For Ku Li, striking oil has turned into a curse

The ‘go go years' are over and our ‘oil lottery' money is fast depleting mainly due to mismanagement by the powers-that-be, decried veteran politician Tengku Razaleigh Hamzah,

According to the Petronas founder, the original plans of the oil giant did not include over-producing oil to pay for billions of ringgit worth of unnecessary government projects.

"It started with this (defence equipment purchase) agreement with (then British prime minister) Margaret Thatcher, and suddenly the production of oil was doubled from 650,000 barrels per day to over a million barrels a day (to fund the purchase). That was too much for us," he said.

As one of the architects of the Malaysian oil blueprint, the Kelantan royal is now out to set things right, especially for his home state which he believes has the "sovereign right" to be paid royalty for oil found on its shores.

"It's not a complicated issue for as long as oil is found along the shore of Kelantan, whether it's in the joint development area or whether it is off-shore in the exclusive economic zone of the country, Petronas is obliged to pay," he said.

Another matter which needs to be addressed is the arrangement between the states and the centre, which Razaleigh said is outdated and cannot provide the revenue required to meet the development plans of each state.

The former finance minister, who met with Malaysiakini last week, was unfazed by the warning from Deputy Prime Minister Muhyiddin Yassin not to accept an opposition invitation to head a parliamentary oil royalty caucus.

Razaleigh said Muhyiddin can "climb to the top of the mountain" to warn him but it would not stop him from doing what is right.

" I don't care who warns me. I'm doing this for the country; I'm not beholden to anybody. People can climb to the top of a mountain to warn me. I couldn't care less. I plan to see that the sovereign rights of the people are protected.

The following are excerpts of the interview. Content has been edited for brevity.

Malaysiakini: You gave a stinging speech arguing that Malaysia has "squandered" quite a lot of our oil money. What prompted you to give that speech?

Razaleigh: It's because we will get caught flat-footed. What happens if the oil runs out? We have not planned to have substitute revenue in the event that we run out of oil revenue in the years to come.

Some economists have put the amount of money already lost (due to mismanagement of oil revenue) at about RM100 billion... some estimate about RM350 billion, while others put it as RM500 billion.

I can't put my finger on the numbers precisely because I don't have access to the accounts. But Dr Mahathir (Mohamad) has said something to the extent that there are some huge sums of money unaccounted for... missing...

Was this in reference to the RM270 billion of oil revenue which Mahathir alleges to have been spent during the previous prime minister Abdullah Badawi's term?

I can't quite remember... but he did come up with the statement querying Petronas, asking, ‘where has this money gone to?' The amount I referred to in my speech, (was the amount spent during the) time when (Mahathir) was in control of the company and Petronas.

The amount that was utilised for all sorts of expenditure, including defence equipment which was purchased from Britain, for instance, amounted to RM7 billion.

This was the defence purchase made with (former British prime minister) Margaret Thatcher at that time after (Mahathir and Thatcher) patched up. This was after Mahathir threatened to ‘buy British last'. Forward contracts were being made to satisfy these purchases.
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Some people have said that surely you would have known that money was being "squandered" earlier. Why are you only bringing the matter up now?

I would know? How would I know?

You would know at least by looking at the mega-structures being built...

No, those mega structures were built when I was not there. In I had already left the government.

So why are you bringing this up now?

Because I thought all this expenditure is too much to bear. Look at Putrajaya. If you go by the simple rule of thumb of 10 percent for maintenance alone, with the cost of RM40 billion, it's about RM4 billion a year. Where are you going to find that money?

But in those days Mahathir said that we have the money.

If we don't touch that money, it's always there, except the value may depreciate. But if you touch that money, it will no longer be there. That's the problem. Where will you find this RM4 billion to maintain Putrajaya... just to change light bulbs that have fused, paint that has peeled off?

At one point in your speech, you said it would have been better if we didn't have oil money.

We've got this income which is like a bonus, or something that fell from heaven. We seem to be over-relying on this money, knowing full well that we have only a small reserve and that reserve is fast depleting at the rate that we are exploiting our oil. I thought it was better to keep it underground and safe for the future generation.

In fact, that was the plan with the inception of Petronas. That was why we had the Petroleum Development Council in order to guide Petronas in its exploration work, and the concessions that were relinquished by the oil companies back to us should be better planned before being given out for exploitation, mindful of the fact that oil is a fast depleting asset that is greatly in demand all over the world, especially by the industralised countries.

What went wrong?

I think it started with this (defence equipment purchase) agreement with Margaret Thatcher, and suddenly the production of oil was doubled from 650,000 barrels per day to over a million barrels a day. That was too much for us.

About the issue of oil royalty in Kelantan, there are reports saying that there will be a big gathering in Kota Bharu.

I don't know if it's big or small, or whether there will be a gathering at all, but I just want to appear in Kelantan because I come from Kelantan, and they say that I'm the man who started all this and therefore I owe it to them to go and explain what it all means.

Basically it is a very simple explanation that I want to give. This is the sovereign right of the people, and if oil is found anywhere near the state concerned, then Petronas is duty-bound to pay five percent of profit from the oil to the state concerned. That is the bottom line of the agreement that was signed between Petronas and the various states in the country.

It does not relate to where the oil is found, because as far as the state is concerned, when they vested their oil to Petronas, they did so with the understanding that Petronas will pay them 5 percent of the revenue, whether the oil is found in the state or outside of the state.

So the federal government does not come into the picture at all. It's between Petronas and each of the states. As long as oil is found along the shore of Kelantan, whether it's in the joint development area or whether it is off-shore in the exclusive economic zone of the country, then Petronas is obliged to pay.

It does not state if oil has to be found within three nautical miles or beyond three nautical miles or the 12 mile limit of the continental shelf. It just says, ‘You vest the oil rights in your jurisdiction in us and we, Petronas, will pay you five percent.'

Najib mentioned that it's not a big amount.

Well, the amount relates to how much Petronas makes out of the off-shore area, if oil is indeed found in the off-shore area. If it is one cent then it is five percent of the one cent. If it's RM10 billion, it's five percent of the RM10 billion, if there's profit from oil.

But has Kelantan ever been paid oil royalty?

Not that I know of.

Not even during the Barisan National rule?

Statistics show that Petronas has been earning money out of oil exploited out of those off-shore areas, and partly in the joint-development area.

You have been invited (by Pakatan Rakyat MPs) to be part of the oil royalty caucus in Parliament but you have yet given an answer.

I have not given an answer simply because it has taken a partisan nature. It should be something that does not relate to party politics.

Since PAS rules Kelantan, it should be two MPs from the opposition, and in the case of Sabah, Sarawak and Terengganu, they are ruled by the Barisan Nasional, let the BN MPs come on board. It's not a question of who is in the majority because we are not going to take a vote. It will only be a forum for discussion.

But we also want to possibly look into the arrangement between the state and the power in the centre. It's high time to ask these questions.

After all, the subject of allocation when the federation was formed in 1948 and subsequently in 1963 probably needs reviewing because things have become much more complex.

The amount of money needed to cope with the development plans that we have for the various states and for the country has taken a different proportion now. The states don't have that kind of revenue.

Let's look at it objectively, whether or not we could come to an arrangement for the revenue to be shared or the states can be given back some of the powers to raise money without having to look over their shoulders to see whether they can do so.

What is the status of the caucus now?

The status as it stands today is just an idea. I have spoken to (the MPs from oil-producing states, including Kelantan) whom I think should come on board, and they all have agreed.

But you have been warned by Deputy Prime Minister Muhyiddin (Yasin) not to be part of the caucus.

I don't care who warns me. I'm doing this for the country; I'm not beholden to anybody. People can climb to the top of a mountain to warn me. I couldn't care less. I plan to see that the sovereign rights of the people are protected.

THE RAZALEIGH INTERVIEW

Part 1: Razaleigh dismisses KPIs as a waste of time

Part 2: For Ku Li, striking oil has turned into a curse

Part 3: To GST or not to GST?

Part 4: Despite his views, Ku Li still loyal to Umno