Analysts: More clarity needed on oil royalty payment

KOTA KINABALU: Analysts viewed positively the announcement of the increase in oil royalty to petroleum-producing states in Malaysia but they also pointed out that more clarity is still needed on matters such as how and when will it be implemented, or in what form.

On Thursday, Prime Minister Tun Dr Mahathir Mohammad announced that oil-producing states will receive 20 per cent of oil royalties, as stated in the Pakatan Harapan (PH) election manifesto.

“While this news is market sentiment positive and will be wellreceived by all oil producing states, the issue needs much clarity,” the research arm of Maybank Investment Bank Bhd (Maybank IB Research) said in a report.

“Firstly, no definite timeline was mentioned to implementing this. Secondly there was no mention of whether the 20 per cent will be implemented immediately or progressively.

“What is also not clear is how these additional payments will be allocated, managed, or in what form,” it stressed.

In particular, the research team pointed out that consideration has to be given to the fact that a higher payout should not jeopardise Petroliam Nasional Bhd’s (Petronas) ability to re-invest and grow.

“In our view, implementation wise, a progressive increase is more realistic, for it would denote commitment and good capital management,” Maybank IB Research opined.