KuLi's reply to government's full page ads on oil royalty

Tengku Razaleigh Hamzah,
The Edge

22 February 2010

I see the Ministry of Information has taken out full page advertisements in
the major Malay newspapers to argue that Kelantan has no right to oil
payments under the Petroleum Development Act because the oil resources in
question lie outside the 3 nautical mile limit that delimits state versus
federal jurisdictions. The advertisement fails to point out that almost all
the oil found in Malaysia is located more than 3 nautical miles offshore,
and Petronas has nevertheless been making oil payments to the states.

By the argument deployed in the advertisement, Terengganu, Sabah and Sarawak
too are not entitled to the "cash payments" of 5% of profit oil (commonly
and a little inaccurately referred to as "oil royalties"). Everything is at
the arbitrary behest of the Federal Government.Yet last year, according to
its annual report, Petronas paid out RM6.2 Billion in petroleum cash
payments, with RM 3Billion to Terengganu, 2.3Billion to Sarawak and
0.9Billion to Sabah.

One wonders what basis this payment was made on since none of this was for
petroleum found within 3 nautical miles offshore of these states. The
argument for depriving Kelantan of 5% cash payments on the basis of its
petroleum resources being found beyond 3 nautical miles is an insult to the
intelligence.I have spoken and written at length on this issue and had been
reluctant to say more on it. Moreover, as a member of the ruling party I am
embarrassed to have to belabour elementary points against the government.

This information campaign, whether through a leaflet campaign in the schools
or through newspaper advertisements paid for with taxpayer money, implies
either culpable stupidity or gross deceitfulness on the part of agents of
the Federal Government. I had hoped to avoid that impression.

The government's advertisement also exhumes a ten year old mis-quotation in
a government newspaper to allege that I once denied that Terengganu had any
right to the 5% cash payment. I said no such thing. If the government media
is to be believed I also once converted to Christianity by wearing Kadazan
headgear just in time to be exposed amidst a General Election campaign. Why
does the government rely on a ten year old misquotation? Well, these days we
have our own blogs.

In fact, as a BN backbencher at the time I opposed the Federal Government's
intervention to prevent Petronas from making oil payments to Terengganu and
the move to channel those funds instead into "wang ihsan". Tun Salleh Abbas
and I offered ourselves as witnesses to the Terengganu state government in
the suit it filed against the Federal government to recover those oil
payments. Between the 2000 and 2009, 15.8 Billion was paid out through the
legal black hole of wang ihsan, not to the rightful party as specified under
the Petroleum Development Act, which is the state government's consolidated
fund, but to agencies more amenable to vested interests linked to the
central government. The outcome of that spending is the Monsoon Cup, a
Crystal Mosque in which it is impossible to pray, a leaking swimming pool, a
collapsed bridge and a collapsed stadium.
The people of Terengganu remain poor while Billions have been paid out in
their name.

I am said to have changed my mind or somehow ignorant of the fact that
Kelantan's petroleum resources all lie offshore when the fact is that, on
the instruction of the late Tun Razak, I drafted the Petroleum Development
Act precisely because we wanted to ensure that Kelantan, Terengganu, and
potentially Pahang and Johor would benefit from the 5% cash payments.We did
precisely because we knew that these states did not have oil onshore or
within their territorial waters. The device we used was a Vesting Deed by
which the states vested, in perpetuity, all their petroleum resources to
Petronas, onshore or offshore. In return for this Petronas guaranteed the
cash payment of 5% from oil found anywhere, offshore or onshore, of the
state. This rendered any consideration of federal/state boundaries whether
at 3 or 12 nautical miles or whatever irrelevant for the purpose of
reckoning the payment. I traversed the country to sign this agreement with
each Chief Minister of each state government. Tun Razak was driven by the
nation-building concern that these poorer east coast areas, which are also
predominantly Malay areas should benefit directly from offshore oil, and I
drafted the Petroleum Development Act to reflect that concern.

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