Whenever oil or gas production begins,the landowner is entitled to part of the total production. A royalty is agreed upon as a percentage of the lease, minus what was reasonably used in the Lessee's production costs. The royalty is paid by the Lessee to the owner of the mineral rights, the Lessor in the Lease. It is based on a percentage of the gross production from the property and is free and clear of all costs, except for taxes.
Traditionally, royalty can be 1/8 of production or 12.8 percent of production; however, it can be any fraction of production, depending on the royalty clause in a lease. The landowner should negotiate for as high a royalty as can be arranged.
Previously, landowners bargained for an overriding royalty. The override was 1/16 taken from the Lessee's interest. Today, mineral owners negotiate for a firm royalty percentage without any override.
Oil royalties may be paid in oil. The Lessor may receive oil from the Lessee and then market the oil. Unless the Lessor is wise and understands the market, electing to receive the royalty in this manner, could be a disadvantage and the landowner, electing for this arrangement, may not benefit from it. Most landowners choose to receive the royalty in cash at the posted price of the oil. A Lessor deciding to receive the oil as the royalty payment can market the oil royalty back to the Lessee for marketing and receive cash through that arrangement.
Gas royalties usually are paid in the monetary units of the country, as in dollars. Gas price is also difficult to value given the fluctuating and volatile markets. Gas royalty clauses usually state a royalty as proceeds, market value or in kind
A landowner can specify separate royalties for oil and gas production. Landowners in negotiating the lease can place a due date for receipt of royalty payments and if timely payments are not made there can be an interest charge for late payment placed in the lease.
A royalty clause in the oil and gas lease specifies the amount of royalty to be paid to the Lessor and it can include other terms and conditions of payment.
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Isu royalti harus dikaji. Sabah berhak menikmati kadar yang berpatutan.
ReplyDeletePembayaran harus pada tarik yang ditetapkan.
ReplyDeleteapparently in Sabah it is calculated based on greed
ReplyDeletePetronas is confident that its multi-billion ringgit key projects planned for Sabah will provide tremendous opportunities for present and future generations of Sabahans. General manager of Petronas Sabah and Labuan Regional office, Joseph Podtung, said these projects would transform the landscape of Sabah’s oil and gas industry into a vibrant oil and gas centre in the region.
ReplyDelete“These mega projects will cost billions and will not only boost Sabah’s oil and gas industry but also generate employment and spin-off opportunities for all the rakyat to enjoy,” he said. Podtung however said Petronas’ mega projects in Sabah were not just about providing opportunities but also required the readiness of the local industry to fully grab them.
ReplyDelete“Capacity and capability require time to develop, and it is worth noting that the expected benefits and spin-offs will only materialise in the long term. “Based on Petronas’ experience in Kerteh and Bintulu, it took decades for these places to be what they are today,” he said.
ReplyDeletePodtung was presenting an overview of Petronas’ activities in Sabah at the two-day Sabah Oil and Gas Industries forum, organised by the Sabah Oil and Gas Contractors Association (SOGCA) here yesterday. He said Petronas’ efforts in developing Sabah’s oil and gas resources had generated substantial revenues, allowing the national petroleum company to pay the state petroleum royalty totalling RM6.8 billion since 1976, while its total investment to date was RM63 billion.
ReplyDelete“Our ongoing exploration and development activities in the state have resulted in steadily growing production of oil and gas, contributing to a steady increase in petroleum royalty paid to Sabah. “All these royalty payments contribute significantly to the state’s fiscal revenue, which in turn will benefit the rakyat,” he said.
ReplyDeleteOn Petronas’ key projects in Sabah, Podtung said the Sabah-Sarawak Integrated Oil and Gas Projects (SSIOGP) would be the cornerstone of an integrated oil and gas master plan for Sabah. He said the SSIOGP comprised the development of oil and fields offshore Sabah, an onshore oil and gas receiving, storage, processing and export terminal or Sabah Oil and Gas Terminal (SOGT) in Kimanis, and the Sabah-Sarawak Gas Pipeline (SSGP).
ReplyDelete“As such, it is critical to secure the highest prices possible for this gas to ensure we are able to maximise the value and royalty (payment) to the state. Because of that, SOGT and SSGP are critical enablers to ensure that oil and gas are monetised on a commercially viable basis,” he said. Podtung said Petronas’ planned to build a RM4.6 billion Ammonia-Urea plant in Sipitang (SAMUR) would definitely provide tremendous spin-off opportunities for the local down-stream small-and-medium industries and enterprises (SMIs/SMEs).
ReplyDelete“Fertilisers from this facility will be exported to lucrative overseas markets, but a sizeable volume will still be made available to serve the state’s rapidly growing agricultural sector. “Ammonia can also be used for various end applications such as textiles, melamine and adhesives, creating opportunities for enterprising Sabahans to venture into these businesses. “This in turn will create more jobs and spur greater economic activity,” he said.
ReplyDeleteSabah’s oil and gas industry is set for a big step forward when five key projects of Petronas in Sabah come onstream this year. These projects, which were announced about two years back, are progressing well and achieving targeted milestones in their implementation, according to Petronas Sabah and Labuan chairman Joseph Podtung.
ReplyDeleteThe five projects are Sabah Oil and Gas Terminal (SOGT), Sabah-Sarawak Gas Pipeline (SSGP), Kimanis Power Plant (KPP), Kimanis Petroleum Training Centre (KTC) and Kinabalu Non Associated Gas (NAG) upstream development. Most of the projects of Patronas are expected to be completed within this year while some may begin operations early 2014, Joseph said during a luncheon with the media here yesterday.
ReplyDelete“These projects, many of which are world-scale, are part of Petronas’ overall plan to optimise the value of the oil and gas resources found offshore Sabah,” he said. In 2011, Petronas announced a host of projects, both upstream and downstream, involving a combined capital expenditure of RM45 billion, he said.
ReplyDeleteThese plans also included the Sabah Ammonia Urea Plant (SAMUR) in Sipitang and the Lahad Datu Regasification Terminal, he added. Joseph disclosed that the RM3.8 billion SOGT project in Kimanis, which is an onshore oil and gas receiving, storage, processing and export terminal, will receive the resources via subsea pipelines from three offshore upstream projects – Gumusut-Kakap, Kababangan and Kinabalu NAG.
ReplyDeleteIts common utilities and facilities to receive gas are expected to be ready in the third quarter this year and will begin receiving oil in the first quarter of 2014. Once fully completed, the SOGT will have a capacity of 260,000 barrels per day (bpd) of oil, 1,250 million standard cubic feet per day (mmscfd) of natural gas and 77,000 bpd of condensates.
ReplyDelete“The RM4.6 billion SSGP is expected to be ready by end of this year. The construction of the Sabah’s side of 512 kilometres pipeline, involving a length of 92km, has been completed,” Joseph said in his briefing on the progress of Petronas projects in Sabah. He said the first block of the 300 Megawatts (MW) KPP that involves a total investment of RM1.55 billion, is expected to be ready by the third quarter of this year, while the other two blocks are expected to be completed in the first and second quarter of 2014 respectively.
ReplyDelete“The first gas production is expected from the Kinabalu NAG by the third quarter of this year,” he said. The RM30.5 million permanent campus of KTC, located just across the SOGT, will be completed in the second quarter of this year. Currently, its trainees are trained at a temporary premises in Membakut Jaya, and have benefited 48 Sabahans.
ReplyDeleteJoseph said KTC augmented Petronas’ existing training efforts in collaboration with five institutions in the state, namely Institut Kemahiran Mara, Institut Latihan Perindustrian and Kolej Yayasan Sabah, all based in the state capital, as well as GiatMARA in Kimanis and Institut Teknikal dan Perdagangan in Papar.
ReplyDelete“These efforts would help develop the skills and capabilities of Sabahans, provide the employment opportunities and support the growth of the oil and gas industry in Sabah,” he said.
He said all the projects are expected to create spin-off effects to further spur economic activities and employment opportunities, as well as provide chances for Sabah companies to participate. Between 2009 and 2011, Petronas awarded 45 contracts worth RM1.07 billion to Sabah companies, of which over 20 state-based companies participated in SOGT and SSGP projects, Joseph said.
ReplyDeleteOn another development, he said that Petronas has also been recruiting Sabahans to its workforce, adding that there are currently 1,588 Sabahans attached in Petronas, including 1,107 serving in Sabah and Labuan.
ReplyDelete“Over the past three years alone, Petronas has recruited 514 staff members from the state,” he said.
The massive Sabah-Sarawak Gas Pipeline (SSGP) will create many positive economic spin-offs for the people of both states, including the rural communities, says a Universiti Malaysia Sarawak (UNIMAS) academician who conducted a social impact study on the communities living within the vicinity of the pipeline.
ReplyDeleteDr Shahren Ahmad Zaidi Adruce, Dean of the Cognitive Sciences and Human Development Faculty at UNIMAS, said the SSGP development would also create new economic activities in the rural areas.
Being built by Petronas at a cost of RM4.6 billion, the 512-km pipeline will transport gas from Kimanis in Sabah to the liquefied natural gas complex in Bintulu by end-2013.
ReplyDeleteDr Shahren said its construction would mean that communities living along the pipeline would have more employment opportunities.
At the same time, the project would bring infrastructure amenities such as roads and telecommunications to these rural areas. The spill-over effect of SSGP will be similar to the North-South Expressway in peninsular Malaysia in bringing economic growth, development in infrastructure and technology to enhance the people』s lives.
ReplyDelete"Communities who live within a three-kilometre radius of the pipeline are those who will benefit most from this project.
ReplyDelete"The project brings a lot of changes to the interior, especially in terms of infrastructure, to support the population』s basic needs and raise their standard of living," said Dr Shahren, who led the social impact research on communities living within the vicinity of the pipeline, stretching from Bintulu through Miri, Limbang and Lawas to Kimanis in Sabah.
The study, which commenced in 2007, had a sample size of 48 settlements and included focus-group interviews with the settlement』s population as well as non-governmental organisations. Shahren said some indigenous groups were at one time not supportive of the SSGP but later changed their mind when they "discovered that Petronas was not encroaching directly into some of the sensitive areas".
ReplyDeleteThe SSGP is a part of the Petronas Sabah-Sarawak Integrated Oil and Gas Project to harness oil and gas resources in the offshore areas of Sabah and Sarawak.
ReplyDeletenotice how the BN propaganda drones seem very interested when it comes to oil issues
ReplyDeleteRoyalties are usage-based payments made by one party (the licensee) to another (the licensor) for the right to ongoing use of an asset, sometimes an intellectual property. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation.
ReplyDelete- LegacyRoyalties.com