Oil royalty: Kelantan files suit against Petronas

By Rahmah Ghazali
FULL REPORT KUALA LUMPUR: With the abundance of oil it possesses, Petronas could burn in the hereafter for a long time. To avoid such a fiery fate, Kelantan Menteri Besar Nik Abdul Aziz Nik Mat said it should pay his state the royalty it deserved.
The PAS spiritual leader issued the dire warning after filing a suit against the national oil and gas company over its refusal to pay oil royalty despite operating an oil platform off the state’s shores.

“We don’t want our rights to be taken away. If they do not pay now, they will need to pay in the hereafter. But before they get punished in the hereafter, it is better for them to pay now,” he said.

Nik Aziz filed the suit through his lawyer Tommy Thomas at the High Court here this morning. However, it did not state the amount being claimed.

About 100 supporters waited the court since 8am. The suit was filed at 9.25am.

Kelantan Deputy Menteri Besar Ahmad Yaakob, state exco Husam Musa and PAS vice-president Mahfuz Omar were also present.

Following this, the leaders went to Masjid Wilayah Perseketuan for solat hajat (a special prayer to ask for God’s forgiveness, guidance and assistance).

Although the federal government had given “compassionate fund” in lieu of oil royalty, the state government refused to recognise it, arguing that it was entitled to oil royalty as stated in the Petroleum Development Act 1974.

In the 47-page suit, it claimed that Petronas had wrongfully, in total failure of consideration and in breach of the Act, the Kelantan Petroleum Agreement and Kelantan Grant, failed and/or refused to make cash payments to the Kelantan state government for petroleum won and obtained off-shore Kelantan.

It also said that despite failing to make the said cash payments, Petronas wrongfully continued to win and obtain petroleum offshore Kelantan, that was, without paying for them.

'We could be entitled to RM1.7 bil per year'
At a press conference later, Husam, who is also chairman of the oil royalty claim committee, said that the state was entitled to 5% of oil royalty per year.

In calculation, for example, Husam said that one of the four compartments offshore of Kelantan which overlaps with Thailand, produces 10 million barrels of oil a month.

This, he said, would amount to US$8.5 billion per year and Kelantan was entitled to RM1.7 billion if the 5% royalty was taken into account.

“This is such a huge amount because oil production began in 2005. Petronas paid oil royalty to (neighbouring)Terengganu for 18 years, (but not to us),” he said.

Husam also said that the suit was the “last resort”.
“We tried to arrange meetings (with Prime Minister Najib Tun Razak and Petronas), and we came out with strong statements that Kelantan is entitled to oil royalty in accordance with the Act (but to no avail).

“This was even supported by (Umno veteran leader and former finance minister) Tengku Razaleigh Hamzah as the first Petronas chairman who had signed the agreement,” he said.

Meanwhile, Nik Aziz said the state government’s entitlement (harta) must be upheld and respected.

In the suit, the Kelantan government also sought the following relief against Petronas:

1. Specific performance of the Kelantan Petroleum Agreement

2. An account be taken or an inquiry be ordered requiring Petronas to make full and truthful disclosure of all relevant facts relating to the cash payments payable to Kelantan, including:

• The period which petroleum has been produced, won or obtained off-shore Kelantan.
• The areas/blocks from which petroleum was won and obtained; and
• The amounts of cash payments so payable to Kelantan.

3. An order that all arrears of cash payments so accounted, be paid to Kelantan within one month of an order of court.

4. An order that all future cash payments be paid to Kelantan by Petronas for petroleum produced off-shore Kelantan in accordance with the terms of the PDA and the Kelantan Petroleum Agreement.