.

He also said that Anwar, who is now with Pakatan Rakyat, had made a commitment to him in May and in June 2008 that the Pakatan government would honour the 20% royalty promise which was among SAPP’s Eight-Point “People’s Declaration For Change”.

“But, we cannot assume that it is automatic that Anwar as prime minister will go ahead to give the 20% royalties to Sabah and other oil-producing states.

“That is not how things work. Things will work if the prime minister of the day needs your support.. then he will fulfil his promise.

“History and bitter experience have taught us not to depend on charity and promises alone. We must have bargaining power, leverage and courage,” he said.

On the Sabah DAP’s assertion that SAPP has only two MPs and cannot make Parliament amend the Petroleum Development Act 1974 to give Sabah the 20% royalties, Yong said that it was not necessary to touch the Petroleum Development Act as it said nothing about percentage of royalties.

He pointed out that payments to Sabah can be done through normal budgeting.

“If the federal government puts this 20% in the annual budget, then the entire budget will be approved by Parliament.

“If Parliament does not approve the budget, then the government will fall and a general election will be held again.

“This is the law. There is no need for another law.

“At the moment, SAPP does not have enough MPs. That is why we are working very hard so that after the general election, with the people’s support, SAPP and Pakatan will have more MPs,” he said.

Honouring A Promise

Yong is banking on Sabah which has 25 parliamentary seats and the other three oil-producing states – Sarawak, Kelantan and Trengganu with 31, 8 and 14 respectively – giving them a total of 78 MPs, more than a third of the 222 MPs.

“All these states want the oil royalties to be 20% if Pakatan comes to power.

“Whether Sabah is under Pakatan or not, Pakatan will have to pay 20% to all the oil-producing states.

Yong also said that if Pakatan captures Putrajaya in the coming general election, the Sarawak government would still consist of state parties.

“Pakatan becomes government at the federal level but opposition at state level, like Kelantan, Penang, Selangor and Kedah today, except for reverse roles.

“Do you mean to say that a Pakatan federal government will not honour its promises of 20% to oil-producing states? Will Pakatan survive such a breach of promise? The answer is no.

“Look at the situation today, the federal and state governments belong to the same (BN) alliance.

“But still the 20% royalties is not fulfilled. Will Pakatan be different?

“Based on history and bitter experience, we know Kuala Lumpur will not give 20% unless they have to.

“It is for their own survival that they have to give back to Sabah what rightly belongs to us,” he said.

- FMT