Saturday, 19 April 2014

Oil Royalty Agreement Can Be Re-Negotiated : Sabah's Chief Minister

The oil royalty agreement Sabah signed with Petroliam Nasional Bhd (Petronas) on June 14, 1976 can be reviewed or re-negotiated in line with the current changes and needs, said Sabah Chief Minister Datuk Seri Musa Aman.

Musa said all discussions could be discussed with the consent of both parties.

"There are various channels available for the state and federal governments to discuss issues based on power-sharing, inclusivity and agreement by all," he said.

Musa said this when winding-up debate on the royalty issue at the Sabah State Legislative Assembly on Thursday.

The Chief Minister said although the royalty was set at five per cent, the state has enjoyed an almost 30 per cent increase within five years, from RM750.9 million in 2008 to RM975.3 million in 2013.

He said Petronas has also invested in several mega projects in Sabah, among them the RM18 billion Sabah Oil And Gas Terminal and the RM30.6 billion Sipitang Oil and Gas Industrial Park where Sabah Ammonia Urea project was under construction.

"These investments would not only change the landscape of Sabah's development but would also provide jobs, boost business opportunities and increase the quality of life.

He added managing petroleum-related operations was no easy task.

"Mega projects pose technical and financial challenges and only big players in the industry have the expertise and strong financial resources to undertake them," he said.

Musa said drilling activities involved high costs and could only be undertaken by the industry's leading oil companies like Shell, ExxonMobil and Murphy Oil.

"To reduce the financial risks arising from uncertainties in oil drilling, Petronas has signed production-sharing contracts with these oil firms.