As polls loom, pressure on Terengganu to explain oil royalty suit withdrawal

By Clara Chooi, Malaysian Insider, 25 April 2012

KUALA LUMPUR, April 25 - Pressure is mounting on Terengganu Mentri Besar Datuk Seri Ahmad Said and his state leaders to explain why their administration suddenly dropped its RM2.8 billion oil royalty suit against Petronas and Putrajaya, a move that threatens to become a key campaign issue for the opposition in the coming polls.

Already, Pakatan Rakyat (PR) leaders are drumming up demands on the Barisan Nasional-led (BN) state and Putrajaya to reveal the terms of the controversial out-of-court settlement, which appeared to have been resolved in a hushed fashion.

In an interview with Harakah Daily yesterday, PAS secretary-general Datuk Mustafa Ali even labelled the Terengganu government "traitors" for unravelling actions that could have helped improve the livelihoods of its people.

Withdrawing the suits, he said to the PAS organ, was tantamount to the state relinquishing its oil rights  to the federal government.

Opposition lawmakers have also demanded to know how much would go into Terengganu's coffers and if the funds would be channelled to its rightful recipients, instead of being squandered away for non-welfare based projects like the Monsoon Cup and the Crystal Mosque.

Further to this, the settlement also places Putrajaya in a tight position with the PAS-led Kelantan, another oil-rich state that claims it has been denied its right to oil royalties of up to RM800 million annually since 2005.

"This is something that is just not right... what were the terms that led to the withdrawal of the suits?" Mustafa was quoted as saying in the daily today.

He added that Terengganu folk must be explained the reasons behind the sudden settlement as the oil royalties were their rights as well.

"Doing things in such a hushed fashion, the people do not even know. The people want to know what action the government plans to take," the former Terengganu state executive councillor added to the daily.

At a press conference in Petaling Jaya yesterday, PKR secretary-general Saifuddin Nasution had also demanded that Putrajaya reveal the terms of its settlement Terengganu over the multibillion ringgit suit.

He asked how much the state government stood to gain from the settlement, saying there would be "no element of finality" to the dispute of its terms are not publicly revealed.

"PKR believes the Terengganu people need an immediate explanation on this latest development.

"An honest and open explanation on the terms of settlement, on how much the Terengganu government is being paid for its oil, should not be too difficult if the government is truly responsible and respects its people," he said.

The Machang MP also demanded to know the actual total of wang ehsan (goodwill payments) and royalties that the Terengganu government has received between 2001 and 2011, taking into consideration that global oil prices had fluctuated from as low as USD20 per barrel to USD100 per barrel.

According to The Edge Financial Daily on Monday, the now BN-led Terengganu government had withdrawn its civil suit against Petronas and the federal government on March 21 but did not provide details of its out-of-court settlement.

"We are not in a position to explain the settlement terms as these are under the purview of the federal government and the Terengganu government," the financial daily had quoted Petronas as saying.

Petronas had signed a profit-sharing deal shortly after being incorporated in 1974 where the states of the federation receive five per cent in royalties for fossil fuel discovered in their territories and sold by Petronas.

But when Terengganu fell to PAS in 1999, then prime minister Tun Dr Mahathir Mohamad ordered Petronas to rescind oil royalties in September 2000 on the grounds that the opposition party did not have the ability to manage the funds of over half a billion ringgit annually.

The royalties were instead channelled through wang ehsan (goodwill payments) which opposition leaders and some BN politicians have claimed were mismanaged and directed to prestige projects such as the Monsoon Cup and the Crystal Mosque.

Datuk Seri Abdul Hadi Awang's administration filed the suit in March 2001 insisting the federal government's orders were illegal as the state's agreement was exclusively with Petronas.

The case has not proceeded significantly and in 2009, Putrajaya decided to reinstate the royalty payments to the state which had already returned to BN rule.

But the east coast state still demanded RM2.8 billion in compensation for the nine-year lapse, rejecting the federal government's offer of RM1.7 billion.

Terengganu received RM7.13 billion in royalties for the 22 years up to March 2000 when Petronas halted the payments.

During this period, global oil prices averaged at just over US$20 (RM61) per barrel but in the last six years, it was US$87.

In August 2010, PAS-controlled Kelantan launched a suit against Petronas for failing to pay royalty for oil and gas extracted within its territory including the overlapping areas with Terengganu, Thailand and Vietnam which has seen joint-development deals with the federal government.

It says it is owed RM800 million annually since 2005 but Putrajaya has disputed the state's claims over the territorial waters where the joint-development projects are located
.