The truth is out there somewhere

Raja Petra Kamarudin

How much has Petronas earned since the mid-1970s until now, a period of about 30 years?

How much did Petronas earn in the 22 or so years Dr Mahathir Mohamad was Prime Minister of Malaysia?

What has Petronas done with all this money?

How much has been spent on legitimate and justifiable development and how much was wasted on prestigious and white elephant projects?

How much has gone down the drain as losses, bailing out crony companies in dire straits, bailing out dying government-linked organisations and business ventures, and to finance other forms of adventures and lost causes?

What are Malaysia’s oil and gas reserves and what is Petronas’ projected income based on prevailing market prices?

Even the Malaysian Parliament cannot get all the answers to these questions. And, mind you, Petronas was set up by Parliament through the Petroleum Development Act (144) 1974.

This Act provides for the exploration and exploitation of petroleum whether onshore or offshore by a corporation in which will be vested the entire ownership in and the exclusive rights, powers, liberties, and privileges in respect of the said petroleum, and to control the carrying on of downstream activities and development relating to petroleum and its products.

The Act was formulated by the government giving any State in Malaysia where oil is found in its territory a 5% royalty. The Act was drafted by Tun Razak Hussein, the second Prime Minister of Malaysia, Rahman Yaakub, the Chief Minister of Sarawak State, Tun Ismail Ali, the Governor of the Central Bank, Tengku Razaleigh Hamzah, the Finance Minister, and Tun Salleh Abas, the Chief Justice.

Okay, since Parliament created Petronas, why can’t it then get Petronas to report to it? Simple! This is because Parliament has no power over Petronas though it may have been its creator. The only person who has this power is the Prime Minister of Malaysia as these clauses in the Petroleum Development Act will show:

1. A Corporation would be set up for this purpose under the Companies Act to be called Petroleum Nasional Berhad or PETRONAS for short.

2. The Corporation shall be subject to the control and direction of the Prime Minister who may, from time to time, issue such direction as he may deem fit.

3. The direction so issued by the Prime Minister shall be binding on the Corporation.

4. In return for the ownership and rights, powers, liberties and privileges vested in it by virtue of this Act, the Corporation shall make to the government of the Federation and the government of any relevant State such cash payments as may be agreed between the parties concerned.

In 1975, all 13 Malaysian States were made to sign an agreement with Petronas giving Petronas the sole rights for oil and gas exploration is their respective states. The states were not given a choice on whether it would like to sign this agreement or not. It was obligated to do so through Act of Parliament; which means it was the law.

Terengganu State too signed this agreement on 22nd March 1975.

In this first agreement of 22nd March 1975 it did not state that the 5% to be given to the States would be called royalty. It just said that the 5% is to be paid twice a year IN CASH, once in March and again in September. On 16th September 1987, a supplementary Agreement was signed where the 5% was clearly specified as ‘royalty’.

One important point to note is: the Petroleum Development Act 1974 clearly states that Petronas must only report to the Prime Minister and to no one else, not even to Parliament. Now Abdullah Ahmad Badawi is the Prime Minister, so by law that should make him the new ‘boss’ of Petronas. However, past-Prime Minister Dr Mahathir very cleverly appointed himself the advisor to Petronas. So now Petronas is under Dr Mahathir’s control instead of the Prime Minister’s.

A very convenient move to deny the Prime Minister access to this nation’s cash cow don’t you think so?

Okay, now back to the money part. Since Petronas will not reveal, even to Parliament, what it earned in the last 30 years or in the 22 years that Dr Mahathir was Prime Minister, we shall have to do our own calculations.

This is what Petronas said on 9th December 2004 as reported by Bernama.

Petronas to contribute RM25 billion to government this year
December 09, 2004 14:25 PM


KUALA LUMPUR, Dec 9 (Bernama) — National oil and gas corporation Petronas is expected to contribute RM25 billion to the country’s income this year based on the company’s profit for 2004, Minister in the Prime Minister’s Department Datuk Mustapa Mohamed said here Thursday.


He said that the contribution would be in the form of dividends and other revenues.


“It contributes some 25 percent to the country’s revenue,” he said in his reply to a supplementary question by Senator Datuk Rhina Bhar at the Dewan Negara here Thursday.


Mustapa said that the government was not only satisfied with Petronas’ performance and the revenue obtained but also with the way the company’s projects were managed locally and overseas.


Earlier, in his reply to Rhina’s question, Mustapa said that the country’s oil reserves had increased 7.2 percent to 4.84 billion barrels while natural gas reserves increased to 89 trillion cubic feet (TCF).


He said that the increase was due to the success in opening up new areas especially deep sea.


“Based on the current production rate for oil and gas, it can last for 18 years, while for gas 35 years,” he said.


Mustapa said that up to January this year, Malaysia is ranked 24th in terms of world oil reserves and 13th for gas.


To a supplementary question from Datuk Karim Ghani, he said that 56 percent of the oil reserves are in Peninsular Malaysia, 19 percent in Sabah and the rest in Sarawak.


He also said that the government did not propose to increase the five percent oil royalties given to the states concerned.– BERNAMA

Okay, that was what was said in Parliament as reported by Bernama.

Now we know that Petronas contributes RM25 billion a year to the government which represents 25% of the nation’s revenue. This means the country’s total revenue is in the region of RM100 billion. Now this is certainly a lot of money.

But that is what Petronas hands over to the government. It is not what it earns. How much then does it earn?

Terengganu is supposed to get 5% of the state’s petroleum revenue. That is the law.

Terengganu earns about RM900 million a year. If RM900 million is 5%, then 100% would be RM18 billion.

But only 56% of the oil and gas income is from Terengganu while the balance 44% is from Sabah and Sarawak. Therefore, the total for the whole country, East and West Malaysia combined, would be about RM32 billion. So, if RM25 billion of this is handed over to the government, then RM7 billion is being kept by Petronas to cover its operational expenses plus other costs.

When Dr Mahathir took over as Prime Minister, Petronas’ reserves were in excess of RM40 billion. When Dr Mahathir retired 22 years later, it still stood at RM40 billion plus.

Now, two things must be noted here.

1) Dr Mahathir finished off all the money Petronas made in the 22 years he was Prime Minister.

2) The RM40 billion reserves, just on organic growth alone, should have been something like RM200 billion 22 years later. This means, if Petronas’ reserves stood at RM200 billion by the time Dr Mahathir retired, this would be equivalent to RM40 billion in 1981. Therefore, if, today, Petronas’ reserves is RM200 billion, you can say it actually never increased at all in terms of purchasing power.

Now, the multi-billion Ringgit question! How much did Petronas earn, and which Dr Mahathir finished, in the 22 years he was Prime Minister? Based on the calculations above, would RM700 billion be a fair estimate? Some experts place it closer to RM800 billion but let us give Petronas the benefit of the doubt and let us put the figure as lower.

And now the sickening question! What happened to all that money? And remember, we are just talking about Petronas’ money. We are not yet talking about the nation’s entire revenue which would be four times that or RM2,800 billion. And we are just talking about the 22 years that Dr Mahathir was Prime Minister, not the last 30 years.

Let’s draw up a shopping list. Investments in Kertih, Putrajaya new township, Sepang F1 race track, KLIA, Twin Towers building, bailing out Bank Bumiputra, bailing out Dr Mahathir’s sons, bailing out other crony companies, etc., etc. But this would come to only RM200 billion. Where is the balance RM500 billion?

Don’t all you who voted for Barisan Nasional in the last general election now feel like you want to kick yourself hard?

Don’t all you clerks and factory workers who live in rented houses because on your meagre salary you cannot afford to buy a house and the government will not provide you subsidised housing feel cheated?

Don’t all you army personnel who have to abandon your family for months on end and put your life on the line to safeguard this nation’s security and then have to work as oil palm plantation labourers in Felda settlements when you retire because on your low salaries you have no savings to live on feel cheated?

Don’t all you police personnel who have to take bribes (a category of Riba’) to supplement your low income just to feed your family though you know Islam forbids the taking of bribes and the sin of Riba’ tantamount to the sin of intercourse with your own mother feel cheated?

Yes, RM500 billion is a lot of money and if this money had not ‘disappeared’ and had instead been put to better use in improving the lot of the working class we would all be enjoying a higher standard of living rather than suffering a higher cost of living.