This piece of news caught our eye today:
Kota Kinabalu: Increasing cash payments – often called oil royalty – for Sabah will have an adverse effect on the national oil and gas industry and possibly render it no longer viable.
Petronas Senior Vice President (Upstream Malaysia) Datuk Mohd Anuar Taib said investors might think twice to come to Malaysia and invest in the oil and gas sector, which is already becoming a highly competitive industry among the oil producing countries.
In a special briefing for the Sabah media, Mohd Anuar together with Vice President of Malaysia Petroleum Management, Adif Zulkifli, said many of the major oil companies from US were also returning to their country.
They said that if the cash payments of five per cent to the Sabah State Government were to be increased it would result in Petronas and its Production Sharing Contractors (PSC) being left with a smaller portion to be divided between them.
The breakdown of the revenue from oil fields is 10 per cent (five per cent each for the State and Federal governments), 70 per cent for cost recovery and only 20 per cent profit.
Out of the 20 per cent, Petronas has to pay 38 per cent to the Federal Government in oil income tax.
“Therefore, Petronas and its PSC would only divide the remaining 52 per cent out of the 20 per cent, normally 50:50,” they said.
Therefore, if the cash payment is increased to 20 per cent like what Sarawak is asking, it means Petronas and its PSC only share 10 per cent of the profit after deduction of income tax.
“This is surely not attractive to investors and they may just shy away from Malaysia,” they said.
Adif said Sabah was actually producing about 180,000 barrels or oil equivalent per day (boe/d) which is only 10 per cent of the total national oil production.
Most of the oil produced was in the peninsula side, he said, adding Sarawak mostly produces gas.
However, Sabah’s production is expected to grow to 16 per cent over the next few years.
According to Adif, out of the 333 oil platforms in Malaysia, 53 were in Sabah.
Sabah currently has 14 oil fields and three gas fields in production while 41 oil and 47 gas fields had been discovered.
Petronas has 27 active PSCs in Sabah involving 12 companies or players. Petronas’ cumulative upstream investments up to 2013 plus commitments amounted to approximately RM179 billion while for downstream the figure was RM6 billion.
Adif said Petronas was not paying oil royalty to Sabah but as stated in the Petroleum Development Agreement, it was paying cash payment.
“This is our top priority and according to the agreement, Petronas must pay the five per cent whenever there is production regardless if there is a profit or not,” he said.
Oil and gas industry have become more costlier, he said, adding that Petronas had to attain expertise from other companies and this was done through the PSC.
The cost of exploration alone starts at RM4 billion, he said.
Nonetheless, he said compared with other oil producing countries, Petronas’ cash payments of five per cent to Sabah were relatively higher.
Source – Daily Express
The opposition in Malaysia have been feeding lies to the people of Sabah and generally to the people of Malaysia regarding the oil royalty. It is now made known that Sabah only produces 10% of the total national oil production.
Therefore, what is the justification of Sabah and Sarawak in saying that people in West Malaysia are living on their oil wealth?
First and foremost, we are fed up with politicians who uses Petronas and petroleum industry as a chess piece in their political agenda. Using oil royalties to entice the people to break the strong harmony that we have as Malaysians.
The opposition had done a massive damage on to the psyche of East Malaysians just because they want to create hatred for the central government and steal more votes for them in the process. Although the Federal government had done so much for East Malaysians, it seems the opposition is teaching the people not to be grateful about the developments and progress achieved.
But the Federal government would still help them..
KOTA KINABALU: A formula is being worked out to address the call to increase oil royalties for Sabah, Prime Minister Datuk Seri Najib Tun Razak said.
The Government, he said, together with Petronas, would decide on various methods to improve Sabah’s economy.
“We have been concerned about the issue of oil royalties in Sabah and as an immediate solution, Petronas will increase its corporate social responsibility (CSR) programmes in Sabah,” he said.
“We will be announcing several other approaches which can help Sabahans in the oil royalties issue,” he added.
Najib explained that there were many approaches which could be applied to it, but not necessarily increasing the percentage of oil royalties as mooted by the Opposition.
He said Petronas would help more rural students, provide more scholarships and increase its funding in its CSR programmes here, among others.
“This is not about getting contracts. It’s about giving and creating value,” he said at the breaking of fast with Sabah Barisan Nasional members at a hotel here yesterday.
In the first place, does Dato Sri Najib Tun Razak know that Sabah is not entitled to receive 20% oil royalty based on the state oil production? Can someone please let him know, before he wrongly reapportioned our country’s precious funds to people who wrongly thought they deserve more than their fair share of contribution?