Another plunder and blunder by YB Teo

Teo clears misconception on oil royalty payment

http://www.theborneopost.com/2014/07/17/teo-clears-misconception-on-oil-royalty-payment/

THERE is a general misconception with regard to the oil and gas royalty paid to Sabah by the Federal Government, Minister of Special Functions Datuk Teo Chee Kang said.

Teo told the State Assembly sitting that people assumed that Sabah was paid 5 per cent of oil royalty and the Federal Government would get 95 per cent of the profit which is not right.
“I wish to correct the wrong perception because the oil and gas industry is one that requires intense capital as the cost is high,” Teo said yesterday.
Those who are familiar with the oil and gas industry know that in the extraction of oil and production, the companies involved all follow a fiscal regime which is consisting of three components.
“Firstly, cash payments which some people prefer to call it royalty like in our case the first component consists of 5 per cent cash payment for the state and 5 per cent for the federal government. The second component would be the cost of the oil including the cost of exploration, exploitation extraction and purification among others.
“The cost for all this is an astronomic figure, Petronas itself is unable to undertake the cost and I would like to remind the YBs and the House that we were recently briefed by Petronas’ Chief Executive Officer, President and senior officers (about the matter),” he said.
According to Teo, those who know about the oil and gas industry understand that the exploration exercise may take between RM8 billion to RM12 billion and the exercise may not be successful all the time.
All this takes high risk, therefore, Petronas has to work with other big companies to share the risk and profit, he said, adding that the production cost is expected to be between 50 per cent and 70 per cent which means that for everything barrel of oil extracted 10 per cent is for cash payment, 50 to 70 per cent for exploration costs and the remaining 20 per cent is taxable by Petronas at 30 per cent on the nett.
“Then the company has to share what is left with its risk sharing partner. Therefore, the oil and gas business is one with intense capital and high risk. It is not like what people say that Sabah gets 5 per cent while the federal government gets 95 per cent… That is a wrong perception,” he stressed.
Meanwhile, in reply to Bingkor assemblyman Datuk Dr Jeffrey Kitingan suggesting that the state government request for its right to the oil found in the state to be restored as per Section 24 (Cap.1968) of the Land Ordinance, Teo said that the vesting of the ownership, right, privileges and everything in relation to oil is vested by way of Petroleum Development Act 1974.
“By virtue of the Petroleum Development Act 1974 all those rights together with the signing of the instrument as prescribed under the act which is more commonly known as the Oil Agreement dated June 1976, all the rights are now vested in a corporation incorporated under the same Act which is Petronas. Actually, it is a misconception to say that we still have the right by virtue of Section 24 of the Land Ordinance,” he stressed.
He stressed that the state Government is always open to renegotiation for what Sabah deserves but is doing it through the correct channel as there is no need to be confrontational about it.
On Dr Jeffrey’s question if the state government can find ways to ensure it has direct participation in the 16 new oil fields found in Sabah, Teo assured him that it would demand and find ways to participate in the oil production, exploitation, upstream and downstream industry.
“For example, a state government owned company M3energy Sdn Bhd will be conducting the extraction of oil production in one of the newly found fields,” he said.

Teo refutes perception on oil revenue

Published on: Thursday, July 17, 2014  Daily Express

SPECIAL Tasks Minister Datuk Teo Chee Kang refuted a widely-held perception that the Federal Government is reaping a massive 95 per cent of the State's oil revenue, while Sabah was left with only five per cent.
He said Petronas Carigali follows a certain fiscal regime, comprising three components, namely, cash payments, exploration and production cost and tax payment.
"Firstly the cash payments which some prefer to call oil royalty.
Ten per cent is set aside, five per cent going to the State Government and the other half to the Federal Government.
"The second component is the cost of oil and exploration work.
This includes exploration, extraction, exploitation, purification and others, which will make up around 50 per cent to 70 per cent," he said during the question and answer session at the State Assembly.
Teo was responding to a question by Pantai Manis Assemblyman Datuk Abdul Rahim Ismail who asked whether Sabah is reaping triple the amount of five per cent or 20 per cent of the oil royalty at present.