Opposition’s 15% oil royalty hike pledge may brankrupt Petronas – MP

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KOTA KINABALU: State Barisan Nasional (BN) secretary Datuk Abdul Rahman Dahlan has cautioned the people that the opposition’s promise of 15 per cent increase in oil royalty for Sabah could ultimately result in a financial blow to Petronas “which may lead to bankruptcy”.

The Kota Belud MP said that based on the current formula, for every RM100 revenue derived from Sabah’s oil, five per cent goes to the state’s coffers while another five per cent to Federal coffers.

“Approximately 45 per cent goes into recovery cost, and the remaining 45 per cent goes to the joint venture’s gross profit.

“In the end, it is as clear as the dawn of the morning sky that Petronas’ profit, after splitting revenue with others and after paying taxes, is only around 16.74 per cent.

“If Petronas is asked to pay up the 15 per cent from its profit margin, this would effectively render them unable to pay their overheads, financial commitments and re-investment for future income. The end result would be a financial blow which may lead to bankruptcy,” he said here yesterday at a press conference designed to counter the opposition’s false propaganda ahead of the crucial general elections.

Abdul Rahman said the capital outlay, technical challenges and financial risks of the Petroleum business are so great and prohibitive that “only the companies which have specialised expertise and bottomless bank accounts normally dare enough to go into it”.

“Imagine trying to lower drilling pipes, 4.5km from the sea level, in an intensely-pressurised environment to search for the elusive black gold.

“It requires special and extremenely expensive equipment and expertise which only the world’s major oil players possess. The cost of exploration drilling could run into hundreds of millions of dollars which would go to absolute waste should no oil be found in the vicinity of choice,” he said.

Abdul Rahman said Petronas, like its counterparts in other developing countries, does not have the capacity to absorb the financial risk.

“It is not financially equipped to spend billions on research and development and take on the financial risks in the exploration and production phases when the same billions are very much needed to be spent on the country’s development,” he added.

Category: Sabah, Sarawak