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Posted: 29 Apr 2013 02:51 PM PDT

Whoever wins the next election, the four states will see increased revenue, if this promise is kept. But how will this change affect Petronas?

Anas Alam Faizli

The oil royalty debacle is perhaps one of the popular components for both Barisan Nasional (BN) and Pakatan Rakyat (PR) as the nation approaches polling day on 5th May. In Kelantan, the "R" for "royalty" movement has in fact been proliferating, especially amongst PR supporters. For years, we have seen the fight for royalty highlighted by the four producing states, namely Terengganu, Kelantan, Sabah and Sarawak. While Kelantan continues with its ongoing battle for legitimacy of its claims under the Petroleum Development Act 1974, Sabah and Sarawak local dailies have been putting forth their plight for a bigger than 5% share over oil and gas incomes.

In an unprecedented move, PR in its Buku Jingga launched in December 2010 proposed an increase of oil royalty contributions from Petronas to state governments from 5% to 20%. This is again reiterated in its election manifesto. Upping the ante, BN too in its recently-launched manifesto has promised the same, albeit under a different name. Whoever wins the next election, the four states will see increased revenue, if this promise is kept. But how will this change affect Petronas?

The Truth behind the 20 Percent Royalty

First, we must know that royalties or cash payout as per PDA 1974 is cost charged to revenues, rather than a share of operating outcomes. Whatever income Petronas or oil operators get from selling oil and gas, royalties are entitled to the first cut. To illustrate, a barrel of oil sold for USD 100 will see USD 5 or USD 20 (depending on the percentage) immediately taken away as royalties. Only what is left after that and taxes, will be left for Petronas to recover its tremendous capital and operating costs, and to reimburse other oil operators and producers.

Imagine what it means in times of lower crude oil prices! This puts tremendous pressure on Petronas' profitability, which will ultimately affect revenues dispersed to the federal government as dividends. (Note that the federal government receives revenues from Petronas via multiple avenues; including royalties and taxes as the government, and dividends as Petronas shareholder).

Second, based on the above, a 20% oil royalty payment will potentially render many in-place existing Production Sharing Contracts (PSCs) unattractive. Without going too much into the intricacies of a PSC, oil operators like Shell and Exxon Mobil having operations in Malaysia, under the PSC, owe royalties and taxes to Malaysia but is then promised some form of "cost oil" and "profit oil".

The PSC essentially ensures Malaysia is compensated as much as possible for oil coming out of its territories, while these operators still makes some attractive margins for their productive efforts. Unless Petronas takes the entire hit from losing a further 15 percentage-points worth of revenues by promising the same profitability to oil operators, the attractiveness of PSCs will be unavoidably severed.

Third, it may be argued an incentive system by way of oil royalty leaves the states with no interest over the profitability of Petronas. This is only natural, as getting a first cut over oil incomes makes it too convenient to worry about the processes thereafter. Thus, states may not be too concerned if foreign operators are no longer incentivized to operate on Malaysian wells and use their valuable expertise on Malaysian oil wells, or if Petronas' long term productivity and sustainability is at stake.

Petronas Inclusive Ownership: Give Shares to the States

The three points above highlight the few potential challenges in applying a 20% royalty contribution from Petronas to the state governments. After all, Petronas is one of Malaysia's few true success stories contributing to a large part of Malaysia's growth. Its sustainability without question is in the interest of all states and Malaysians alike.

It is important to note that Petronas could indeed credit its success to effective management of hydrocarbon resources out of the producing states. Although revenue contributions attributable to domestic petroleum resources has now reduced to 60% of revenues, Petronas would have not arguably been where it is today; if not for the petroleum "capital" contributed by these states to the corporation, by virtue of the PDA 1974, and other enactments entrusting custody of oil fields over to Petronas. Although today, incomes from domestic oil and gas blocks are not the single largest component of Petronas' incomes, other incomes would have never been there in the first place without the petroleum from these producing states.

A whole slew of Petronas subsidiaries, including downstream industries such as Petronas' Gas, LNG, petro-chemicals, and retailing businesses, as well as the inception of local contractors such as Sapura Kencana, MMHE and many others have created a plethora of job opportunities, and positive spillover economic impacts onto Malaysia which would have not happen without oil and gas from the four producing states.

It is proposed here that ownership of Petronas is made more inclusive. Currently, the federal government owns 100% of Petronas. Let's maintain the 5% royalty rate but give oil producing states some profit participating stake in Petronas via non-voting equity shares without participation at the board as to evade a corporate governance nightmare. With this, decision-making and executive matters are still left to the hands of professionals who have done a fantastic job at running the country's only Fortune 100 company.

A 2% ownership each to the four producing states for example, would mean RM600 million out of the fixed annual RM30 billion dividends would go to each shareholding state, while the remaining is still paid to the federal government as the major shareholder. However, how much equity each state will get is for another discussion.

Being shareholder, oil producing states will want to see Petronas as a company grow and maintain profitability as to enjoy dividend incomes from the company. Meanwhile, the dynamics and attractiveness of current and future PSCs and RSCs will not be tampered with. In the case of oil royalty, the states have no interest with Petronas' profitability as they take directly from revenue.

The bottom line is, a higher royalty and equity stake will increase revenue for the four producing states which is among the poorest in Malaysia, which is the ultimate blanket intention. The equity route, however, maintains maintains the status quo for Petronas and PSC Contractors and still rewards the states, especially the poorer ones that deserve the oil royalty income they badly need.

Here's another catch, oil royalty cash payments will only exist as long as oil and gas is being produced while an equity stake and dividend payments will continue to be there as long as Petronas exist and do well. Alternatively, as proposed by PR, little Petronas can be setup e.g Petronas Kelantan, Petronas Sarawak, etc which will be governed by Petronas with equity participation in the oil producing states.

* A version of this article first appeared in The Edge

** Anas Alam Faizli is an Oil and Gas professional. He holds a Master's degree in Project Management and is pursuing a post graduate doctorate. He tweets at @aafaizli

Change

Posted: 29 Apr 2013 02:45 PM PDT

Ask yourselves if a transformation has really taken place. Is your life better today than it was 5 years ago? If it is then by all means vote BN again.

Krishna M Singh

About 2 years ago there was a general election in Singapore. The ruling PAP won handsomely. However, there was a clear message that the voters were not happy at how things were being run. The PAP lost a few seats but there was a higher percentage of votes for the opposition. That was enough for the PAP to stand up and take note. The immediate effect was that LKY and a few ministers lost their jobs. And the PAP continues to listen and make some serious changes to their previously "rammed down the throat" policies.

Five years ago there was a general election in Malaysia. The ruling BN lost quite badly but managed to retain a majority in the Parliament. What did BN do? For a year UMNO moved to remove Abdullah Badawi as though he was alone responsible for the losses. Then Najib took over and promised big changes. There have been a lot of slogans and billboards repeating them. There have been transformation programs which have been declared a great success. A lot of vote buying giveaways have been taking place.

Ask yourselves if a transformation has really taken place. Is your life better today than it was 5 years ago? If it is then by all means vote BN again.

For 22 years Mahathir ruled this country. Every institution of government was made UMNO pliant. There was no more fair play. Accusations of abuse were swept under the carpet with the reasons which treated us common folks as fools who will accept anything. Then ask yourselves:

Are the police and MACC working with an even hand and without fear or favour?

Are all other institutions of government – the courts, the EC and government departments working independently as they should?

Has firm action been taken against those who have abused their power or acquired wealth which cannot be accounted?

Year in and year the Auditor General has revealed huge wastages. Has that been plugged?

If your answers to the above questions are in the positive then by all means vote for BN.

For me, the answers tell me that it is time for change. BN is not capable of carrying out any change. Changes will hurt those who are and were in power. Those in power have blurred lines between what is personal and what is official. Everything is being treated as bapak punya harta.

Mahathir is made adviser to Petronas and his son gets the rights to sell petrol at KLIA. Mahathir uses the Petronas plane to travel at will.

Abdullah Badawi is made adviser to MAS so that his brother can bleed MAS selling expensive satay.

Lifelong plundering carries on!

If BN really has been a good government it does not have to give all these gifts to get your vote. We will judge them on their performance and vote for them. They have to resort to these low cost tactics because they know they have failed.

We have to change that. We have to have a new government which will respect the independence of the institutions of government. Power must be in the hands of the people. We cannot allow anyone to force known corrupt leaders down our throat. We can see that from the list of those nominated to run in the coming election. We cannot allow a situation where the people of Kuala Lumpur vote out the BN candidates but Kuala Lumpur is being run by a BN controlled DBKL.

About a week ago a senior customs officer with integrity, who has helped stamp out corruption, was mercilessly gunned down in broad daylight. This is a frightening development where the corrupters are gunning down those who are standing up to them. That is how deep rooted corruption is in our system and UMNO is not the one that can stamp it out.

I also fear that the following will happen if BN comes into power after GE 13:

Goods and services tax will be implemented
In Selangor project Langat 2 will commence at a great cost which will be passed on to the consumers;
AES, which was suspended, will be resumed;
More crony contracts will be dished out so that there is another 5 years to clean out the treasury.

The voters must know that they are getting these goodies from BN for one reason only. There is an opposition in place which has and is mounting a serious challenge to their long years in power. We must always keep BN on edge by voting for a strong opposition. Vote for Change.

Heading Towards a Catastrophe?

Posted: 29 Apr 2013 02:38 PM PDT

Isn't this what the PAS-DAP-PKR grouping is all about? An opportunistic grouping hell-bent on power but opposed to each other.

Chandra Muzaffar

Dear fellow Malaysian,

Peace.

I am writing this Open Letter because I am deeply concerned about two trends within the electorate which may have an adverse impact upon the future of our nation. The first is a trend associated with a segment of the Malay electorate, both rural and urban. The second is a trend associated with a segment of the non-Malay communities. If these two trends are enthroned through the 13th General Election on the 5th of May, 2013, it could be catastrophic for our people.

The Malay Electorate.

Some Malays, disillusioned with elite corruption and the widening gap between the have-a-lot and the have-a-little, regard a hudud-oriented Islamic State as the solution. They should ask themselves the following questions.

One, is there any such State in the contemporary world that serves as a model worthy of emulation? Saudi Arabia? Sudan? Afghanistan?

Two, why is it that the vast majority of Muslim states have not opted for a hudud oriented Administration?

Three, why have the people in the world's largest Muslim country, namely Indonesia, rejected hudud oriented parties over and over again in elections?

Four, why has Turkey whose ruling party has an Islamic root, eschewed hudud and a fiqh oriented legal system in favour of a democratic, constitutional, secular system of governance?

Five, if the mainstay of the ruling coalition in Malaysia since 1957 was PAS and not UMNO, what would be the socio-economic situation of the Malays today? Would poverty have been reduced from 64% to 1.7%? Would there have been the phenomenal transformation of an entire people, sustained over two generations, which has resulted in a significant Malay role in education, the professions, commerce and industry, compared to what it was at the time of Merdeka? Would the Malays have emerged as an important component of the Malaysian middle-class which has undoubtedly helped to stabilise ethnic relations and politics in the country and allowed democracy to function?

One just has to look at PAS's 22 year rule in Kelantan to get an idea of what its version of Islam can do to a people. From its dismal failure to provide jobs for tens of thousands of well-qualified Kelantanese to its utter inability to curb rising drug addiction, Kelantan is Malaysia's first and only failed state. Malaysian voters should have no illusions about the type of Islamic State that PAS seeks.

The Non-Malay Electorate.

If some Malays are under an illusion about PAS's Islam, a lot more non-Malays, especially many middle-class Chinese and some middle-class Indians are labouring under a huge misconception about what their vote would deliver. They are convinced that it would be able to "eliminate ethnic discrimination" and bring to an end alleged "Malay supremacy." Since those who have been pedalling these cliches, have never really explained in detail what they mean by eliminating ethnic discrimination or Malay supremacy, non-Malays exposed to this rhetoric have drawn different conclusions.

For many, the perception is that the Pakatan Rakyat is going to set aside the Special Position of the Malays and the Bumiputras of Sabah and Sarawak. This cannot be done. The Articles in the Malaysian Constitution pertaining to places in the public services, licences, scholarships and land reserves (like some other Articles) cannot be amended or abrogated by Parliament even if the PR wins 100% of the seats. Special Position is safeguarded by the Conference of Malay Rulers.

Publicly, all three PR parties, including the DAP, have endorsed Special Position. However, at the hustings some of the DAP and PKR activists give the impression that it is discriminatory and is therefore unacceptable. This is why their leaders should be honest with their members and supporters. Tell the whole truth. Neither Special Position nor any of the other iron-clad Articles in the Constitution pertaining to citizenship, language and the Rulers will change one iota if PR comes to power.

Since PR cannot do anything about Special Position, what sort of discrimination is it going to eliminate? Will it abolish the NEP? In theory, the NEP does not exist anymore. It came to an end in 1990 though one of its twin objectives of restructuring society in order to reduce the identification of ethnicity with economic function continues in certain specific areas. Given the nature of this objective, it would be wrong to view it as ethnic discrimination. Rather it is an attempt to enhance national integration.

1Malaysia

Everything considered, the actual flaws with the NEP are related to its implementation --- its excesses and its abuses. These should be rectified. In the last four years, Prime Minister Mohd Najib has made a concerted attempt to do so. Federal scholarships for students are based largely on academic merit; there is a serious endeavour to increase the number of Chinese and Indian public servants; and their mobility in the public services has improved through some high profile appointments. At the same time, all 1Malaysia ventures --- from its retail trade outlets to its affordable housing programme --- are non-ethnic. 1Malaysia in its concrete manifestation is an all-embracing, inclusive idea. Najib is also paying close attention to the needs of different ethnic and sub-ethnic communities and engaging them at the social and cultural level as part and parcel of his 1Malaysia drive.

There is a lucid message he is attempting to put across. There must be understanding and empathy among us, whatever our religious or cultural differences. We must respect one another. Respecting one another means that we should never ever manipulate each other. This is what happened in the recent DAP symbol episode. Though there was no question at all about whether the DAP could use its own rocket symbol, in the high drama that the leadership staged it opted to use PAS's symbol, rather than the PKR symbol on the Peninsula. Wouldn't it have been more logical for the DAP to use PKR's symbol since the DAP wants PKR leader Anwar Ibrahim, to be the Prime Minister if PR won the General Election? Why did it prefer the symbol of a party whose goal of a hudud oriented Islamic state it vehemently opposes? Is it because Pas has much more Malay support on the Peninsula than PKR and the DAP was hoping to capitalise on its support? Isn't this rank opportunism?

Isn't this what the PAS-DAP-PKR grouping is all about? An opportunistic grouping hell-bent on power but opposed to each other. If an illusion on the one hand, and a misconception, on the other, makes the grouping a catastrophe, its opportunism renders it an even greater catastrophe.

THINK CAREFULLY! VOTE WISELY!!

With warm regards,

Chandra Muzaffar

Be Grateful, Go Vote This Sunday

Posted: 29 Apr 2013 02:35 PM PDT

The new media is of tremendous help here. It enables us to connect directly to leaders from both sides. We can now judge better who we think and believe will make good leaders based on our own set of criteria. Likewise, those unsavory characters will have their true colors exposed in no time.

TBH

How often have you been reminded to be grateful?

I received an email from a friend, reminding recipients not to be "ungrateful" to the ruling coalition for their contribution all these years – education, peaceful life, conducive business environment etc. etc.

The leaders themselves have also frequently been reminding the people, as if expecting rakyat to be "eternally" grateful.

Yes, Malaysians have been grateful which probably explain the reason why Barisan National had been voted into power at every general election since independence!

But does being grateful dictates that we must continue to turn a blind eye to a wide spectrum of issues ranging from personal and communal grievances to matters of national interest that many now blame the sitting government for?

In the good old days, controversial issues were easily kept hidden from the public. However, with the help of Internet, issues that would have otherwise remained "covered-up" are bared to all and sundry. Much to the people's horrors, our state and national closets were overflowing with skeletons (not going into details here as many have written about these) with the stench unbearable.

After weighing all the "goods and bads", the inevitable happened. Feelings of disdain and disgust simply overwhelmed that of gratefulness. It manifested itself in 2008.

All said, it is the future that we should really be concerned with. While none is perfect, who do we think can lead our country better? Which set of party leadership is more dynamic and capable? Which team can we expect to have the courage and conviction to make the necessary drastic changes envisioned and expected by majority of the rakyat? Surely, a time will come when people perceive a different set of leaders to be more capable of leading our country and will vote for change, gratefulness notwithstanding!

Of course, there is no known scientific tool available to make these precise measurements. Each of us simply judge as any normal human would and we all form own respective opinions which collectively will translate into the result of our votes.

So do not patronize us - the raykat knows best.

Stop constantly telling us to be grateful - we have been!

Stop telling us the other side is inexperienced – seeing Penang, Selangor, Kedah and Kelatan, we believe they can deliver.

Stop saying the other side will ruin or bankrupt our country - candidates and leaders from both sides are just as Malaysian, just as loyal and just as patriotic as you and I who love and definitely want the best for our country!

Just tell us and convince us why you deserve to govern the next 5 years.

Be grateful Malaysians. Go vote this Sunday.

Kredit: www.malaysia-today.net

Selasa, 30 April 2013

Malaysia Today - Your Source of Independent News

Malaysia Today - Your Source of Independent News

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