THE long-standing dispute between national oil company Petronas and the Sarawak government over the imposition of the state’s sales tax on petroleum products was resolved today with the signing of a commercial settlement agreement.

The agreement was inked at the Hilton Hotel in Kuala Lumpur today with Prime Minister Muhyiddin Yassin and Sarawak Chief Minister Abang Johari Openg as witnesses, following negotiations between the two parties that had been facilitated by the Finance Ministry. 

With the settlement, Sarawak will receive a greater share of revenue from oil and gas mined and produced in the state. 

The state will also have a more active involvement through Sarawak oil company Petros on the management of onshore oil and gas resources and investment in the upstream ventures in offshore areas.

Welcoming the move, Muhyiddin said the commercial agreement will not only resolve the issues related to the management of oil and gas resources in the state, but also open a new chapter for efforts towards the development of the industry in the state by creating new business opportunities.

He said Petros will have a greater role to play in the state’s oil and gas industry in collaboration with Petronas.

Sarawak can also expand its collection of revenue generated from the sales tax on petroleum products and channel funds towards development programmes for the well-being of the people, he said.

“The consensus reached between both parties with the signing of this commercial agreement reflects the federal government’s commitment towards resolving this matter with the Sarawak government.

“It is hoped that this resolution will open a new chapter in efforts towards achieving the Shared Prosperity Vision 2030, in addition to ensuring that there is inclusive development of territories so that the benefits can be reaped by all Malaysians fairly and equally,” he said.

Muhyiddin added that Petronas will continue to play its role as the national oil company with full power to regulate the country’s oil and gas industry in line with the provisions of law.

Meanwhile, Petronas president and group CEO Muhammad Taufik and Sarawak State Secretary Jaul Samion said in a joint statement that both parties are committed to working together to create and maintain a stable and conducive business and investment environment.

“Both the Sarawak government and Petronas, continuing its current role as Malaysia’s national oil company, remain committed to working together to create and maintain a stable, conducive business and investment environment for the sustainable growth of the oil and gas industry, both upstream and downstream in Sarawak,” they said.

Towards this objective, the agreement provides for a consultative framework whereby both parties will be able to jointly discuss and deliberate on matters of importance to the oil and gas industry, including those that affect the interests of the state,” they added.

Sarawak, the Finance Ministry and Petronas had agreed in May this year for the issues to be resolved without going through the legal process, which had led to the legal actions commenced by Petronas and the state government being withdrawn last August.

The national oil company also confirmed in writing in August that seven of its subsidiaries, including Petronas Carigali Sdn Bhd, would pay the disputed state sales tax for petroleum products. – December 7, 2020.