Monday, 30 August 2010

Oil Royalty Lawsuit

Kelantan claims RM800m per annum oil royalty

UPDATED @ 01:06:55 PM 30-08-2010
August 30, 2010
Nik Aziz (centre, with cane) leaves the court complex today after the filing. - Picture by Choo Choy May
KUALA LUMPUR, Aug 30 — The Kelantan state government claims Petronas owes the state RM800 million per annum from the Kelantan-Thailand offshore area since 2005.

The Kelantan government filed a suit today at the High Court here against the oil giant for breaching the Petroleum Development Act (PDA) 1974 by failing to pay the state oil royalties.

“The worth of condensate (gas liquid) comes to about US$8.5 billion per annum from the joint development offshore area with Thailand,” said state executive councillor Datuk Husam Musa.

“Five per cent of that belongs to Malaysia, which is RM1.7 billion. Half of that belongs to Kelantan which is RM800 million. Petronas owes Kelantan RM800 million per annum since 2005,” he added.

The Kelantan state government said today that Petronas owes the state oil royalties from at least four offshore areas from which oil has been extracted from. These are Kelantan, Kelantan-Thailand, Kelantan-Vietnam and Kelantan-Terengganu.

The state government also asserted that Petronas’s refusal to pay cash for oil obtained offshore not only breached a slew of laws but also Article 8 of the Federal Constitution.

Article 8 prohibits discrimination against citizens on the ground of religion, race, descent, gender or place of birth.

The writ of summons alleges Petronas is unfairly discriminating against the east coast state because it is an opposition state under PAS rule.

Despite failing to pay Kelantan oil royalties, the national oil company kept its payments to Barisan Nasional (BN) controlled Sabah, Sarawak and Terengganu (interrupted in 2000 when the state was governed by PAS).

“Such conduct on the part of Petronas constitutes unfair discrimination which has resulted in severe financial loss to the Kelantan state government and will continue to do so,” said the state government in its writ of summons.

In addition to failing to make an account of all oil obtained offshore Kelantan to date, the national oil company informed the state that it was not entitled to any cash payments.

“All this while, Kelantan’s property has been stolen by the federal government,” PAS Mentri Besar Datuk Nik Aziz Nik Mat told reporters today.

“The Kelantan government needs to reclaim it to secure justice for the people,” he added.

Petronas and Putrajaya have continued to argue that Kelantan is not entitled to oil royalties, preferring instead to offer only a token goodwill payment.

The Kelantan state government however contends that under the PDA, Kelantan Petroleum Agreement and Kelantan Grant, Petronas is obliged to make cash payments twice a year for all oil obtained from Kelantan's offshore.

The PDA states that in return for vesting of petroleum ownership in the company, Petronas would pay cash payments to the federal government and state governments where petroleum was found.

On May 9, 1975, Petronas had entered into an agreement with Kelantan where it agreed to make cash payments yearly amounting to the equivalent of five per cent of the value of petroleum obtained onshore and offshore Kelantan. In consideration of Petronas's payments, it was granted exclusive rights and privileges of obtaining petroleum in the state under the Kelantan Grant.

“We want Petronas to pay all the oil royalties owed to Kelantan since the oil production date,” said Husam.

The state government is also seeking a court order that all future cash payments be paid to Kelantan by Petronas for oil produced off-shore Kelantan; an account or an inquiry to make a full and frank disclosure of all the relevant facts relating to cash payments payable to Kelantan, including the period from which petroleum has been produced, won or obtained offshore Kelantan; and general damages.

Malaysia Insider

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