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There remains a gross public misunderstanding about the formula of the oil royalty paid to the three oil states of Sabah, Sarawak and Terengganu
. these states for Petronas to increase the 5% royalty that they get all through 20% and has become the hottest litigation point between them and the national oil company.
For the general public, when we talk about a 5% royalty to states, the impression that we get is that what happens to the other 95% and on the paper, the formula seems very unbalanced.
But in reality, nothing could be further from the truth.
That's how it works – the federal government and the oil producing states each receive 5% royalties.
Of the balance, up to 20% goes to what is called the "cost of oil" to recover the cost of production. 19659002] This leaves a balance of 70% that is shared between operators and Petronas. [19659002] Operators are multi-national, foreign and local companies that invest billions in drilling oil in areas that Petronas has allocated to them under the Production Sharing Contract (PSC).
In the oil and gas industry (O & G), they sometimes spend billions of dollars without producing the oil needed to make it commercially viable.
In barrels of oil, per 100 barrels, the PSC's division is five barrels up to 20 barrels claimed by the operator as the cost of oil.
The remaining 70 barrels is split 70:30 with Petronas getting 70% or 49 barrels and the operator 30% or 21 barrels.
If the federal government, for example, is to accede to the demands of a 20% royalty, this proven formula works very well with foreign investors like Shell, who has been drilling for oil for more than 100 years in Malaysia, will be in jeopardy.
And it will undermine our foreign direct investment attractiveness in the O & G sector and worse, could very well kill the goose for the biggest economic support of Malaysia.
Today, there are more than 40 investors in the PSC, 80% of whom are foreigners. 19659002] And contrary to general perceptions, Petronas pays these royalties in cash to the federal and state governments, whether or not the production from the fields is profitable
These cash payments are paid twice a year.
Sarawak politicians have regularly made explosions by demanding a higher royalty.
But in reality, Petronas has so much invested in the state, about 18 billion RM in the only upstream sector.
In addition, he paid Since 1976, Sarawak's liquidity amounted to 33 billion yuan, of which 18 billion rupees from Sarawak's participation in the liquefied natural gas plant of Malaysia in Bintulu .
In addition, Petronas employs some 5,000 Sarawak professionals in its operations worldwide, with the exception of RM411 million scholarships.
In the end, let's be fair and objective when we discuss petroleum issues and not be influenced by emotions
. the states will also undermine the sustainability of Petronas to contribute to the nation because this would translate into lower revenue from the petroleum income tax.
According to Petronas, for five years from 2012, planned projects with a total investment of
In addition, such an increase will also reduce the profitability and economic viability of all current and future O & G projects. in development.
It also means that Petronas and the PSC entrepreneurs are discouraged from investing more in finding new fields that are essential to make up for the depletion of oil reserves.
And of course, a reduction in the production of O & G could In other words, adherence to their demands would return economically all the more so as world oil prices no longer revolve around 100 US dollars (RM 407) per barrel as in the good old days of
We must all remember that about 30% of Malaysia's gross domestic product comes from Petronas' production and that it contributes to more than 40% of the federal government's revenue.
Strictly speaking, according to a former minister, Putrajaya can not raise the royalty to 20%
"Maybe a few percentage points would be acceptable but certainly not a 15% rise," he tells me .
And even with 5% royalties, these three states receive more than a few billion ringgits each year while states that are not in the oil reserves do not receive any.
More clarity and transparency were revealed in Parliament Wednesday by the Minister of Economic Affairs Datuk Seri Mohamed Azmin A He warned that Petronas could "cease operations" when he accessed the 20% royalty based on gross production as required by the states, instead of net profit.
"Our position is, if you want 20% on the basis of gross value, we have to stop Petronas' operations," he said, warning of the serious consequences on the financial situation of the company. oil company and the federal government.
With regard to these states, it's time for them to get to the bottom of how the income distribution in the industry works instead of pursuing demands that exceed what the industry itself could afford. Comment: [email protected]
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