Negotiations Underway on Rights Over Hydrocarbon Resources Sought by Sabah From Petronas

KUALA LUMPUR: Negotiations to accord Sabah with special arrangements on its hydrocarbon resources are underway but thorough deliberations are needed to find a suitable framework for the state.

Petroliam Nasional Bhd (Petronas) president and group chief executive officer Tengku Muhammad Taufik Tengku Aziz said the federal government and Sabah have started discussions and consultation process on contracts and investments in the state.

“We are waiting for the federal government and the state government to invite us as part of the process to bring us to the solution,” he told Bernama and Berita Harian in an interview recently.

Tengku Muhammad Taufik said the extent of value chain, operations and investments between Sarawak and Sabah were different and there was a need for Petronas to tailor them to what Sabah was aiming for in the agreement and what the national oil company could accord.

He noted that the commercial settlement agreement signed with the Sarawak government in early December has enabled Petronas to craft the right to participate in the state’s offshore fields on a commercial basis.

“If there is participation from state vehicles like Petroleum Sarawak Bhd (PETROS), we will work with them just like any other contractors.

“You know the commercial solutions agreement has accorded Sarawak the right for overview and management of what is onshore and they left Petronas to cultivate and continue investment offshore,” Tengku Muhammad Taufik said.

However, he noted that there would be a challenge to emulate the same framework in Sabah. 

“The geology, the profile of production and nature of business is not identical to Sarawak. We will have to sit down and deliberate it carefully in the joint committee,” he added. 

In late December last year, Sabah Deputy Chief Minister Datuk Dr Jeffrey Kitingan said Sabah wanted the same benefits accorded to Sarawak by Petronas, including the sales tax on oil and gas revenue, following the signing of an agreement between Sarawak and the national oil company earlier that month. 

Jeffrey said Sabah would ensure that it would receive no less than what Sarawak had obtained under the commercial settlement agreement. 

He said the talks between the Sabah government and Petronas on the matter were expected to be held early 2021.

On Dec 7, 2020,  Petronas and the Sarawak government signed a commercial settlement agreement on issues involving the state’s sales tax and oil mining laws. 

Sabah is expected to collect the sales tax on petroleum products worth RM1.25 billion or 27.9 per cent of the state’s total revenue in 2021.