KOTA KINABALU: Tun Dr Mahathir Mohamad believes that while there is a need to review the oil royalty rate for oil-producing states, it should not be at the expense of ‘killing’ Petronas.
The prime minister, asked on how soon the increase in oil royalty to oil producing states from the existing five per cent to 20 per cent would take place, said it has to be done without Petronas incurring losses.
"We do not want to kill Petronas. While we feel there is a need to re-look the five per cent (oil royalty), we need to maintain Petronas’ strength."
Petronas, he said, is a unique company because it is the only national oil company that undertakes exploration, development, production and petrochemical, making it sought after by industries worldwide.
"That five per cent is based on operational costs, it is part of it and is a big amount.
"If we take away 40 per cent from the operating costs for example, Petronas will lose money.
"So if you reduce Petronas to just collecting royalty, then we lose a lot of things," he cautioned.
Asked if the Federal government would consider giving up their five per cent royalty to the states in question, he replied that the Federal government already gives money to the states.
"In fact, many states owe money to the Federal government in the form of non-performing loans (NPLs),” he told reporters after a breakfast meeting with Sabah Chief Minister Datuk Seri Mohd Shafie Apdal and state cabinet ministers.
He said the key was for all states to be fair to each other. Sabah, he noted, had improved vastly from in 1965, when he first visited.
"I see so much progress has taken place over the years.
"There is evidence that Sabah is capable of growing rapidly. What should be done is to identify Sabah’s assets which can be capitalised on,” he said.
He said Sabah has potential but was hampered in the past by corrupt practices.
“But that I think will stop because I intend to adopt the Chinese law where we shoot people," he joked.
Dr Mahathir also noted that there were several factors which have contributed to high cost of living in the state, including the cabotage policy and transportation costs.
He suggested that Sabah and Sarawak work together to develop an assembly business for the automotive industry as they now have the population volume.
"This may bring down costs. Sabah also has the potential to become the world’s biggest petrochemical producer because deepwater production will begin anytime soon," he said.