POWER OIL AND GAS

KELANTAN CHALLENGES TRANSFER OF OIL ROYALTY SUIT


KUALA LUMPUR, March 15 — The Kelantan government has filed an application to challenge the transfer of its oil royalty suit against Petronas, which was done allegedly without the state’s knowledge.
 
The suit is currently being heard in the civil division of the High Court.
The case against the national oil company was originally placed in the commercial court when it was filed last year by Kelantan Mentri Besar Datuk Nik Abdul Aziz Nik Mat.

It is understood that the case was transferred to several judges before being pushed to the civil court.

In the Kelantan government’s affidavit, filed by its representative and state executive councillor Datuk Husam Musa, the transfer, which was done in January this year, was not made based on a formal application by any party to the suit.
“The transfer was done in January 2011 without the agreement of any interested parties. On January 18 the matter was transferred to civil court. We want it to be heard in the commercial court, because the suit essentially involves business contracts,” Husam told The Malaysian Insider today.

The affidavit was filed this afternoon at the High Court here.
According to Husam’s affidavit, the plaintiff’s counsel was informed by the court registrar on January 18 during case management that the case had been transferred to the civil courts, because it involved constitutional issues.
“Kelantan is aggrieved that the decision to transfer was made administratively and without its knowledge or consent, and without being given it an opportunity of being heard.

“Accordingly, it is a wrong decision in law and ought to be rectified,” read Husam’s affidavit.

The PAS politician told The Malaysian Insider that Kelantan also wants the application to be heard concurrently with a separate application filed by the federal government recently.

"Kelantan wants its application to be heard together with the federal government's application on March 22," said Husam.
The federal government's application will be heard on March 22, where it has applied to become the second defendant in the on-going suit.

The Kelantan state government claims Petronas owed the state RM800 million per annum from the Kelantan-Thailand offshore area since 2005.

The Kelantan government filed a suit last year at the High Court here against the oil giant for breaching the Petroleum Development Act (PDA) 1974 by failing to pay the state oil royalties.

Petronas and Putrajaya have continued to argue that Kelantan is not entitled to oil royalties, preferring instead to offer only a token goodwill payment.
The Kelantan administration, however, contends that under the PDA, Kelantan Petroleum Agreement and Kelantan Grant, Petronas is obliged to make cash payments twice a year for all oil obtained from Kelantan’s offshore.
The PDA states that in return for vesting of petroleum ownership in the company, Petronas would pay cash payments to the federal government and state governments where petroleum was found.

On May 9, 1975, Petronas had entered into an agreement with Kelantan where it agreed to make cash payments yearly amounting to the equivalent of five per cent of the value of petroleum obtained onshore and offshore Kelantan. In consideration of Petronas’s payments, it was granted exclusive rights and privileges of obtaining petroleum in the state under the Kelantan Grant.
The state government is also seeking a court order that all future cash payments be paid to Kelantan by Petronas for oil produced off-shore Kelantan; an account or an inquiry to make a full and frank disclosure of all the relevant facts relating to cash payments payable to Kelantan, including the period from which petroleum has been produced, won or obtained offshore Kelantan; and general damages.



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