KUALA LUMPUR, July 25 — Datuk Seri Mohamed Azmin Ali told Parliament today that the Petroleum Development Act (PDA) 1974 must be amended before Putrajaya can increase the oil royalty payout to states that produce the resource.

He pleaded for more time to carry out the Pakatan Harapan’s (PH) electoral promise, pointing out that the ruling coalition had not given a definite deadline in its manifesto.

“If we want to implement the 20 per cent oil royalty based on nett profit, then we would have to first amend the PDA 1974,” he said during Question Time.

He said the federal government must abide by the law, and pointed out that the existing PDA specified that the calculation of the oil royalty is based on gross profit and not nett profit.

Answering a question from Tuaran MP Datuk Seri Madius Tangau, who asked when the federal government would implement the 20 per cent royalty promised to oil-producing states, Azmin said the promise stated in the PH manifesto was made based on the cost structure analysis of petroleum production by Petronas.

He said at present, Petronas is required to pay 10 per cent of its oil and gas gross production to the federal government, with 5 per cent from the amount paid to the federal government and oil-producing states respectively.

He said the payments are made twice a year to the government in February and August.

Due to significant cost increase over the years, such as increased risk in offshore oil and gas exploration, Azmin said the cost could reach up to 80 per cent of the total gross production.

“After deducting the 10 per cent royalty and the production cost of about 70 per cent, the remaining 20 per cent is the profit that will be taxed under the Petroleum Income Tax Act (PITA), which imposes 38 per cent of gross profit.

“Based on the estimated 20 per cent profit, the amount payable tax is about 8 per cent of total gross production,” he said, adding the remaining 12 per cent from the gross output would be the profit shared between Petronas and other oil operators based on the current agreement.

In an effort to fulfil the 20 per cent oil royalty pledge, Azmin said a special Cabinet committee will be set up to review the Malaysia Agreement 1963, which will be represented by those who have the expertise on the matter.

“The special committee will be given six months to formulate and present recommendations to the government, to ensure the rights of Sabah and Sarawak are guaranteed according to the Malaysia Agreement 1963, such as the rights over oil and gas resources.

“The federal government will analyse the suggestions by the special committee, who will also monitor the implementation of the recommendations,” said Azmin.