November 17, 2009 22:01 PM

Government Prepared To Go To Court Over Oil Royalty For Kelantan

KUALA LUMPUR, Nov 17 (Bernama) -- The Federal Government is prepared to go to court if the Kelantan government were to dispute the oil royalty demanded by the state, said Minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz.

"If the Kelantan state government takes the dispute to court, we are open. I will not budge," he said when winding up the debate on the 2010 Supply Bill at the committee stage for the Prime Minister's Department at the Dewan Rakyat Tuesday.

He said the government maintained that in terms of law, Kelantan had no right to ask for the oil royalty because there was no petroleum produced in the state's waters within three nautical miles of the coastal line.

"Section 2 of the Petroleum Development Act (PDA) 1974 gives exclusive rights to Petronas to explore and process petroleum products whether on the state's offshore or onshore.

"In exchange, Petronas must pay to the state government a cash payment agreed upon between the parties concerned," he said.

He said the agreement between Petronas and the state government which was signed in 1975 stated the cash payment of five per cent from the value of petroleum explored and produced in the state of Kelantan.

"That's why we don't mention royalty because there are no rights, if the agreement says five per cent, then we will give five per cent. But if the oil is produced outside the three-nautical-mile zone, then it is the rights of Malaysia and it is up to us to give or otherwise.

The winding up session later turned chaotic when several opposition members of Parliament stood up to express their dissatisfaction on the special payment which should instead be a royalty for Kelantan.

Mohamed Nazri later said he was prepared to debate with any opposition members including Salahuddin Ayub (PAS-Kubang Kerian) on the dispute.

The house will sit again Wednesday.

-- BERNAMA

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