Impossible to pay 20% royalty is a lie

KOTA KINABALU - “The Petronas financial results of making RM17.487 billion for the 1st quarter of 2015 may have proven that Petronas and the Sabah ministers and leaders lied to Sabahans in July 2014 that Petronas would suffer losses and unable to pay the proposed 20% oil royalties when the world Brent grade oil prices were hovering at USD100-USD110 per barrel then” said Datuk Dr. Jeffrey Kitingan, State Assemblyman for Bingkor cum STAR Sabah Chairman, showing that Petronas announced a quarterly profit despite world Brent oil prices dropping from USD115 in June 2014 to between USD47  and USD62 for the quarter January to March 2015.

For the record, for the 1st quarter of 2015, despite the lower oil prices Petronas recorded a 21% drop in turnover from RM84.049 billion to RM66.191 billion and a 38% drop in gross operating profit from RM27,527 billion to RM17.487 billion compared to the corresponding quarter in 2014.

Minister in the CM’s Department, Teo, even told the State Assembly in July 2014 that exploration costs was between 50% to 70% and an exploration exercise costs RM8 billion to RM12 billion would make oil production non-lucrative if royalties were increased to 20%.

It was “explained” that even at USD100 per barrel, Petronas could not afford to pay 20% royalties as it would result in Petronas losing money and any re-negotiation will deter foreign oil companies from investing in Sabah.

“The question arising from Petronas financial results is “Did Petronas and the Sabah Umno/BN leaders lie to Sabahans that it was near impossible for 20% to be given to Sabah?” asked Dr. Jeffrey.

As for Minister Teo, he owes the Sabah State Assembly a very good and detailed explanation why he misled the Assembly and said that Petronas could not afford to give 20% royalties to Sabah.

The Petronas profits showed that despite a 60% drop in oil prices to USD50-USD60 per barrel, Petronas was still profitable.   It further means that at USD100, if Petronas had given 50% or USD50 per barrel, not just 20% or USD20, to Sabah, it would still be profitable.

Currently, world Brent oil prices are hovering at USD60-USD65 per barrel.  If Petronas were to give 20% based at USD60 amounting to just USD12 per barrel, Petronas will still be profitable.Now, that Petronas and the Sabah Umno/BN leaders have been proven wrong in their explanations, “Will the Sabah government now cooperate with the Sarawak government and demand for 20% oil royalties starting this year?” added Dr. Jeffrey.

At the same time, the Sabah government should enforce Item 3, Part V, 10th Schedule of the Federal Constitution and claim for the 10% export duty which is the legitimate entitlement of Sabah from the federal government on all petroleum and gas exported from Sabah.  The said Item 3 reads:-          

               ADDITIONAL SOURCES OF REVENUE ASSIGNED TO STATES OF SABAH AND SARAWAK

               3.      So long as the royalty levied by the State on any mineral chargeable with export duty other than tin (but including mineral oils) does not amount to 10 per cent ad valorem calculated as for export duty, export duty on that mineral or such part of the export duty as makes the total of royalty and duty on exported mineral up to 10 per cent ad valorem so calculated.

The time has come for the Sabah government and the Sabah Umno/BN leaders to show Sabahans that they truly are the government and leaders representing the interests of all Sabahans or mere lackeys bowing to the wishes of their political masters in Malaya.