INSTEAD OF 20% ROYALTY, MAHATHIR MAY OFFER TO SELL PETRONAS STAKES TO SABAH & SARAWAK: ‘PETRONAS IS A VERY BIG COMPANY, IT DEPENDS ON HOW MUCH SABAH & SARAWAK CAN PAY’

KUALA LUMPUR: Dr Mahathir Mohamad says the government will consider selling Petronas stakes to Sabah and Sarawak, as the two states demand a bigger share of revenues from oil extracted in their territories.

Speaking to Reuters, the prime minister said Putrajaya could not meet the states’ demand to increase the royalties paid by Petronas to 20%.

“Petronas is a very big company, it depends on how much (the states) can pay also,” he said.

Sabah and Sarawak hold more than 60% of Malaysia’s oil reserves.

Mahathir said the government could also let go of its stakes in smaller units of Petronas.

“What we need is to reduce our involvement, the number of shares that we hold, in order to raise some funds for ourselves.” he said.

On Dec 7, Petronas CEO Wan Zulkiflee Wan Ariffin said that a 20% royalty to oil-and-gas producing states was not possible as production costs are high and profit margins low.

He said Petronas – Putrajaya’s biggest source of income – makes only 3.7% profit from local oil production, with 70% of oil revenue going towards production costs, which are higher when ultra-deep-water production is involved.

Pakatan Harapan had promised in its election manifesto to increase the royalties paid to Sabah and Sarawak from 5% to 20%.

Mahathir had said it was impossible to raise the royalty as the higher payout would “kill” the oil company.

– FMT

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