IT'S HIGH TIME TO REVIEW THE PETRONAS OIL ROYALTY AGREEMENTS

In view of the shocking developments as inevitable results of the sudden
oil price hike, I woul like to raise several issues with regards to the
situation in Petronas which I believe most people are not aware of.
This is especially pertinent in the face of several revelations, such as
the fact that the oil wells in Sabah will dry up six years from now.
The issue has also been raised that Petronas "could go bust in 2018",
forcing us to ask: Where have all the huge amounts of Petronas money
gone to?

Had Petronas been managed so badly that despite it being the nation's
biggest money earner, it is now facing the possibility of going bust
(bankrupt)? The first problem with Petronas is the fact that it was
designed to be a secretive organisation. The Petronas agreements have
been classified secret. Why? What clauses are in the agreement that
the people should know? This secrecy also include the secrecy of
Petronas' detailed annual report which is shielded from public scrutiny,
making it an organization without public accountability.


The other shocking revelation that had came to my knowledge is that 80%
of the oil produced by Petronas is not sold directly to the world market
but is channelled through six 'option holders' who obtain the supply
from Petronas below market prices. These option holder agents are the
ones reaping the benefits in the oil price hikes. Who are these people?
Why are there in the first place? Why had such a system been created
for Petronas? Are these people in fact representing certain private
interests?

It is also understood that this supply through the option holders is
sold by contracts with a binding agreement for 20 or 30 years, causing
huge losses for Petronas when oil price increases, as Petronas would
then have to continue selling at the old agreed price. Only 20% of
Petronas's supply is sold through direct open bidding. Because of these
arrangements, Petronas is sadly not maximising its revenue by dealing
direct with the open world market. Instead it has been incurring
incalculable losses for the nation and for the people. How much this
monstrous loss is, we will never know.

The Members of Parliament and the state government should boldly raise
up this very important issue in Parliament or directly with the federal
government for the benefit of the oil-producing states. As soon as
possible, leaders of the oil producing states should seek for a review
of the oil royalty rate and push for a differentiation of prices and
benefits for the oil-producing states and the non-oil-producing states.

This review is being offered by the alternative government which is
committed to giving the oil-producing states at least 20% oil royalty.
This is a window of opportunity for all of us to demand for a review of
the Petronas agreements, and to make Petronas more open and transparent.
Parti Keadilan Rakyat also demands that the system of having the six
option holders be abolished. A new system should be created in which
the three oil-producing states are in control of the marketing arm of
Petronas, to make Petronas trade directly in the world market with the
aim of maximising revenue for the benefit of the nation.


Obviously, Petronas is a huge business organisation which is not
accountable, secretive, and has been open to a lot of abuses, including
the decision to use its revenue to bails out various individuals who
faced bankruptcy as results of the Asian economic crisis ten years ago.
It the federal government truly wants to be responsible and accountable
to the people as it claims it wants to be, it can begin to prove its
sincerity for excellent governance by looking into the problems with
Petronas.

- DATUK DR. JEFFREY KITINGAN