KOTA KINABALU, Sept 17 — Consideration must be given to Petronas so as not to “kill” the national oil company, Tun Dr Mahathir Mohamad said today in response to royalty negotiations between oil-producing states and the federal government.
The prime minister said Petronas is unique in that it’s the only company that is involved in all stages of the manufacture of oil and gas, from exploration, development, production down to petrochemicals.
“We don’t want to kill Petronas. If you take 40 per cent for oil royalty from its operating cost, Petronas will lose money,” he told reporters here.
The 93-year-old said that Malaysia would also lose out if Petronas were reduced to merely collecting oil royalty as the company was highly sought after to work in oil and gas industries worldwide.
“So we need to maintain the strength of Petronas but at the same time we feel that there is a need to relook the 5 per cent we are currently paying.
“That 5 per cent is based on operation cost, it is part of operation cost and that is very big,” he said.
When asked if the federal government would consider giving up their 5 per cent share of the oil royalties, Dr Mahathir said the it had already been done.
“In fact, they also owe the federal government, which they have not paid. There are non-performing loans, which means we can bankrupt you,” he replied, referring to the state governments.
But he said some of the states were cash-rich and had even offered to lend money to Putrajaya.
“So I think we should learn to live together and be fair to each other,” he added.
Economic Affairs Datuk Azmin Ali recently expressed the PH federal government’s commitment to fulfilling its election promise to increase the state’s oil royalty from 5 to 20 per cent, but said there were financial constraints to consider.
Sabah has been complaining for decades that the 5 per cent in oil royalties was a disservice to the state, which is among the poorest in the country despite being among the biggest oil producers.
Last month, Sabah Chief Minister Datuk Seri Shafie Apdal promised Sabahans that his state government would be steadfast in demanding a 20 per cent oil royalty from Petronas based on gross production and not profit, and that paying out about RM6 or RM7 billion would not bankrupt the national oil company.
He also said that the federal government receives three payments from Petronas, first from oil royalties, then the dividends, and lastly through tax.