UPDATED

KUALA LUMPUR, March 11 — Kelantan’s oil royalty champion, Tengku Razaleigh Hamzah said today that Sarawak’s oil royalty may have been arranged when it was still a British colony but as it is now a part of Malaysia, it is subject to the rules laid down in the Petroleum Development Act (PDA) 1974.

The Kelantan prince was responding to a statement from former Sarawak Chief Minister Tun Abdul Rahman Yakub who in an enclusive interview with The Malaysian Insider yesterday claimed the Borneo state’s cash payments from the federal government were a result of a 1954 declaration by Queen Elizabeth II that its territorial waters were not limited to only three nautical miles from its coast.

“He’s right,” Razaleigh (picture) replied when asked if he agreed with Abdul Rahman.

But, he added quickly that the arrangement was no longer binding on the federal government.

Sarawak, together with its sister Borneo state, Sabah, joined the peninsular to form the Federation of Malaysia in 1963.

“The Petroleum Development Act supercedes all previous laws and Acts,” Razaleigh stressed.

Abdul Rahman, who was Sarawak Chief Minister when the Petroleum Development Act (PDA) came into force in 1974, had told The Malaysian Insider yesterday that unless Kelantan could prove that its territorial waters extended beyond the three nautical mile limit, it could not claim royalty payments for oil found offshore.

“Of course if oil is found within the three mile limit it belongs to the state. If it is found offshore then it belongs to the federal government,” the 82-year-old former Sarawak CM said in an interview in Kuching.

He said the legal position of the states in peninsular Malaysia was different from that of Sabah and Sarawak. Abdul Rahman said that Sarawak was entitled to oil royalties because Queen Elizabeth had declared in 1954 that the east Malaysian state’s territorial waters extended beyond the three-nautical-mile limit.

The British monarch’s declaration was used by his Sarawak administration to negotiate payments for the state, said Abdul Rahman. He did not, however, want to comment on why the federal government had paid royalties to the Terengganu government.

The Barisan Nasional federal government recently took out full page advertisements in Malay weeklies listing eight questions and answers to rebut Tengku Razaleigh Hamzah’s argument that Kelantan and all other states are entitled to the 5 per cent oil royalty under the Petroleum Development Act 1974.

The federal government’s main argument is that oil and gas are extracted from waters that are beyond the three-nautical mile limit prescribed as territorial waters under Malaysia’s Emergency Ordinance (Essential Powers) No 7 1969.

The advertisement also explained that oil royalty payments for Sabah and Sarawak was due to agreements made prior to 1974 and through the Continental Shelf Act 1966.

However, Petronas had been paying Terengganu the 5 per cent oil royalty since offshore production began in 1978 but stopped after PAS captured the state in the 1999 general elections. It promised to resume twice-yearly direct payments from March 2009 after the earlier payments were converted to compassionate payments disbursed by federal agencies.

Oil was first discovered in the South China Sea off Terengganu in 1973, a year before Prime Minister Tun Abdul Razak Hussein directed Tengku Razaleigh to form Petronas and become its founding chairman.