Oil price to impact State budget

Kota Kinabalu: The fall in fuel price will probably affect the State's budget but it is still too early to know exactly to what extent. Chief Minister Datuk Seri Musa Aman said due to the unstable price of oil in the global market, it is not possible to declare precisely how much the State's budget deficit will be."We will only know at the end of the year, how much we can collect. However, we are ready to face any possibility. By spending prudently, we are confident we can reduce operation costs," he told Tamparuli Assemblyman Datuk Wilfred Bumburing during question and answer at the State Assembly sitting, Monday.

"In terms of oil royalty, it is very easy. We are receiving five per cent of the total gross production of crude oil, just like Sarawak. On top of that, we are also asking for other equities.

"Among the equities, we have asked for 10 per cent equity from Bintulu LNG, 25 per cent from Samur and other downstream processing such as melamine. Other than that, we are also asking for the rights to obtain equity on onshore exploration.

"All this while, we have offshore exploration. Now when we have onshore exploration, they must give the exploration right to us because it will be on our lands," he said.

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Musa said he is grateful to Prime Minister Datuk Seri Najib Tun Razak and Petronas who agreed to granting Sabah 25 per cent of the onshore exploration.

Bingkor Assemblyman Datuk Dr Jeffrey Kitingan asked Musa if the State Government will discuss with the Federal Government to be granted higher cash payment than the five per cent, following the discovery of 16 new oil wells in the State last year.

Musa said the State Government had asked to be given the rights to take over the marginal fields, including one in Sandakan. In principle, Petronas had already approved the request. "We want to take over the field. We don't want equities only.

We want to explore the fields. That's how good the Federal Government had been to us," he said.

Earlier, replying to a question by Kiulu Assemblyman Joniston Bangkuai, Musa said Petronas pays oil royalty to the State Government twice a year with the first around February and the second around August.

Musa revealed that prior to the fall in oil price, the State government had expected to collect RM1.15 billion in royalty this year. "However, due to the foreseeably lower crude oil price this year, the number had been revised to only RM788million.

"Seeing that oil royalty contributes to between 20 and 23 per cent of the State Government revenue, we will be affected if the price remains low.

"Other than practising more cautious and prudent spending, we are expecting minimum impact to the development plan due to the RM1billion bond raised last year supported by strong State reserves," he said.

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In other aspect, Musa said the fall in oil price would affect Petronas' plans in its oil and gas development projects.

"Therefore, Petronas will conduct a detailed review on managing the operational costs for each project. This is to ensure that each project will remain competitive and profitable even when the oil price is low," he said.

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