‘RM12b oil royalty unreasonable’


(NST) – INEQUITABLE: Kelantan govt’s claim involves technical matters, says PM’s Office

KUALA LUMPUR: THE Kelantan government’s RM12 billion petroleum royalty demand is not only unreasonable from the legal standpoint but also concerns technicalities related to activities for oil and gas extraction in the area concerned.

The Prime Minister’s Office (PMO), in a statement issued yesterday, said Kelantan, just as Terengganu and all other states in Peninsular Malaysia, only had rights to demand petroleum royalty if extraction of oil and gas was done not more than three nautical miles from the low tide line or the shore of the state concerned.

It was noted that areas where petroleum extraction was being carried out outside the waters of Kelantan were Block PM301, Block PM2, Malaysia-Thailand Joint Development Area (MTJDA) and Commercial Arrangement Area between Malaysia and Vietnam (PM3 CAA).

“Blok PM301 and Blok PM2 are more than three nautical miles from the low tide line or shore of Kelantan but within Malaysian waters. MTJDA is also an area claimed by Thailand while PM3 CAA is also claimed by Vietnam,” the PMO said.

According to PMO, the area claimed by Thailand, namely MTJDA, was under the Malaysia-Thailand Joint Authority (MTJA), which was responsible for regulating activities in the area and was not just the responsibility of the Federal Government.

“This is because the sea boundary between Malaysia and Thailand, to date, has not been fully settled,” it said. As such, Malaysia and Thailand had signed a memorandum of understanding, which must be complied by both nations so long as the issue of boundary was not resolved.

“This is to avoid disputes between Malaysia and Thailand. Both nations have agreed that Malaysia and Thailand be paid five per cent each of the petroleum output,” it said.

The statement added that production in the area had been taking place since 2005 and that the Federal Government had received US$600.27 million (RM2.1 billion) till last year from the sale of petroleum extracted there.

According to PMO, based on the agreement between Malaysia and Vietnam for the area claimed by Vietnam, namely, PM3 CAA, the Federal Government had received a payment of five per cent or RM2.2 billion from the production in the area since 2005.

“The Federal Government has received RM285.1 million from the production of petroleum in Block PM301 and Block PM2 which started in 2009,” it said.

Seeing that Block PM301 and Block PM2 are located outside the waters of Kelantan, exceeding three nautical miles from the low water line or coast of the state, the statement clarified that the Kelantan government was legally not qualified to get payment from production at the two blocks.

It said the Federal Government would still make payments to Kelantan in the form of benevolent money from the revenues from the two blocks whereby, until February, RM142.6 million was credited to the account of the Benevolent Fund of Kelantan.

“Of the total, RM100.8 million has been channelled to the Kelantan Federal Development Department to finance programmes such as for students of higher learning institutions, death benefits, repairing houses of the poor, disaster aid, schooling aid and helping orphans,” it added.