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Equity, firms can ensure more than 20pc royalty

Published on: Thursday, July 17, 2014

Kota Kinabalu: Sabah stands to receive more in terms of monetary value through various downstream activities in the oil and gas industry instead of pressing for a 20 per cent oil royalty.

Chief Minister Datuk Seri Musa Aman said through equities and formation of downstream companies with the help of Petronas, he is confident that Sabah will get more than the value of 20 per cent royalty.

"Furthermore, through grants from time to time, in health and education, when we calculate that, we are getting more than 20 per cent.

When we needed a convention centre, the Prime Minister announced a RM250million allocation.

"When we asked for a container terminal in POIC, he gave us RM400million. He also allocated RM100million for our emergency funds.

"That's what we want. Through whatever means, the important thing is the value added dollar and cents," he said to a question by Tamparuli Assemblyman Datuk Wilfred Bumburing during question and answer time at the State Assembly sitting, Wednesday.

Musa added he is confident that the Industrial Development Ministry is working hard to make sure the Government's downstream businesses are developed which will provide significant returns to the State's treasury.

"You don't worry because our oil and gas industry will give the returns we want and I am sure you will be happy," he said.

In its bid to get more involved in the industry and, thus, reap more rewards in terms of cash and other benefits, Musa said the Government, through Sabah Development Bank, had chosen M3energy Sdn Bhd to manage its operations.

The company is currently in discussion with certain companies to collaborate in onshore exploration in Sabah.

"At first, Petronas gave higher priority to Sapura Kenchana, giving them 80 per cent in the onshore exploration stake. But I have met the Prime Minister because this is a huge opportunity for the Government through M3energy to do a joint-venture and was initially offered only 10 per cent by Sapura.

"I asked for 30 per cent and they eventually agreed to give us 25 per cent.

This 25 per cent is huge. So now, onshore exploration in Sabah will be 20 per cent for Petronas, 55 per cent for Sapura and 25 per cent for M3energy," he said.

Musa also said that M3energy had been given 100 per cent control of a marginal field in Sandakan by Petronas. However, due to the huge expenses in operating the field, M3energy only holds 55 per cent of the stake while Petronas Carigali and Sapura Kenchana hold 20 and 25 per cent, respectively.

Since gas produced in Sabah is sent to the Bintulu LNG, Musa said he had also asked the Prime Minister to grant equity to Sabah. Currently, Sarawak is given 10 per cent equity with an estimated value of RM1billion.

"It is logical to ask for equity since the gas produced here is also sent to Bintulu. So we asked for 10 per cent, I raised the matter to the Prime Minister, and eventually Petronas agreed to give us five per cent.

"However, the number is still profitable for us because Bintulu LNG is strong and very solid," he said.

Musa also addressed the concern raised by Bumburing who asked if the Government could negotiate the terms of payment for the equity, whether it would be through installments or deductions from the royalty due to the State.

He said that he had asked Petronas to grant Sabah any benefit or privilege previously given to Sarawak since that system will not burden the State's treasury.