Dr. Jeffrey: Petronas must pay oil royalties as Constitutional Obligation

KOTA KINABALU - “CM Musa should stop hoodwinking Sabahans on oil royalties and cash payment payable by Petronas just to show support for the Federal government. He should start acting as the Chief Minister of Sabah acting in the best interests of Sabah and Sabahans and not to look after the interests of the Federal government and his political masters in Putrajaya or Petronas,” said Datuk Dr. Jeffrey Kitingan, Assemblyman for Bingkor, in response to news reports that it is a tall order for Petronas to pay higher royalties as alleged by Musa.

Leaving aside the 40% net revenue entitlement, all other parties except Sabah Umno-BN wish to implement higher oil royalties. It is an issue dear to all Sabahans but the Sabah government has failed to put its foot down in dealing with Petronas and the Federal government. As a result, the present Umno-BN government has failed all Sabahans who are now unable to enjoy the true wealth of Sabah’s oil and gas resources.

If CM Musa and his Sabah government as well as the Federal government are sincere, there is no reason for Petronas or the Federal government not to increase the 5% cash payment. After all, all the oil and gas comes out from Sabah’s territory including the continental shelf which is Sabah’s since 1954 through Her Majesty’s Order in Council extending Sabah’s boundary to the continental shelf and entrench in Article 1 of the Federal Constitution since 1963.

The Federal government and Petronas need to be made known that without Sabah and Sarawak there will be no Malaysia.  They should understand that without Sabah and Sarawak, Malaya and Petronas will not get to enjoy the wealth of Sabah and Sarawak’s oil and gas resources.

Other than the cash payment, Sabah is legitimately entitled under the Federal Constitution to 10% oil royalties in its true sense through substitution in lieu thereof the export duties on crude oil exported from Sabah. This is expressly provided in Item 3, Part V of the Tenth Schedule of the Federal Constitution.

Petronas and the Federal government must pay this 10% export duty as oil royalties as it is constitutionally provided.   In addition, no one can take away Sabah’s right or entitlement to oil royalties as Article 112C(4)(b) expressly prohibits even Parliament from passing any law to prohibit Sabah from levying of royalties or to restrict the royalties that may be so levied in any case so that the State is not entitled to receive a royalty amounting to 10% per cent ad valorem.

The 10% ad valorem export duty is to make up for the shortfall in the royalties (not the 5% cash payment) which is presently nil.  It worth more than RM2 billion annually and will increase to more than RM3.5 billion in 2017 with the new Malikai production facility producing 193,000 barrels per day from December 2016.

CM Musa should explain to Sabahans why his Umno-led government has failed to claim the 10% oil royalties entitlement and the full arrears that come with it since 1976 or at least from 2003 when he was first appointed.

His government has also failed to get the full import and excise duties on petroleum products of more than RM8.5 billion and which is currently pegged at RM120 million without any review.

The import and excise duties as well as the export duties in lieu of oil royalties are also not supposed to be deposited into the Consolidated Account as set out in the Federal Constitution as they are meant to be returned to Sabah.

Not only the Sabah Cabinet Ministers and Assistant Ministers, each and every BN MP and State Assemblyperson have broken their oath to protect and uphold the Federal Constitution by failing to comply with the Federal Constitution on Sabah’s revenue entitlements.

As a businessman, Musa should know better to divert attention from the oil royalties with the 10% investment in LNG 9 in Bintulu, Sarawak. As he himself admitted in the State Assembly 2 years ago, the investment costs Sabah big money and there is no guarantee of profit-sharing through dividends.

On the other hand, seeking the return of the 10% oil royalties will cost the Sabah government nothing in terms of investment capital.

It is common knowledge among the people that Sabah will be much better off without the Sabah Umno-BN government. That is why the mood for the forthcoming general election is to throw them out and replace them with a pro-Sabah government.

In a new pro-Sabah government with Parti Solidariti Tanah Airku (STAR) and Gabungan Sabah, not only will the revenues under the Federal Constitution be restored, STAR will take the necessary action to restore the oil and gas ownership rights to Sabah from Petronas which was unconstitutionally and invalidly vested by Tun Abdul Razak to Petronas in 1975. The present Umno-BN Sabah government has refused to act to declare it invalid. 

The same invalidity goes for the 1976 Oil Agreement signed by CM Harris Salleh 8 days after the tragic Double 6 air-crash killing Tun Fuad and senior members of his Cabinet. In the Oil Agreement, CM Harris agreed for Sabah to receive the 5% cash payment and waiving all rights to claim for royalties under the Sabah Land Ordinance.

With the new pro-Sabah government with STAR and Gabungan Sabah, Sabahans will get the chance to enjoy the true benefits, welfare, development and progress that they fully deserve for Sabah is a rich country but made to suffer under the present Umno-BN government.