Petronas ‘obligated’ to pay royalties, Ku Li tells Nik Aziz

By Lee Wei Lian, The Malaysian Insider

Bucking his party line, Tengku Razaleigh Hamzah has written to Kelantan Mentri Besar Datuk Nik Abdul Aziz Nik Mat telling him that the state is legally entitled to royalties from oil extracted in a joint development region bordering Thailand.

The PAS led Kelantan state government is seeking RM1 billion in oil royalty it claims it is owed by the federal government and made it a campaign issue during the recent Manek Urai by-election.

Nik Aziz had written a letter to Tengku Razaleigh, also known as Ku Li, on 15 July seeking his advice on the issue. The letter was delivered by Kelantan state executive councillor Datuk Husam Musa on July 19.

In a written reply to the query today, Tengku Razaleigh said that based on the Petroleum Development Act, Petronas is obligated to pay 5 per cent the value of oil found on-or-offshore any Malaysian state or federal territory.

The Kelantan prince, who was the founding chairman and CEO of national oil company Petronas, added that he had signed the agreement on behalf of Petronas in 1975 while then mentri besar, Datuk Haji Mohamed Nasir had signed on behalf of Kelantan.

"It is clear that Petronas is bound by these agreements as is the Kelantan state government and therefore, Petronas is obligated to pay," wrote the Gua Musang MP who was unsuccesful in getting nominations for the Umno presidential contest last year.

The Information Communication and Culture Minister Datuk Seri Rais Yatim has been reported as saying however, that Kelantan has no right to the oil royalties.

"Under international law, Kelantan has no right to oil royalty as the oil and gas operations area in the Gulf of Siam is located in the zone with overlapping claims by Malaysia, Thailand and Vietnam," he said.

In an interview last week with The Malaysian Insider, Ku Li disputed that view and said that though the oil is being extracted from a joint development area with Thailand, the Petroleum Development Act is still in force.