Petronas Oil Royalty Agreement

Things get complicated when the 20% of royalty was mentioned in Pakatan Harapan`s election platform, and now that it is the federal government, according to Sabah, Sarawak and Terengganu, PH must keep its promise. But the 20% figure itself is controversial, whether it is based on PDA royalties, profits and not on the revenues of those countries, on the profits of the Petronas group, or on the profits of the upstream sector. Reuters reported, citing sources, that Wan Zulkiflee had left Petronas after a disagreement with Prime Minister Tan Sri Muhyiddin Yassin over a plan to pay billions of VAT to Sarawak. There are two schools of reflection on the issue of oil licensing. On the eve of Malaysia`s secession, as in the case of Singapore, the federal government will not be able to pay more than 5% on the basis of all the facts and arguments before us. Over the past two months, news reports have shown the fall in oil prices, as shown below. For the first time in history, U.S. oil prices were negative as Covid-19 reduced demand. Never before has there been this confluence of negative forces: an international public health crisis, a global recession, major disruptions in the global supply chain, persistent trade tensions, intense domestic political pressure to break future production agreements after a recent history of failed production agreements.

In addition, petronas has committed to pay 5% annual licence fees to Sarawak and the neighbouring state of Sabah. Both Sarawak and Sabah have insisted in recent years that royalties increase by trying to increase the quantum to 20%. Increasing the levy could cost Petronas RM 30 billion per year. In addition to production costs, there are also oil licences that must be paid to the federal government and the federal states at 5%, and a mineral oil tax of 7.6%, which would place Petronas and production sharing contractors (CCCs) at 13.4%. Kelantan reached an agreement last November on a one-time payment of $400 million.RM after intense back-and-forth on public debt and a debt of $1 billion .RM. The dispute over the ownership of offshore oil deposits is maintained, but measures taken last year indicate a greater acceptance of Kelantan as an oil producer.