Ex-Sarawak CM says Kelantan has no right to oil royalty

Tun Abdul Rahman Yakub, who was Sarawak Chief Minister when the Petroleum Development Act (PDA) came into force in 1974, has thrown his weight behind the federal government’s contention that Kelantan has no right to oil found beyond its territorial waters.

He told The Malaysian Insider yesterday that unless Kelantan could prove that its territorial waters extended beyond the three nautical mile limit, it could not claim royalty payments for oil found offshore.

“Of course if oil is found within the three mile limit it belongs to the state. If it is found offshore then it belongs to the federal government,” the 82-year-old former Sarawak CM said in an interview here.

But he added that his view that Kelantan had no rights to oil found offshore “might be wrong.” “Tengku Razaleigh was one Umno member with knowledge of the economy. He ought to know what happened with Kelantan,” he said in reference to Umno veteran Tengku Razaleigh Hamzah’s continuing fight for Kelantan to be given oil royalty payments.

He said the legal position of the states in peninsular Malaysia was different from that of Sabah and Sarawak. Abdul Rahman said that Sarawak was entitled to oil royalties because Queen Elizabeth had declared in 1954 that the east Malaysian state’s territorial waters extended beyond the three-nautical-mile limit.

The British monarch’s declaration was used by his Sarawak administration to negotiate payments for the state, said Abdul Rahman. He did not, however, want to comment on why the federal government had paid royalties to the Terengganu government.

The Barisan Nasional federal government recently took out full page advertisements in Malay weeklies listing eight questions and answers to rebut Tengku Razaleigh Hamzah’s argument that Kelantan and all other states are entitled to the 5 per cent oil royalty under the Petroleum Development Act 1974.

The federal government’s main argument is that oil and gas are extracted from waters that are beyond the three-nautical mile limit prescribed as territorial waters under Malaysia’s Emergency Ordinance (Essential Powers) No 7 1969.

The advertisement also explained that oil royalty payments for Sabah and Sarawak was due to agreements made prior to 1974 and through the Continental Shelf Act 1966.

However, Petronas had been paying Terengganu the 5 per cent oil royalty since offshore production began in 1978 but stopped after PAS captured the state in the 1999 general elections. It promised to resume twice-yearly direct payments from March 2009 after the earlier payments were converted to compassionate payments disbursed by federal agencies.

Oil was first discovered in the South China Sea off Terengganu in 1973, a year before Prime Minister Tun Abdul Razak Hussein directed Tengku Razaleigh to form Petronas and become its founding chairman.

Petronas founder Tengku Razaleigh had recently rubbished the federal government’s explanation.

He said the advertisement failed to point out that almost all the oil found in Malaysia is located more than three nautical miles offshore, and Petronas has nevertheless been making oil payments to the states.

The Gua Musang Umno chief said that the implication of the argument is that Terengganu has no right to receive the cash payment which was reinstated early last year.

Abdul Rahman said yesterday that Sarawak had also wanted to sue the federal government for the right to its oil before the PDA was finally put into place.

“Around 1974, the federal government introduced a Bill in Parliament claiming that Sarawak oil belonged to the federal government.

“I then instructed the state Attorney-General to write to the federal Attorney-general to say that if the Bill was not withdrawn I would take the federal government to court.”

Abdul Rahman said he was immediately instructed by Tun Abdul Razak Hussein, who was then Prime Minister, to go to Kuala Lumpur.

“What’s all this about taking the federal government to court, he asked me. I told him that Sarawak oil belongs to Sarawak,” he said.

Tun Abdul Rahman said he obtained three legal opinions from the former AG of Australia, an expert in public international law from Cambridge University and a former High Court judge to back Sarawak’s claims.

The main argument put forward by the three legal experts was based on Queen Elizabeth’s declaration that Sarawak’s territorial waters included offshore and was not confined the three nautical mile limit.

“This discussion was between Tun Razak and myself. There was no one else present. He asked me what do we do now?

“I reminded him that in 1965 (when Tun Abdul Rahman was the federal land mines minister) I had advised the federal government to form a national oil company.

“He agreed and hence Petronas was later established.”

Abdul Rahman also claimed that he recommended to Razak that Tengku Razaleigh be appointed to run Petronas.

He said that he was informed by the prime minister that the federal government was not wealthy and could not afford a huge payout.

Abdul Rahman said then that he agreed to take a smaller payment with the understanding that the quantum should reviewed in future.

The final decision on the quantum of the royalty payments was decided at a meeting chaired by Tun Tan Siew Sin, who was Federal Finance Minister, and attended by the deputy chief minister of Sarawak Tan Sri Stephen Yong.

“Without consulting me he agreed to accept the five per cent royalty. What he ought to have done was to listen to the federal proposal and come back to me. But so we are bound.”

Abdul Rahman said that whatever was being argued by Tengku Razaleigh regarding Kelantan’s rights was a federal government problem and had nothing to do with Sarawak.

courtesy of Malaysian Insider