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.
The Link : http://www.theborneopost.com/2019/02/03/what-are-the-rights-of-petros/
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