STAR: Petroleum Masterplan - Sabah Oil Resources Belongs to All Sabahans

“Sabahans will enjoy cheaper petrol, diesel and gas products, lower electricity rates and enjoy annual grants generated by a new Sabah petroleum corporation under STAR’s Petroleum Masterplan” announced Datuk Dr. Jeffrey Kitingan, STAR Sabah Chief.

“STAR‘s Petroleum Masterplan for Sabah oil and gas resources is based on the vision “Sabah Oil and Gas Resources Belongs to All Sabahans”.

“It will be a three-pronged strategy that will seek a review of the existing arrangements on Sabah’s oil and gas resources as well as the overall development of a oil and gas industry in Sabah and the utilization of the oil and gas resources for Sabah and Sabahans first and the preservation and investment of the oil revenue for the well-being of Sabahans and for the future generations”  added Dr. Jeffrey.

The Masterplan includes review of the cash payment from the current 5% to 50%, establishment of PetroSabah Corporation and the PetroSabah Wealth Fund and a Sabah Petroleum Advisory Council.

In 1976, after the tragic air crash that killed the then Chief Minister and senior members of the Cabinet, the State Government signed away 100% of the State’s oil and gas resources.  It even gave up the collection of its 5% oil royalties and accepted a cash payment under the Petroleum Development Act, 1974.

Under the agreed cash payment, Sabah is now given only a meagre 5% of the revenue generated by Petronas from oil and gas extracted from Sabah and there is no transparency or accountability including whether revenue is given to Sabah for any oil and gas extracted off Labuan island, which is now a federal territory.

If Sabah had not waived collecting the 5% oil royalties, today, Sabah will be receiving at least 10% of the revenue from its oil resources, 5% oil royalties and 5% cash payment.

In 2012, Petronas is expected to receive RM14.734 billion from Sabah oil resources while Sabah will receive only RM0.775 billion and none is specifically invested for future generations.  At the same time, gas is going to be channelled from Sabah to Sarawak via the new RM3.5 billion Kimanis-Bintulu Gas Pipeline, leaving little for Sabah and Blocks L&M have been signed away by the Federal Government to Brunei.

Despite recent demands by the people of Sabah, the State Government has done little to “re-negotiate” oil royalties for the long-term benefit of Sabah and Sabahans and safeguard the exploitation oil and gas resources in the best interests of Sabah and Sabahans.

Under STAR’s Petroleum Masterplan, the underlying objective will be to secure maximum benefits for Sabah from its oil and gas resources based on the vision and rationale that SABAH’S OIL RESOURCES BELONGS TO ALL SABAHANS.

Getting only 5% from its oil resources is no longer acceptable today.   If this continues, Sabah will continue to remain as the poorest State in Malaysia.

The rights of Sabah and the welfare of the people can no longer be compromised by the continued exploitation of its oil resources at the expense of the people in Sabah.

Therefore, the first strategy of the Masterplan will be seek to obtain the best terms for Sabah’s oil resources including the restoration of Sabah’s rights to and autonomous control and management of its oil resources and payment of at least 50% of the net revenue from Sabah’s oil and gas.

This strategy includes a review of the Petroleum Development Act, 1974 and all matters relating to the giving away of the State oil and gas resources, a review of the Kimanis-Bintulu Gas Pipeline and assurances given by Petronas and the Federal Government inclusive of the  guarantee to leave sufficient gas for Sabah’s use and review of sales tax revenue on oil and gas products in Sabah.

Also included will be a request to the Federal Government for a special subsidy for petroleum products equivalent to the volume of oil extracted from Sabah for consumers in Sabah.   Sabah consumers should be paying less for petrol, diesel and gas products compared to their counterparts in Semenanjung.

There will be established a SABAH PETROLEUM ADVISORY COUNCIL to advise on and oversee the planning and policies for Sabah’s oil and gas resources.  The Advisory Council will also assist to formulate a NEW SABAH OIL AND GAS POLICY.

It has to recognized that to derive maximum benefits and spin-offs from its oil and gas resources, these resources need to processed in Sabah and down-stream activities need to be promoted to generate further spin-offs.

Therefore, the second strategy of the Masterplan will be seek to establish a systematic development of an oil and gas industry in Sabah to maximize returns and spin-offs to its economy on best terms basis including the exploration and exploitation of the oil and gas resources.

The present day system of secrecy, non-transparency and non-accountability will be abolished.  Petronas will have to be accountable to the people of Sabah for Sabah’s oil and gas resources.

There will be established a PETROSABAH CORPORATION to spearhead the development of the oil and gas industry in Sabah.

Where possible, Sabah’s oil and gas resources will be used for its oil and gas industry and related industries as well as for other local industries with priority utilization in the State.

A proposal will be submitted to the Federal Government for the licensing of oil and gas industry in Sabah to be under State control and not Federal control.

It will also be proposed that special tax incentives be given to oil and gas-powered plants in Sabah so that Sabahans will enjoy cheaper electricity rates generated by Sabah’s own oil and gas resources.

It will also be proposed to the Federal Government that PetroSabah Corporation will be tax-exempt company, exempted from paying Federal income tax.

It is recognized that despite the several recent announcements of new oil and gas finds off the coast of Sabah including within its inner waters, the oil and gas resources are a depleting resource and will be exhausted in the future.

Therefore, the third strategy of the Masterplan will be seek to invest some of the oil and gas revenues and at the same time to provide for the benefit and well-being of Sabahans.

The oil and gas revenues need to be conserved and invested for the future of Sabah and all Sabahans and cannot be wholly used in the annual State Budget as currently practised by the Government.

There will be established a PETROSABAH WEALTH FUND which will be entrusted to invest Sabah’s oil and gas revenues for the future generations.   The investment guidelines and criteria will be formulated by the Advisory Council.

It is proposed that 12.5% of the annual profits of PetroSabah Corporation will be set aside to provide for Sabahans and another 25% will be invested in the PetroSabah Wealth Fund.

We cannot rely on and cannot depend on outsiders to decide on Sabah’s oil and gas resources which belongs to all Sabahans.


Datuk Dr. Jeffrey Kitingan is Chairman, STAR Sabah