Seeking to be master of its own destiny
John Teo 

If there had been any doubts that Sabah and Sarawak seeking to exert their full rights under the Malaysia Agreement of 1963 (MA63) is, at heart, a matter of finances, recent actions and statements by state leaders, particularly from Sarawak, largely put paid to those doubts.

Nothing much will come of either state having more complete governing autonomy without their having access to greater financial resources and the autonomy to decide alone what to do with such resources. And nothing, therefore, galvanises such talk over autonomy more than attaining a new consensus with the federal government over, principally, how revenues obtained from oil and gas (O&G) resources extracted from either state are shared with that particular state.

Since the state’s official demand for a 20% share of O&G royalties (up from the current 5%) has been rebuffed for several years, the Sarawak government has gone about a rather circuitous route in its efforts to increase its share of revenues derived from extraction of its O&G resources.

The most concrete of such moves has been the setting up of Petroleum Sarawak (Petros), which appears to be the state’s answer to Petroliam Nasional Bhd (Petronas). In explaining the state initiative in July, Chief Minister Datuk Patinggi Abang Johari Tun Openg said the state intends to be active in upstream activities in the industry, including exploration and extraction. He also took pains to say Petros will be working together with Petronas.

The manner of any such Petros-Petronas collaboration is of course the subject of some interest and much speculation at this stage. Petros’ newly-appointed chairman Tan Sri Hamid Bugo has been busy getting his top management team up and functioning and has revealed nothing so far of its intentions and mode of operations. He revealed to this writer recently that he will only be able to engage with the media in the first quarter of next year.

A Petros-Petronas collaboration may not just be prudent but, in fact, imperative, given that the Petroleum Development Act of 1974 (PDA 1974) vested all the nation’s O&G resources in Petronas’ hands. It appears Petros’ first order of business will be coming up with a mutually acceptable and workable modus operandi with Petronas.

Abang Johari shed some light over the state’s intentions in this regard by telling the state assembly in November that although the PDA 1974 vested Petronas with rights over the state’s O&G resources, the rights over the issuing of mining leases in Sarawak remain exclusively under the State List.

“Therefore, we must exert our mining rights. In exerting our right to mining, we are saying that even if the PDA had vested the rights to exploration and export of petroleum to Petronas by the federal government, it does not mean  that Petronas has the right to simply enter into Sarawak territory, be it on land or at sea.

“Before Petronas could operate in Sarawak territory, it must obtain the necessary licences or leases to operate within this territory,” explained the chief minister. He did not elaborate on what any exertion of the state’s mining rights would entail in practical terms as they relate to Petronas.

Will new permits to operate in greenfield O&G areas in Sarawak be henceforth given exclusively to Petros as one way to force Petronas to come to the altar with the former?

And as if to drive home his message about the state exerting its rights, Abang Johari also announced in the state assembly the setting up of a high-powered new MA63 taskforce headed jointly by the three deputy chief ministers to negotiate with Putrajaya over autonomy matters. “We are exerting our rights under MA63 because we want to safeguard our economic interests for the present and future generations of Sarawakians,” said Abang Johari.

There had been no public reactions from either the federal government or Petronas to what the chief minister had spelt out thus far. Prime Minister Datuk Seri Najib Razak who was in both Sabah and Sarawak the week following Abang Johari’s statement in the state assembly offered nothing in direct answer to even a specific suggestion from the chief minister that the taskforce he has just created inter-face with the deputy prime minister leading a federal panel.

All the prime minister said was a general statement while in Sabah to the effect that if anything in MA63 relating to state rights had been inadvertently taken by Putrajaya, it will be returned. He had on previous occasions counselled patience, suggesting it will take time to ascertain if any state rights had been so taken by the federal authorities.

If the intent all along has been for Sarawak to extract as much funds as it considers to be its due from Putrajaya, there may arise some questions as to the real effectiveness of going about it in the way Abang Johari appears to have laid out.


Huge business risks

After all, Putrajaya gets the same 5% O&G royalty that Sarawak and Sabah enjoy. The lion’s share of federal O&G revenues is derived from dividends out of the profits made by Petronas and those profits come from the wholly federal-owned national oil corporation’s worldwide operations, not just its domestic operations.

Petros attempting to replicate Petronas’ success, especially under current conditions of a persistent low international oil-price regime, looks to be a rather tall order, even assuming the state government is willing to dig deep into its budget reserves to come up with the huge capital outlays that exploration and extraction entail. Are there more than just marginal fields left to explore within Sarawak waters or even lands is another pertinent question that needs to be answered. If the answer is no, the business risks involved will only further rise accordingly.

To be sure, Abang Johari faces pressures from popular expectations and aspirations in Sarawak for the state to be seen as more of a master of its own destiny. And these are generally fairly popular sentiments which Putrajaya should find little difficulty in understanding and even appreciating.

The chief minister may be credited for coming up with some creative solutions. These may hopefully serve to make Putrajaya come back with creative counter-solutions so that a final truly win-win way forward can be crystallised.

John Teo is based in Kuching. Comments:

This article first appeared in Focus Malaysia Issue 262.