Agreements pertaining to the payment by oil company Petronas to Terengganu state that it is royalty payable in cash to the state government and not "goodwill" payment as claimed by the prime minister,according to documents made available to malaysiakini today.

"These documents show that the cash payment is well understood as royalty payment and not 'goodwill' payment, and this has been the case under the 1987 agreement," said Terengganu exco member Mustafa Ali.

"Umno has been saying that it is a 'goodwill' payment, a term which did not appear at all in the agreements. By exposing these documents, the lawyers and public will now know the real situation," he added.

Mustafa told malaysiakini this after the announcement of the declassification of the three documents pertaining to the oil royalty payment by Mentri Besar Abdul Hadi Awang yesterday. The documents were previously classified under the Official Secrets Act.

Hadi Awang said the decision to declassify the documents, copies of which were faxed to malaysiakini, was taken to clear the confusion following the federal government's interference into an agreement signed between the state and Petronas.

Dr Mahathir Mohamad recently claimed that the payment was not royalty but a "goodwill" payment made to the state in consideration of its economic backwardness.

He also said the federal government does not trust the PAS-led government to handle the money and therefore wants the "goodwill" payment to go directly to financing infrastructure instead of being channelled through the state government.

While the original agreement in 1975 did not specifically refer to the payments as oil royalty, a 1987 letter which confirmed an agreement on a number of technical issues relating to the payment did refer to it as such.

If Petronas refuse to pay the royalty due, Mustafa said, the state government will take further action.

Seventy-five to 80 percent of the state expenses come from the royalty payment. In February, Petronas paid RM432 million to the Terengganu state government and the remaining amount of RM378 million was due last month.

Cash payment

Under the agreement made on March 22, 1975, between Terengganu and Petronas, it was agreed that:

1.(1) Petronas shall make to the government cash payment in the form of yearly sum amounting to the equivalent of five percent of the value of the petroleum won and saved in Terengganu and sold by Petronas or its agents or contractors during the period provided in Clause 2.

(2) The value to be applied for the purpose of sub-clause (1) of this cause shall be the realised six-monthly average f.o.b. price obtained by Petronas or its agents.

2. The cash payment payable under this agreement shall be paid semi-annually. Payment in respect of petroleum won, saved and sold in the first half year period shall be made on or before the first day of September and payment in respect of petroleum won, saved and sold in the second half-year period shall be made on or before the first day of March of the following year.

"The evidence from the three released documents is strong enough to support our stand," said Mustapha, who is the state exco in charge of economic development, petroleum, industrial and human resources.

He, however, said that Terengganu will not boycott Petronas and its products since the state's grouses are with the federal government and not Petronas.

State grant still owing

Meanwhile, Mustapha revealed that the federal government still owes Terengganu its annual state grant which has now amounted to RM76 million.

He said that this allocation, which amounts to 20 percent of the state' expenses, is stipulated in the Constitution and must be paid by the end of the year.

The Terengganu state government affirmed that it will only resort to court action as a last resort to demand oil royalty payment from the federal government.

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[#1]Petronas 'simpati' nasib Terengganu[/#], 23-24 Sept

[#2]Release payment to Terengganu, DAP says[/#], Sept 22

[#3]'PM lied regarding oil royalty payment'[/#], Sept 19

[#4]Federal government 'hypocritical', says Hadi[/#], Sept 7

[#5]Honour oil agreement, urges Terengganu MP[/#], Sept 7

[#6]Government accused of 'hijacking' Terengganu's oil royalty[/#], Sept 6