Azmin’s oil royalty delay excuse a massive con job

TTF: Dato’ Seri Azmin Ali may just have shot himself in the foot.

Yesterday, the Minister of Economic Affairs stressed the need for the Petroleum Development Act (PDA) 1974 to be amended before Pakatan could do good on its promise to offer 20% royalty to oil-producing states.

According to him, the amendment was necessary as hinging royalty calculations on gross production would be detrimental to Petronas and the country.

“The act carries out calculation based on gross profit,” he said, adding that an amendment would allow for calculations to be based on net profit instead.

But his statement reeks of a massive con job on the part of government to mislead the people.

Prior to GE14, Pakatan Harapan promised to offer the royalty without ever specifying the need to amend the Petroleum Development Act (PDA) 1974.

What this means, is that the coalition had no qualms calculating royalties based on gross production as opposed to the net profit method Azmin is now proposing.

But just for the sake of discussion, let’s assume that Azmin just realised the grave repercussions oil royalty payments would have on Petronas should calculations be based on gross production.

Under the circumstances, not only must the Petroleum Development Act (PDA) 1974 be amended, he must consult with all oil-producing states regarding his proposed method of calculation for royalty payments.

Parliament is already in session.

By now, Azmin should already have proposed a Bill to parliament if indeed his intent is to amend the Act.

But he has yet to even hold discussions with Sabah, Sarawak, Terengganu and Kelantan despite it being more than two months since he came into power.

Here itself, you can see that Pakatan has absolutely no interest in honouring its royalty pledge and may deliberately have demanded that calculations be based on net profit.

Azmin knows as well as I do that the oil-producing states will never agree to calculations based on net profit and will probably drag discussions for an indefinite period of time.

Under the circumstance, Pakatan will get away with not paying these states the promised quantum by accusing them of being uncooperative. 

Did you actually think that Dr Mahathir Mohamad would allow PAS run states to receive 20% oil royalty?

KUALA LUMPUR: Pakatan Harapan’s (PH) promise of offering a 20% royalty to oil-producing states will take time to be realised, as the law needs to be amended and the states have to be consulted.

Economic Affairs Minister Datuk Seri Mohamed Azmin Ali confirmed that the royalty would be based on the net profit and not gross production as is practised presently.

He said the government does not foresee encountering constraints in its effort to increase the royalty when drafting up its election manifesto.

“This proposal could not be implemented immediately as it contradicts the Petroleum Development Act (PDA) 1974, as the current calculation is based on the gross profit and not the net profit,” he said in the Dewan Rakyat, here today.

“If Petroliam Nasional Bhd were to increase this royalty to the state governments based on the gross profit, it will have grave implications on Petronas and the federal government’s financial states.

“The mechanism for royalty payment will have to be ironed out between the federal government and Petronas. This matter will also have to be discussed with the state governments as such matters need their agreement.”

He was responding to a question by Datuk Seri Wilfred Madius Tangau (Upko-Tuaran) on when the government intends to implement the 20% royalty for the four states – Kelantan, Terengganu, Sabah and Sarawak – as promised in the election manifesto.

On a supplementary question on the amendments to be made to the PDA 1974, Mohamed Azmin said it needed to go through the Attorney-General’s Chambers.

“We are now tied to the act, which states that petroleum royalty must be based on gross value on not the net profit. If we want maintain this practice and increase the royalty to 20%, it will have implications,” he said.

Mohamed Azmin explained that at present, Petronas needed to pay 10% royalty twice a year from its gross production to the government, of which 5% each would be given to the federal and respective states.

Prime Minister Tun Dr Mahathir Mohamad had last week clarified that the 20% proposed royalty would be based on profit and not revenue.

This, however, did not bode down well with certain quarters, who claimed that it was supposed to be based on the revenue of oil and gas extracted from the state, rather than profits obtained after subtracting expenses.

Meanwhile, Mohamed Azmin said a special Cabinet committee to address issues of oil royalty based on the Malaysia Agreement 1963 would be established soon.

“Among its tasks would be to study and suggest corrective steps in several issues, including Sabah and Sarawak’s rights on natural resources such as oil and gas.

“However, our manifesto did not specify a specific timeframe on when this effort would be undertaken as its implementation is subjected to the law and regulations that must be abided.

“This include the clauses in the agreement between Petronas and the federal government, and Petronas and the state governments,” he added.

Source: The Sun Daily

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