Kelantan to get oil royalty

(The Malaysian Insider) – The mood was exuberant among PAS officials in Parliament last night, and rightly so. They received word that Prime Minister Datuk Seri Najib Razak was likely to announce today that the federal government has decided to pay the Kelantan state government some form of oil royalty — an issue that PAS-controlled state has been fighting for since 2001.

That is the good news. The not-so-good news is that Kelantan is likely to receive a much smaller sum than the RM1 billion which it claims constitutes 5 per cent of the earnings from petroleum and liquefied natural gas extracted from Kelantan’s offshore since 2004.

The oil royalty issue was first brought up by PAS’s Husam Musa in 2001. This year, the issue was raised by PAS MPs in Parliament again, as Kelantan was found listed in the Statistics Department’s State/District Data Bank as one of the four oil- and gas-producing states.

The other states are Sabah, Sarawak and Terengganu that receive yearly 5 per cent royalty from the federal government. These three states are under the control of Barisan Nasional while Kelantan has been in the hands of PAS since 1990, giving rise to the view that the government’s reticence to share any royalty with Kelantan was coloured by politics.

The federal government has argued that oil and gas activity is located about 150km off Kelantan shores and is jointly developed with Thailand. The area is disputed by Thailand and Malaysia.

A school of thought within the government has steadfastly resisted any softening of the federal government’s position while others believe that much goodwill can be extracted by the BN government if it offers Kelantan some payment for resources taken from within its borders.

The doves seem to have won the day but it is unclear if the PAS government will go away pleased with the amount of oil royalty or goodwill payment announced today.

For Najib, this was an easy decision to make. It presents an opportunity to show that he is willing to look beyond politics, sometimes. Saying no would have made his “I am the prime minister of all Malaysians” sound hollow.