CM: State will continue to seek 20 pct hike in oil royalty from Petronas

The Sarawak government will continue to pursue 20 per cent in oil royalty from Petronas but while waiting for more favourable conditions, the state will focus on enhancing local participation in the oil and gas industry.

Chief Minister Datuk Amar Abang Johari Tun Openg pointed out that various factors including hovering oil prices must be considered in the negotiations so that Sarawak is in a strong position before putting forth a strong rationale to demand.

“While they can’t give us the 20 per cent in oil royalty at the moment, we asked for Petronas to give us in lieu, especially greater participation in both downstream and upstream activities in the oil and gas sector as well as further exploiting the marginal fields,” he reiterated.

“If they increase royalty ( for Sarawak), it means Petronas also needs to give the federal government a similar percentage of royalty besides other taxes. But if cost of production is high, Petronas may close shop,” he said.

Abang Johari highlighted this after an official visit and meeting with top police leaders at Sarawak Contingent Police Headquarters at Jalan Badruddin here yesterday.

Despite the lack of development in the oil royalty negotiations, he gave his assurance that Petronas was in fact helping Sarawak to get more involved in the oil and gas industry.

“Petronas and the state government have a common platform but I cannot divulge the details yet. We are working on something,” he said.

“Though they have not met our request for 20 per cent in oil royalty, we have requested Petronas to give us in lieu and that’s why we are going to set up the methanol plant where Petronas will give us the gas,” he added.

In addition, he revealed that the project will play a significant role in Sarawak’s economic transformation and extend the oil and gas sector’s downstream value chain to transform the state, particularly Bintulu, into a petrochemical hub in the region.

As for the report on Petronas’ intention to sell a stake in the SK316 Production Sharing Contract (PSC), Abang Johari said that was a different issue which involved an expensive exploration.

“It could cost billions which Sarawak won’t be able to put in. Nevertheless, we have to be intelligent, rational and not emotional in our negotiations,” he emphasised.