SARAWAK’S OIL & GAS – LOST FOREVER?
By Yusuf Abdul Rahman
It is important for Sarawakians to realise that the main reason behind the proposal for the formation of Malaysia was in fact the Oil & Gas resources and wealth that was greedily coveted by the UMNo Malayans, who under Tunku Abdul Rahman had realised that Malaya’s economy after Independence would remain precarious without a new source of wealth, especially since most of the tin mines and rubber estates were still under British and Chinese control.
Greg Poulgrain, a historian has noted from his study of previously classified British government documents that the primary impetus for forming Malaysia was oil, not ethnicity.
This is why the Malayans were never really bothered about implementing the terms of the Malaysia Agreement 1963 (MA63) as fully as they should have, especially once they had gotten their dirty hands on Sarawak’s Oil & Gas (Sabah’s as well, of course) – mission accomplished.
MA63 was in fact silent about Sarawak’s Oil & Gas resources, which rightfully are inalienable assets of the state and not the federation, like all other natural resources such as forests and other minerals.
It all started while the negotiations for independence were proceeding between Malaya and the British. The British since as early as 1953 had also started plans in motion for its “grand design” to merge all of their five colonial possessions in South East Asia into some form of “British SouthEast Asia Dominion”. Malaya was aware of this “grand design”, but the Borneo territories were not.
According to an opinion article in the Daily Express dated 16th February 2020, "...As for the oil in Sarawak territory, the British were prepared to surrender that to the new federation under control of Malaya. Sir Anthony Abell, then Governor of Sarawak, in April 1956 observed in a communication to the Colonial Office that “the politicians in both Malaya and Singapore were showing considerable interest in the Borneo territories “including its empty spaces, its potential wealth, and its oil”.
This was even before Malayan independence.
The British kept Sarawakians & Sabahans blissfully unaware of this considerable interest by the Malayans and the Singaporeans.
While the Sarawak delegation may not have been aware of the negotiations going on behind the scenes between Malaya and Brunei prior to MA63, it is clear from historical records that the Malayans insisted from the start that Brunei’s oil revenues would pass to the federal government after 10 years.
Negotiations failed when the Bruneians (the Sultan of Brunei in particular) did not want to give away their oil revenues, the main source of Brunei’s wealth.
The Malayans therefore kept completely silent about Oil & Gas in their negotiations with Sarawak & Sabah, fully intending to take Sarawak & Sabah by surprise, which they did, since the “Development of mineral resources, mines, mining, minerals and mineral ores, oils and oilfields; purchase, sale, import and export of minerals and mineral ores; petroleum products; regulation of labour and safety in mines and oilfields;” was already provided in the Item 8 (j) of the Federal List, 9th Schedule of the Constitution of the Federation Malaya 1957.
Sarawak & Sabah unfortunately did not give any importance to this nor even raise any query, since the entire negotiations were stage-managed by the British and the Malayans. To the deceptive British & Malayans, of course, silence meant consent.
This is partly why MA63 is actually null and void, being signed by Britain & Malaya & purported Sarawak “representatives” while Sarawak was still a colony, following the Chagos case opinion by the ICJ.
By 1966, the Malayans had enacted the Petroleum Mining Act 1966, which under section 1 (2) “shall apply throughout Malaysia but in its application to Sabah and Sarawak it shall have effect only with respect to off- shore land”. This Act was supposed to come into operation on 8th November 1969 with regard to Sarawak and Sabah.
Why only off-shore land? Because by 1955 Shell had already started marine seismic surveys and in 1957 had relinquished 75% of its land lease. Initial drilling in the Temana field had also hit first oil in 1962.
Earlier in July 1966, the Malayans had already enacted the Continental Shelf Act 1966, whereby they illegally and unconstitutionally took over the Continental Shelf that rightfully belonged to Sarawak. This gave the Malayans “all rights with respect to the exploration of the continental shelf and the exploitation of its natural resources are hereby vested in Malaysia and shall be exercisable by the Federal Government”.
To do this, they first had to get rid of Singapore and secondly, Ningkan, who by 1965 was becoming a critic of the Malayanisation policy that had supplanted what was supposed to be Borneonisation. The Malayans never really wanted Singapore in the first place, nor did they really want Sarawak & Sabah either, only Sarawak & Sabah’s Oil & Gas.
After 1966, the Malayan-controlled federal government started collecting the royalties that were paid by Shell Sarawak, which incidentally, at 10% and later 12.5%, were more than double what Sarawak was to get later from Petronas for more than 56 years.
This was still not enough for the Malayan-controlled federal government and by the 1970s they started to seriously think about following the Pertamina (Indonesia) production-sharing model, to do which the illegal and unconstitutional Petroleum Development Act 1974 (PDA74) was enacted that vested the entire ownership of all petroleum resources within Malaysia with Petronas.
So finally in 1976, Sarawak and Sabah thus “lost” complete ownership of our Oil & Gas, even if it was done illegally and unconstitutionally. Neither Sarawak nor Sabah have ever challenged PDA74 in court.
In this way, instead of 10-12.5% as previously, Sarawak received a cash payment of 5% (based on crude oil or raw gas prices). The other 5% went to the federal government, who as the sole shareholder of Petronas, also got additional returns in the form of dividends and corporate tax, petroleum income tax and export duties. Altogether Petronas/the federal government received 92% of total net petroleum revenues, with approximately 6.5-7% going to the petroleum contractors such as Shell, leaving 1-1.5% to Sarawak.
Has all been lost forever, or is it still possible for Sarawak to claw back the ownership of its own Oil & Gas resources from Malayan control and domination?
That is a question that can only be answered by the people and the government of Sarawak.
Clawing back our property from the hands of thieves is not easy and they will of course resist to the bitter end.
The Sarawak government has made a good start with the formation of Petros and the imposition of SST on petroleum products. Revenue derived from petroleum products alone according to Sarawak Premier has reached RM8.52 billion todate, a significant amount, in view of the fact that the Federal budget still doesn’t give Sarawak a commensurate share based on Sarawak’s contribution to the national economy via our Oil & Gas revenues.
The Federal government seems to think Petronas is the golden goose, when it is in fact Sarawak (and also Sabah). Yet they don’t feed the golden goose properly while stealing all the eggs.
The Sarawak govt and Petros have taken the correct step of regaining control of Sarawak’s onshore petroleum assets. Next must be regaining full
control of Sarawak’s offshore petroleum assets, while Oil & Gas still remain relevant and while we develop new sources of renewable energy.
We are still talking here of potential revenues to Sarawak amounting not to tens of billions of ringgit but hundreds of billions of ringgit that can raise the living standards of all Sarawakians, especially those that have so far been marginalised and have not had proper access to development and socio-economic opportunities for advancement.
Between 1976 and 2017, the value of crude Oil and raw Gas production exceeded 660 billion ringgit, out of which Sarawak only saw 33 billion ringgit in royalty, amounting to an average of 805 million ringgit per year.
By now, the figure should have reached more than 1 trillion ringgit, with value added from processing of about 2 trillion ringgit, just from Sarawak alone. This is what Sarawak has lost over the last 46 years.
It is largely from Sarawak’s Oil & Gas revenues that the Malayans have managed to siphon off 1.9 trillion ringgit into offshore bank accounts, as revealed by the Pandora Papers. This is another subject that they will not allow to be debated in Parliament.
In trying to claw back as much Oil & Gas revenue as possible, through value added processing, Sarawak has now embarked on various initiatives involving setting up of various petrochemical and other refining plants to be able to process and utilise our own Oil & Gas resources for value added instead of being sold cheaply for fast cash, as is now being done by Petronas.
We need to enhance our domestic gas distribution facilities so that Sarawakians can also enjoy cheaper energy that we now supply overseas and subsidise in Malaya. Malaya has more than 2,000 km of natural gas pipelines and Sarawak less than 50 km. Gas subsidy to Malayan power plants, industries and consumers alone has already amounted to more than 200 billion ringgit, while Sarawak gets zero.
In order to get the full benefit of our own Oil & Gas resources, we need to regain full control and ownership of them from Petronas and Malaya. To do this we need to strengthen our regulatory capabilities and we need the political will to be tough with the Malayans, instead of constantly being pushed around and taken for a ride on our own Oil & Gas resources.
As we can see, this has been a very expensive ride that has cost us at least a couple of trillion ringgit all this while, if we had developed our own Oil & Gas resources. We just cannot afford to be taken for a ride by the Malayans any more. They have been thinking of themselves all this while, and taken us for granted, even calling us their fixed deposit.
No more. It is now more than high time for Sarawakians to think about ourselves and our own people.
Or else, our Oil & Gas will truly be lost forever.
Yusuf Abdul Rahman Kuching 23rd July 2022
