The Umno-led Terengganu government will pursue its legal suit for alleged breach of contract filed against Petroleum Nasional Bhd (Petronas), in order to reinstate payment of oil royalty amounting to about RM700 million annually.

State Umno secretary Rosol Wahid said the state government would prefer to have the oil royalty paid to it, as it currently relies on a special federal fund to finance development project in Terengganu.

The suit was filed by then PAS-led state government, over Petronas' alleged failure or refusal to pay RM850 million in cash for petroleum obtained in the first half of 2000.

Payment was discontinued soon after the 1999 general election, when the opposition party took control of the state from Barisan Nasional (BN).

The federal government later converted the royalty payment into wang ehsan (goodwill money). which was channelled through the Terengganu Umno to finance development projects at divisional level.

After BN recaptured Terengganu in the general election conducted last March, the wang ehsan was converted into a federal special fund, also to finance the state's development projects.

"The state government prefers the payment of oil royalty to be reinstated to the state which is now under BN rule... just as when the state was rule by the BN under then Menteri Besar, Tan Sri Wan Mokhtar," Rosol said.

"With that money (oil royalty), it would easier for the state to plan and implement development projects for the people. Under the present arrangement, we would have to ask for money from the federal government.

"It would be better to get the payment of oil royalty to be reinstated so that the state government will have its own financial resources every year."

Rosol, who is also a state exco member, said the Terengganu government was allocated the special federal fund of about RM500 million to implement development projects annually.

The five percent royalty amounts to about RM700 million yearly, based on the current world oil prices. In 1999, Petronas had paid oil royalty amounting to about RM700 million.