Why was the unilateral abrogation of the 25-year-old Petronas oil royalty agreement with Terengganu made arbitrarily  without Cabinet approval 

Media Statement
by Lim Kit Siang 

(Petaling Jaya,  Friday): The people of Terengganu and Malaysia are entitled to know why the Federal Government’s unilateral abrogation of the 25-year-old Petronas oil royalty agreement with Terengganu was made arbitrarily by a handful of people without Cabinet approval - totally against the principles of accountability and transparency.

This is because  Deputy Prime Minister, Datuk Seri Abdullah Ahmad Badawi had said in Gopeng on Sunday that the government was still studying the issue of oil royalty and that a decision would only be made on the matter once the study had been completed.

This was reported in the press the next day, with the New Straits Times using the heading "Oil royalty issue under study", which read:

However, two days after Abdullah’s Gopeng statement and even before a Cabinet meeting, a Finance Ministry statement announced the Federal Government’s unilateral abrogation of the 25-year-old Petronas oil royalty agreement with Terengganu - clearly without approval by Cabinet or even completion of the study on oil royalty mentioned by the Deputy Prime Minister.

In Chicago recently, the Prime Minister Datuk Seri Dr Mahathir Mohamad said he was  saddened that certain quarters, especially opposition parties, were resorting to a hate-campaign against the government to garner  public support.

What is even more saddening is that the Barisan Nasional Federal Government is practising its own brand of politics of hate as in unilaterally abrogating the Petronas agreement with Terengganu and hijacking the 5% oil royalty of the people and state of Terengganu solely because of the repudiation of the UMNO state government by the voters of Terengganu in the recent general election.

It is most regrettable that the Federal Government’s arbitrary decision was taken not only without Cabinet approval, but made without any consultation with the Terengganu state government treating it as if it is an alien foreign power, showing utter contempt not only to the properly-elected state government but the people of the state as well.

It has been reported that since 1978, Terengganu had  been receiving annual royalty payments from Petronas. On 29th June 2000, Petronas president and chief executive officer Tan Sri  Mohamad Hassan Marican said Petronas would continue paying five per cent oil royalty to Terengganu  on offshore oil and gas to Terengganu because of Petronas’ agreement in 1975 and estimated that the royalty for Terengganu this year would amount to RM810 million. The first payment of RM432 million to Terengganu was made by Petronas in February this year.

With the current oil price hitting  a 10-year high on Monday, Sept. 5, 2000, shooting beyond an Opec target price of US$22-US$28 a barrel to US$32.13 a barrel, the Prime Minister said on his return from the United States yesterday that the oil royalty payable to Terengganu this year could be as high as RM1 billion.

This would mean that the Federal Government is depriving Terengganu state and people of some RM500 million this year when it unilaterally abrogated the Petronas agreement with Terengganu and directed Petronas not to release the second payment of royalty this year  - as well as  billions of ringgit in years to come.


*Lim Kit Siang - DAP National Chairman