“The Sabah government need to take immediate actions to restore ownership rights of Sabah’s oil and gas resources as the legal opinion is that the vesting order signed by Tun Abdul Razak on 26 March 1975 granting ownership rights to Petronas is unlawful, unconstitutional and invalid” said Datuk Dr. Jeffrey Kitingan, Chairman of STAR Sabah at a press conference regarding proposed legal action on the vesting of Sabah’s oil and gas resources to Petronas.
As a re-collection, Tun Abdul Razak, the then Prime Minister of Malaysia, had on 26 March 1975 signed away Sabah’s oil and gas resources to Petronas by executing the Vesting Order under Section 2(2) of the Petroleum Development Act, 1974 and granted in perpetuity and conveyed to and vested in Petronas the ownership in and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether lying onshore or offshore of Malaysia.
Based on legal opinions received, Tun Abdul Razak had no authority to sign away Sabah’s oil and gas resources to Petronas as the oil and gas belonged to the Sabah government.
Based on Datuk Harris Salleh’s own admission, it appeared that he was coerced into signing the 1976 Oil Agreement agreeing to accept 5% cash payment as compensation for the surrender of ownership rights of the oil and gas vested to Petronas and further agreeing to waive or reject the collection of royalties that were the rights of the State government under Section 24(2) of the Sabah Land Ordinance.
Harris ought not to have signed the 1976 Oil Agreement as the 1975 Vesting Order was invalid and should not have been binding on Sabah and Harris.
Challenge on Federal Government’s Deal on Blocks L & M with Brunei
On 16 January 2003 Murphy Oil Sabah Co. Ltd., a subsidiary company of Murphy Oil Corporation (USA) announced that it signed Production Sharing Contracts with Petronas covering Block L and M, offshore Malaysia.
Murphy Oil had a 60% interest in Block L and 70% in Block M with Petronas Carigali Sdn. Bhd., a subsidiary of Petronas, holding the remaining 40% and 30% respectively. Each block covered an area of about 1.5 million acres, totaling 3 million acres for Blocks L & M.
Blocks L & M are located within Maritime District 14 (MD-14) and within the boundary and territorial waters of Sabah.
On 16 March 2009, 3 weeks before stepping down as prime minister, Datuk Seri (now Tun) Abdullah Ahmad Badawi, executed by way of exchange of letters with Brunei ceded Blocks L & M to Brunei purported in exchange for Brunei dropping its claim to Limbang, Sarawak. Brunei subsequently denied the alleged dropping of its claim over Limbang.
This arrangement was only disclosed by Petronas to Murphy Oil Corporation on 21 April 2010 and in turn Murphy Oil made a public disclosure on 22 April 2010 that their production sharing contracts were terminated by the exchange of letters and ceding of Blocks L & M to Brunei by the Malaysian government.
Tun Dr. Mahathir and Tan Sri Harris Salleh had stated that it was within their knowledge that the oil reserves in Blocks L & M were worth at least USD100 billion. Even based on the 5% cash payment payable to Sabah, Sabah would have lost at least USD5 billion or USD30-40 billion if the 40% of Block L and 30% of Block M had belonged to Sabah instead of Petronas.
Naturally, as a direct consequence of the invalidity of the 1975 Vesting Order, the ceding of Blocks L & M to Brunei is invalid. In the proposed action, the Sabah government should also challenge the ceding of Blocks L & M and if it cannot be recovered from Brunei, the federal government ought to compensate Sabah at least USD30-40 billion for the loss of Blocks L & M.
Sabah Government Urged to Annul 1975 Vesting Order and Regain Oil Rights
“In the best interests of Sabah and its people, I call upon and strongly urge the Sabah government and the Sabah BN leaders to act truly as patriotic Sabahans and take all appropriate action to annul the 1975 Vesting Order as well as the 1976 Oil Agreement which will restore and return the oil and gas resources to Sabah” pleaded Dr. Jeffrey.
Letters have been prepared to be sent to the Sabah government and the Sabah BN parties and their leaders to take the necessary action.
The Sabah Chief Minister and his Sabah BN leaders have been trumpeting that the Sabah BN enjoys a very good relationship with the federal government.
If what is said by the Chief Minister and his Sabah BN leaders are true, it would appear to be a simple task for them to get the Prime Minister to give back and restoreSabah’s oil and gas resources to its rightful owners.
Along with the annulment of the Vesting Order, the Sabah government can negotiate on a win-win situation for the restoration of the losses sustained by Sabah since 1975 including the returns of the windfall gains wrongfully obtained by Petronas.
If diplomatic discussions cannot resolve the annulment of the vesting and restoration of the oil and gas ownership rights, then the Sabah government should not hesitate to take legal action and bring the matter before the courts.
On our part, we have made all preparations and are ready to file the court action against the federal government, state government (if needed), Petronas and the various parties to annul the 1975 Vesting Order and to seek the necessary consequential orders for compensation and damages and return of the wrongly obtained gains from Sabah’s oil and gas over the years from 1975.
The patriotism of the Sabah BN leaders and the sincerity of the federal and Sabah government are now laid before the people of Sabah and we let the people judge on their actions and make their votes count in the forthcoming general elections.