KUALA LUMPUR, Feb 22 — The Barisan Nasional federal government yesterday argued why states in the Malay peninsula are not entitled to oil royalty, but was silent about its decision to resume paying the 5 per cent cash payment direct to oil-rich Terengganu.
The Information, Communication and Culture
The federal government’s main argument is that oil and gas are extracted from waters that are beyond the three-nautical mile limit prescribed as territorial waters under Malaysia’s Emergency Ordinance (Essential Powers) No 7 1969.
However, Petronas had been paying Terengganu the 5 per cent oil royalty since offshore production began in 1978 but stopped after PAS captured
“Kelantan or any other states in the peninsula are not entitled as the oil and gas wells in the peninsula are located outside the three nautical miles limit. Therefore, anything obtained beyond the three nautical mile limit belongs to the Federal Government,” said the
Oil was first discovered in the South China Sea off Terengganu in 1973, a year before Prime Minister Tun Abdul Razak Hussein directed Razaleigh to form Petronas and become its founding chairman.
The argument in the advertisement could raise the ire of the Terengganu government which is now controlled by BN. The federal government had promised to channel the oil royalty to the Terengganu Investment Authority, the first state sovereign fund in Malaysia, which was later renamed 1Malaysia Development Berhad.
The advertisement also explained that oil royalty payments for Sabah and Sarawak was due to agreements made prior to 1974 and through the
“It is historic and a special right acknowledged when they joined Malaysia in 1963,” the advertisement stated, taking the popular misconception that both Borneo states joined Malaysia rather than forming it together with Malaya and Singapore.
The advertisement also took great pains to explain the term oil royalty does not appear in the Petroleum Development Act, stating it is called cash payments.
It added compassionate payments are made at the discretion of the federal government and is outside the scope of the Petroleum Development Act or the vesting deeds signed between the states and Petronas in 1975 and 1976.
“The aid is given based on the awareness and responsibility based on the federal government’s care for the welfare of
It stressed the federal government was offering Kelantan RM20 million in compassionate payment due to gas being extracted in the Thailand-Malaysia joint development area in the deep waters off the Kelantan coast.
“The Kelantan government has no rights in that area as it is beyond the three nautical-mile limit,” it added.
The government also argued that Razaleigh, who is Gua Musang MP, was only expressing his own opinion but not facts of the matter under relevant laws. It pointed out the Kelantan prince popularly known as Ku Li had once said Terengganu was not entitled to oil royalty.
“Although Tengku Razaleigh Hamzah has changed his mind this time, the position in law has not changed. The people and the nation must respect the country’s laws,” it said.
The advertisement also claimed the parliamentary opposition leader, which it did not name, had realised current laws do not provide the states with the right to get cash payments or oil royalty for oil and gas extracted outside their territorial waters.
“Because of that, the parliamentary opposition leader tried to propose amendments to the Petroleum Development Act 1974 in the parliamentary session last December 2009.
“The Parliamentary Opposition leader himself realises that the Kelantan government has no rights over any oil and gas wells within the Federation,” it added.
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