‘Long-overdue’ for Petronas to revise O&G revenue-sharing deal — Gerawat

  • Oct 10, 2019
  • Borneo Post Online

MIRI: The move to haul Petronas to court to compel the national oil company to pay the state’s five per cent tax on petroleum products, should only be a last resort if ongoing negotiations fail, opines Dato Gerawat Gala.

The State Legislative Assembly Deputy Speaker believes that rather than battling it out in court, it is incumbent upon Petronas and the federal government – legally and morally – to listen and comply with Sarawak’s aspiration for a more equitable share in revenue derived from the state’s oil and gas production.

“It is my humble view that going to court will be the final recourse if all negotiations fail.

“Surely after 45 years since Petronas took over development of the state’s oil and gas, a revision in the revenue-sharing arrangement is long overdue,” he told The Borneo Post when contacted yesterday.

The Mulu assemblyman said this when disagreeing with the view expressed by constitutional law expert Emeritus Professor Datuk Shad Saleem Faruqi who, during a talk on ‘The Spirit of the Malaysia Agreement 1963 in our Constitution’ here on

Tuesday, questioned the state’s right to impose a sales tax on petroleum products, as such products are in the Federal List under the Ninth Schedule of the Constitution.

According to Gerawat, Sarawak’s Oil Mining Ordinance (OMO) 1958, which was enacted before the Petroleum Development Act (PDA) 1974, gave the state the authority over the mining of oil and gas in Sarawak, including offshore.

He pointed out that the OMO has not been replaced by the PDA or any other law, and that it is still a valid law applicable for mining and production of oil and gas including petroleum products in Sarawak, meaning these are not within the exclusive jurisdiction of the federal government.

Gerawat said the professor’s opinion – that the state’s right to impose sales tax as provided in Article 95B(3) of the Federal Constitution does not apply to petroleum products because petroleum products are within the Federal List – did not highlight the opening words of Item 8(j) in the Federal List which set out matters over which the federal government has jurisdiction.

“Quoting Item (8)(j) ‘Subject to Item 2(c) in the State List: Development of mineral resources…, petroleum products,…’, Item 2(c) in the State List gives the state power to issue permits and licenses for mines and mining leases.”

However, Gerawat concurred with the professor that the same Article 95(B)(3) of the Federal Constitution also stated that sales tax imposed by state law (i.e Sales Tax Ordinance) is deemed to be in the State List as set out in the Ninth Schedule of the Constitution.

“The learned professor recognises that Article 95B(3) read together with the relevant items in the Federal List and State List appearing in the Ninth Schedule of the Constitution, does not preclude the state’s right to impose the five per cent sales tax on petroleum products,” he said.

Shad Saleem had said a legal interpretation by the Federal Court of these relevant parts of the Constitution may be necessary to clarify any dispute between Sarawak and

Petronas over the interpretation of these constitutional provisions.