Tan Sri Wan Zulkiflee Wan Ariffin

BY A. ANANTHALAKSHMI, JOSEPH SIPALAN &  KRISHNA N. DAS

KUALA LUMPUR: The chief of Petronas quit this month after disagreement with the prime minister over giving more oil money to one of the country’s states, sources close to the government and the company said.

Extra payments would hit Petronas and the national budget at a time the novel coronavirus has dampened oil prices but could also raise questions over the management of finances as Malaysia seeks to rebuild its reputation after the international scandal over state fund 1MDB.

Petronas chief executive Tan Sri Wan Zulkiflee Wan Ariffin resigned after a disagreement with Prime Minister Tan Sri Muhyiddin Yassin over a plan to pay $470 million in sales tax to Sarawak, five sources close to the government and the company said.

Petronas is the Southeast Asian country’s only Fortune 500 company. It is the world’s fourth-largest exporter of liquefied natural gas and had revenue of $56 billion in 2019, but profit fell 68 percent in the first quarter of 2020.

Petronas had been fighting Sarawak’s demand for the sales tax in court before the two parties announced a settlement last month — although Sarawak later said it would continue its legal action until an agreement is final.

“He resigned because of principles, that he is not agreeable to the Sarawak deal,” said a source close to the government, referring to Wan Zulkiflee.

“The new government is open to giving more to the states that produce oil.”
Wan Zulkiflee declined to comment. The prime minister’s office and Petronas did not immediately respond to requests for comment.

Last week, Bernama quoted a Sarawak official as saying Petronas had yet to pay the tax as the state had decided to continue with the court action.

Wan Zulkiflee had said in public that Sarawak had “no legal competence” to demand the sales tax and had also opposed demands from Sarawak and neighbouring Sabah states for bigger royalty payments.

Muhyiddin took office after the resignation of Tun Dr Mahathir Mohamad, who opposed giving more oil revenue to the states that hold two-thirds of Malaysia’s oil and gas reserves.

Sources said Muhyiddin was in no position to decline requests from Sarawak because the state’s main party — Gabungan Parti Sarawak — has 18 out the 222 elected seats in parliament and is key to keeping him in power.

In addition to agreeing to the sales tax, Muhyiddin had shown that he was open to demands from Sarawak and Sabah for more royalty payments, the sources said.

Wan Zulkiflee had said that increasing royalties could make operating in Sabah and Sarawak unfeasible. By some estimates, quadrupling the royalties from the current 5 percent would cost Petronas $7 billion a year.

The sources did not say how much Muhyiddin would be willing to increase royalty payments or whether any figure had been discussed. ­– Reuters