PRIME Minister Dr Mahathir Mohammad’s unilateral announcement on the royalty payments to oil producing states to be based on profit and not revenue contravened with the Petroleum Development Act 1974 (PDA 1974), a Sabah MP said today. 

According to Tuaran MP, Wilfred Madius Tangau, provisions in the act states that the mechanism of oil payments must be mutually agreed first between the federal and state before any official announcement is made.

He said the terms of the oil royalty payment is clearly stated in PDA 1974 and that is revenue or gross revenue, not profit.

While the distribution of 5% goes to the state, 5% to the federal government and the rest are kept by Petronas, Tangau says the act also include provision that any review must be mutually agreed between the state and federal government. 

“Our thinking all this while of course (that the) PDA, there have to be mutual agreement between both parties.

Of course, when Dr Mahathir made the announcement in Parliament (on the 20% oil royalty hike), the chief minister (Shafie Apdal) and I was very happy.

“But further clarification based on profit the next day, hello?

“This have to be mutually agreed because the PDA 1974 said so,” he told reporters after attending the Sabah-Petronas strategic industry conversation and engagement forum in Kota Kinabalu, today.

On suggestion by Economic Affairs Minister Mohamed Azmin Ali to amend the PDA 1974 to allow the oil royalty payment, Tangau said this is the federal’s own initiative and does not reflect Sabah, an oil producing state where Petronas is extracting the resources.

He said if the Pakatan Harapan federal government plans to amend PDA 1974, the state also proposed that the affairs of Petronas to be made public.

“Well if indeed federal (government) wants to do the move as a federal initiative, I venture to suggest that the federal address the issue of transparency of Petronas.

Although Petronas is a public listed company, a lot of its affairs are kept under wraps.

“Despite the oil company published its financial report somewhere, the normal way of doing things it is important for a government linked company like Petronas to report all its affairs to Parliament,” said Tangau, adding that if the federal government wish to amend PDA 1974. 

In Parliament yesterday, Azmin, in proposing the amendment of the PDA 1974, said voters in oil producing states did not vote-in Pakatan Harapan due to its 20% oil royalty pledge.

He said this following claim by a Barisan Nasional MP that the people were deceived into supporting on the promise of higher oil royalty payment.

The oil royalty payment has been a hot topic among Sabahans who had voted in the Warisan-PH-Upko state government in the 14th general election.

Critics say the promise of raising oil royalty and giving further autonomy to Sabah by PH are not subjects for negotiations as it is embodied in the Malaysia Agreement 1963, Inter-governmental report and the federal constitution, which brought about the Malaysia Act 1963 and subsequently the formation of Malaysia the same year.

They say it is for the federal government to honour Sabah’s rights since federation of Malaysia became a nation 55 years ago. 

Such provisions were much older than the Petroleum Development Act 1974, which activist-politician like Jeffrey Kitingan said as a clear violation of the special rights of Sabah and Sarawak.

“Yes, (the PDA) is unconstitutional because oil and natural resources are all under land and land is a state matter under the State List in the Federal Constitution.

“The federal government cannot give Petronas (resources) which is clearly not theirs in the first place,” he said. – July 26, 2018.