Sources say the board of Petronas is not about to throw in the towel just yet

by ALIFAH ZAINUDDIN/ graphic by MZUKRI

ALL eyes are currently focused on Putrajaya’s Court of Appeal today, as observers and industry players anticipate Petroliam Nasional Bhd’s (Petronas) next move in its ongoing fight for control over petroleum resources in Sarawak.

Although it was widely speculated that the struggle between the state-oil firm and Sarawak’s state government could finally come to an amicable end following the resignation of Tan Sri Wan Zulkiflee Wan Ariffin as CEO, sources said the board of Petronas is not about to throw in the towel just yet.

Wan Zulkiflee, who has staunchly opposed the demand for more oil revenue from energy-rich Sarawak, is said to have resigned for holding his ground and will be replaced by current CFO Tengku Muhammad Taufik Tengku Aziz.

The Court of Appeal in Putrajaya has scheduled a hearing by the national oil company today against a High Court decision in March which ruled in favour of Sarawak’s sales tax rule. The ruling meant that Petronas owes an estimated RM2.8 billion in backdated sales tax to the state.

The court-hearing notice came a month after a joint statement was issued by Petronas and the Sarawak state government, in which both parties said they have agreed to resolve the issue.

It said Petronas has agreed to pay in full the petroleum products sales tax imposed by Sarawak for 2019, which is 5% of the products’ sales value, and the two concluded that future petroleum products sales tax will be lower and staggered based on future negotiations.

In return, Petronas has retracted its appeal against the decision by the Sarawak High Court in relation to a judicial review request dated March 13, while Sarawak has dropped all claims in its civil case against Petronas for the payment of petroleum products sales tax.

The status of the agreement, however, has been anything but clear since Wan Zulkiflee’s resignation on June 8.

The appellate court notice was listed on the Federal Court chief registrar cause list portal soon after. Petronas has yet to clarify its position on the matter.

Sarawak Chief Minister Datuk Patinggi Abang Johari Tun Openg claims the hearing is merely a legal procedure for Petronas to withdraw its appeal against the High Court judgement. He said the state-oil company had appealed earlier against the decision before the joint press statement was made.

It was reported that the Sarawak state body would also pursue legal proceedings against Petronas over the non-payment of a 5% sales tax that was imposed on Jan 1, 2019.

State news agency Bernama, citing Sarawak state legislative assembly Speaker Datuk Amar Mohd Asfia Awang Nassar, reported that the state would continue its civil case against Petronas if no final decision is reached through further negotiations on the tax payment with the company. He said the settlement reached in May was not a formal agreement.

Sarawak has been pushing hard in recent years to assert ownership of its resources after a promise for a greater share of petroleum royalties failed to take shape. Sarawak and neighbouring state Sabah produce much of the nation’s petroleum wealth.

Sarawak introduced a sales tax, which covers crude oil, gas and liquefied natural gas, on Jan 1, 2019. The tax is deducted from revenue, which effectively is a 5% add-on to the actual royalty rate of 10%.

The tax — estimated to generate at least RM3.9 billion per year — is intended to be a new source of revenue to drive Sarawak’s development agenda. Petronas is the only operator that has failed to pay the tax.

The hearing today will likely give a clear indication on whether the spat can be resolved soon.