Federal govt and Petronas reach agreement to settle oil and gas negotiations with Sarawak

KUALA LUMPUR, May 8 — Petronas has successfully reached an agreement on the settlement of negotiations over the oil and gas business and sales tax on petroleum products in Sarawak.

In a statement today, Prime Minister Tan Sri Muhyiddin Yassin said the solution is in line with the government’s Shared Prosperity Vision, which aims to apportion Malaysia’s wealth across all income groups, ethnicities and territories.

“In addition, the solution will provide the Sarawak state government with space for joint involvement in the development of the oil and gas industry with Petronas in that state, without changing Petronas’ role as a national oil company with full power over regulation the whole development of the oil and gas industry in the country, in line with the Federal Constitution,” he said in the statement today.

Muhyiddin also said that a committee chaired by Works Minister Datuk Seri Fadillah Yusof and Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz will also be formed to continue the negotiations towards the goal of involving Sarawak in the development of the state’s oil and gas industry.

This includes more active state government involvement in investment opportunities in the state’s oil and gas industry on commercial terms as well as joint venture opportunities at the company level in Sarawak, he added.

“A committee that will be chaired by the works minister and finance minister will ensure that negotiations continue towards amicable solutions that will be accepted by all,” he said.

Meanwhile, Sarawak Assistant Minister of Law, State-Federal Relations and Project Monitoring Datuk Sharifah Hasidah Sayeed Aman Ghazali and Petronas chairman Datuk Ahmad Nizam Salleh also issued a press statement on the settlement which saw the resolution of all legal disputes between the two.

It also shows that Petronas will make full payments to Sarawak for the sales tax of all oil and gas products from the state.

“In this regard, Petronas agreed to withdraw the appeal of the Sarawak High Court’s decision on the application for Judicial Review on March 13, 2020 and the Sarawak state government will also drop all civil litigation against Petronas for the payment of sales tax on petroleum products.

“In addition to the withdrawal of all legal proceedings, Petronas through its subsidiaries, will make a full payment of sales tax imposed by the state government of Sarawak on petroleum products for 2019 amounting to RM2 billion at 5 per cent of the value of the product.

“The state government of Sarawak and Petronas further agree that sales tax on petroleum products provided under the State Sales Tax (Taxable Goods and Rate of Tax) (Amendment) (No. 2) Order, 2018 (“Order 2018”) shall be charged at a lower rate in time based on future negotiations. The Sarawak State Government has also agreed that sales tax will be limited to petroleum products provided under Order 2018,” said the joint statement.

Both Sharifah Hasidah and Ahmad Nizam said that Petronas together with the Sarawak state government will continue to develop the oil and gas industry in the state.