KUALA LUMPUR: PETRONAS is not bound by law to pay oil royalty to Kelantan, Terengganu or Pahang as no petroleum has been found in those states.

In a statement yesterday, the Finance Ministry said a special committee, formed in 2012 and tasked with resolving the issue of petroleum royalty, had established that the three east coast states were not owed any cash payments under the terms of the “Settlement Agreement” signed between them and the national oil company.

Under the agreement, the states were entitled to five per cent of the value of petroleum obtained within their territories.

“The term di dalam negeri (‘in the state’) used in the agreement referred to state land and ocean territory not exceeding three nautical miles from the low-tide marker along the state’s shorelines.

The interpretation of the term is based on established international and domestic laws.

“Until today, no petroleum has been discovered and obtained in the states of Peninsular Malaysia’s east coast,” the ministry said.

It, however, said the committee’s findings were still among the issues being disputed in court, as part of the breach of contract suit filed by the Kelantan government against Petronas.

“As such, whatever decision or conclusion reached by this special committee should not be seen as influencing the court’s decision upon that case.”

The ministry said the Federal Government had decided to release the committee’s findings to enlighten the public and prevent them from being fed with incorrect and misleading information over the claim.

“This step was taken to protect national interests and so that the public would understand that the government’s stand was made based on the study carried out by an independent committee.”

The ministry said the committee’s findings, presented to the cabinet on Aug 28 last year, did not have any legal effect and were not binding upon the Kelantan government, the Federal Government or Petronas.

The six-person committee, headed by former chief justice Tun Abdul Hamid Mohamad, included representatives from Pahang and Kelantan, a former chief secretary to the government, a constitutional law expert and a member assigned to represent Terengganu.

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