PART I (B)
Necessary amendments of the Federal Constitution and Acts
WITH the vesting instrument and authority from the State government,
Petros has (1) the exclusive right to re-issue and issue new PSCs in
Sarawak and negotiate as dominion of its O&G in January 2019,
including all existing PSCs as announced by the Sarawak Chief Minister,
and on the carried interest (free shares) in the older PSCs of 15 per
cent to 25 per cent to be assigned by Petronas to Petros as the new
regulator, and the dominion of its O&G under the coastal states with
a transitional period of six months.
(2) The right to impose, as practised by Petronas
before on the re-issued or new PSCs with 15 per cent to 25 per cent
carried interest, subject to negotiation, apart from direct investments
from additional 30 per cent to 40 per cent in the contractors’ companies
in the joint ventures with Petronas and/or others — eg Shell.
(3) To form a wholly owned subsidiary company, say,
New Sarawak Petroleum Corporation S/B similar to the functions of
Carigali, dealing with foreign and local oil companies as well.
What reasons for digital recording on O&G pumps offshore?
(4) Furthermore, Petros has the right to use high
resolution of advance technology with CCTV cameras and computer system
locked to the pumps of O&G in the production platforms to jointly
share with Petronas or independently to prevent allegations, true or
false, of spillage, leakage and wastage as happened in the 1980’s of
Exxon’s operations offshore from Terengganu-Kelantan, strongly voiced by
Mr Lim Kit Siang, as the loyal opposition in the parliament that had
caused the resignation of the head of the monitoring and enforcement
unit of Petronas. In the open sea, only whistle blowers would know the
true production of each platform then.
(5) As owner and regulator in renewing and
re-issuing O&G licences and PSCs leases, Petros and the Sarawak
government are entitled legally and constitutionally to get all the data
from the Data Room on O&G discoveries, reserves of P1, P2 , P3 and
productions of O&G fields as standard licensing terms for royalty
and renewals or re-issuance of existing licences or extensions of PSCs
in future, including the sums and parts, operation plans, new trains,
new discoveries, past E&P production records, annual audited
detailed accounts and all projections for monitoring and Council
Negeri’s meetings.
(6) To work out both state and federal overlapping
laws and rules in proper environmental controls in industrial accidents
and emergency plans of oil spillage or serious fire — eg using Red Adair
and boons at sea for pollution.
Rule of law
Sir Ivor Jennings of Cambridge University, an authority on the
constitutional law, has helped to draft the Constitution of Ceylon.
As a member of REID Commission responsible for drafting the
Constitution of Malaysia (1957), he has always maintained that it would
be the constitutional collective responsibility of the cabinet to ensure
that all the constitutional conventions and entrenched provisions of
these countries having written constitutions are implemented in full
force to maintain the Rule of Law and administrative justice in a
constitutional democratic parliamentary system of government.
Our present premier has proclaimed that — and ensured to make Putrajaya shining on the hill as part of his legacy.
What is the proposed modus operandi of Petros envisaged? What
commercial experts would be critical to build up a strong, articulate
and successful Petros?
Petros should form a strong economist-trained Geological and
Geophysics Department with specialists on 3D interpretation of oil &
gas for sealed “kitchens,” working with petroleum engineers,
technicians and mechanics unit and an enforcement unit, including the
Land & Survey, with special boats or drones to monitor with Petronas
on agreed shared costs on the drillings, development, particularly on
the production platforms, digital cameras and meters locked in the pumps
and FPSOS before transporting and marketing of O&G by recruiting or
seconding specialised professionals on operations and management of oil
and gas to beef up the team.
The objective is for monitoring the actual productions and related
activities of the contractors’ companies of the PSCs and valuation on
O&G assets and downstream.
An O&G Advisory Committee, including oil economists, O&G
specialists, oil finance and fiscal experts for advising the Chief
Minister and the Cabinet should be formed and others, if not already in
place.
In brief, it cannot be run as a government department but a
commercial profit-oriented model like Singapore Petroleum Corporation
(SPC) and Petronas professionally and independently.
Why Petros needs to run a trim commercial enterprise but not as a part of Sarawak or ministry like Petronas?
Petros would need to run like a commercial enterprise, working
closely with Petronas not as a government department nor ministry but
with a tight, trim and efficient, independent, professional management
of costs and profits, even seconded from elsewhere at the start with
shorter learning curves, avoiding the pitfalls — for example, based on
the previous trim and cost-effective company SPC, which built up the
upstream within a short time worth US $12 billion from scratch before
the sale of SPC to Petro China, majority-owned by Temasek and Keppel
Shipyard, which owned also 50 per cent of the 280,000 bbl per day
refinery.
Now Tan Sri Merican, the ex-president – CEO of Petronas, is heading
the GAS and LNG division of Temasek under Pavilion Energy Pte Ltd in
Singapore.
Why marketing unit with seconded experienced management staff is also needed?
A marketing unit and a trading outfit with proper hedging and futures
on O&G, working with Petronas, would generate more profit, exposure
and experience in the complete horizontal and vertical integrations in
due course of Petros operation similar to Petronas with upstream and
downstream.
Working together with Petronas or other profit oriented oil companies
would reduce the learning curve time and avoid some of the pitfalls in
O&G industry to achieve a cost-effective, trim and accountable
operation and management of an efficient, profit-orientated commercial
enterprise, following Singapore government-linked company, namely SPC’s
profitable history, during and after the legal-political settlement is
achieved on the O&G resources.
Petros should perform better. Its main focus then would be on the
commercial undertakings and developments of that O&G enterprise to
make it the biggest profitable company for the state development,
working hand in hand with the Development Bank of Sarawak after the
settlement.
A sovereign fund, based on Norway’s model, with clear policy and
corporate governance would need to be set up to avoid the pitfalls of
rich Venezuela, Libya and Nigeria oil companies to safeguard Sarawak’s
long term sustainable interest after depletion of O&G.
Would fluctuating prices of O&G affect profit?
Yes, unless hedged. Non-OPEC countries such as Russia, the US and
others, are producing over 45 million bpd compared to OPEC’s 33 million
bpd.
Russia wants reduction of output to raise price against sanctions.
Saudi Arabia needs IPO for ARAMCO and funds for more development. Price
will fluctuate between US$50 to US$80 bbl in the immediate future with
Brent Crude higher than others, including Sarawak light crude by 12 per
cent.
OPEC has to cut productions to save itself against various sectors of
risks and maintain its price above US$50 bbl to US$70 bbl and against
US’s sizeable production of oil from shale.
OPEC is a restrictive cartel while non- OPEC members also protect their own interests. Geopolitics also plays a critical role.
The disunity, namely Saudi Arabia with 11 million bpd in the OPEC
members and geopolitical tensions with the US, Russia and others, would
affect the volatility and the prices of O&G directly in real times.
The daily or monthly fluctuations of prices are affecting the royalty
or equivalent local sale tax only but not on smart investments in its
O&G, issuing and re-issuing the PSCs or licences with terms of
investments and commitments which must be stipulated in the licences
before exploration, not in the normal second stage of mining “leases”
stage for hard rock mining, procedurally for O&G industries.
Has Petros, as the regulator, to issue longer terms of licensing? Why?
Yes. Unlike hard rock mining, the issuances of licences before the
actual normal issuances of mining leases for oil afterwards, would not
be acceptable and practicable with the participation and carried
interests in the contractor companies with IRR of 15 per cent always at
the front.
That is the international commercial practice to attract the
investors properly — very special and essential in O&G industries.
No one will explore and drill without agreed terms, taxes and others
before hand. Sarawak as the dominion of O&G, the licensor and
regulator, would be a different ball game, as explained above.
Why correct offshore production needs more proper digital recordings now?
Understandably, monitoring offshore then was not easy to establish unless from a whistle blower.
Due to Mr Lim Kit Siang’s challenge on Exxon’s offshore oil operation
of Kelantan-Terengganu, reporting on the actual production, the head of
the monitoring and enforcement unit of Petronas from Sarawak had to
resign in 1980’s.
There are now increasing numbers of offshore production platforms in Sarawak and Sabah.
“Oil” is a greasy business, according to Jonathan Black. Twenty four
hours monitoring would only be possible with modern high technology
under digital economy, costing little compared to precious oil of US$60
bbl, but now in terms of tens of billions per year.
Sarawak would need the verified actual records of productions in real
times, not over six months period now of O&G and royalty figures,
calculated thereof as the dominion of its O&G based on real times.
This is in response to questions from the YBs in the Council Negeri
with breakdowns of the sums and parts and share profits of O&G under
the PSCs on the 20 per cent royalty for transparency, advocated by PH
or any responsible government.
Oil, autonomy and clamour of independence are echoing in the hills and valleys in the heart of Borneo.
Any comment or dealing with Petronas?
The writer has helped Petronas in Chad, Africa. He has nothing
personal against Petronas. In fact, on pro bono basis, even not
requested by Petronas, he has helped to get President Idriss Ebbey of
Chad, in Central Africa, to accept Petronas into the Oil Consortium with
Exxon and Chevron after Petronas was rejected originally by the
President even with Exxon’s recommendation in the 35 per cent interest
in the consortium, vacated by Alf Acquitaine and Shell, earmarked
already for Phillips Petroleum and Conoco.
His good friends, Mr Robert Friedland of Ivanhoe of ex-oil and
ex-mining group before, now owner-producer of the “Crazy Rich Asians”
movie, and Mr Friedhelm, the envoy of President of Chad, helped him to
turn the table.
Datuk Idris Mansor, the E&P of Petronas, could not believe it when Tun Daim requested the writer to inform him.
The writer brought the envoy of President Idriss Ebbey to see Tun Mahathir before he retired before.
So, the writer brought them to meet our premier, Tun Mahathir, with
the letter from President Idriss Ebbey, before he retired from
Putrajaya.
“What! We have Americans in our room,” Tun Mahathir freaked out.
“I …, … actually come from Canada,” Robert stuttered defensively.
“I’m from Louisiana, you know close to the Canadian border,” nervously assured Friedhelm.
“I’m from the border of Mexico.”
“You mean New Mexico!”
“Yes” came the meek response.
Tun Mahathir burst into a warm sardonic smile, wondering why at the
mere mention of Americans, the various States of America all suddenly
moved their boundaries to the borders.
“That’s quite all right. I’m only joking.”
Nevertheless, Tun Mahathir graciously thanked the team, the President and the envoy for getting Petronas into the consortium.
That was the cheapest Petronas’s acquisition with Exxon management
and oil production nine months after farming in for 35 per cent of the
consortium for US$350 million, next to Libya with no broker fees nor
risk of exploration and expensive airborne drillings in Central Africa,
for the proven reserves of 1.2 billion barrels when oil was around US$
100bbl.
We believe the present PM will carefully consider for the sake of
good order and governance, protection of Petronas and its officers to
revamp and adopt the Petronas Act, instead of under a public company
now, to be amplified later on a proper constitutional and legal basis
with transparent, legal and financial structures not in breach of the
Companies Act, MA1963, 7FCs and 7PMs, the five tiers entrenched
constitutional provisions and Article 76 of UNCLOS, unless approved by
the Legislative Councils of the Borneo Territories.
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