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Anwar plays the Borneo card
Andrew Symon, ATI Correspondent
30-07-2008
SINGAPORE – The oil and gas wealth of Malaysia’s two North Borneo states, Sarawak and Sabah, is emerging as a key factor in Malaysian politics post the March election – when the long-standing dominance of the United Malays National Organisation (UMNO)-led Barison Nasional (BN) alliance was broken by an Opposition coalition, soon likely to be led by former Deputy Prime Minister, Anwar Ibrahim.
The 60-year-old Anwar is seeking to gain majority support in Parliament to form a Government by wooing away non-UMNO members of the BN Alliance. His goal is to be able to form a Government by September.
Sarawak and Sabah may be critical to his quest. All their Federal members are members of parties in alliance with UMNO. The carrot Anwar is offering is the promise that Sarawak and Sabah would gain an increase in petroleum royalties from the current five per cent to 20 per cent.
For Anwar, Sarawak and Sabah could open the road to a remarkable return to power. He was controversially sacked by the former Prime Minister, Dr Mohammad Mahathir, in 1998 – at the height of the Asian crisis. In 1999, he was sentenced to prison for corruption, and then, in 2000, also for alleged homosexual acts.
In 2004, Malaysia’s Federal Court reversed the second conviction and he was released. He was ineligible, as a result of the first sentence, to contest a seat in Parliament until April 2008. He is expected shortly to take a seat through a by-election, with his wife, Wan Azizah, President of the Parti Keadilan Rakyat, one of three Opposition coalition parties, standing aside for her husband.
Sabah and Sarawak offer Anwar potentially up to 55 seats. That is, the two States provide 55 of the 140 seats held by the UMNO-led BN alliance, with the Opposition holding 82 of the 222 Parliamentary seats after the March election. Without the Borneo seats, BN would hold only 85 seats. Anwar would achieve Government if he could win a large majority of the Borneo seats.
Given the petroleum riches of the two States, and the ever-rising prices of oil and gas, Anwar’s offer on royalties is very enticing. It shows yet again the impact on national political dynamics of petroleum and other resources wealth.
Inevitably, there are tensions between central governments and regions over who gets what share of the spoils. This was a major grievance in the old Suharto regime in Indonesia. In Malaysia, while a less sensitive issue, there is still no doubt that it has simmered in relations between the Borneo states and Kuala Lumpur.
So what is at stake?
Sarawak has long been a major producer. It now produces about 200,000 barrels of day of oil, or about 28 per cent of national production. But it is natural gas that is most important, with output of three billion cu ft per day – 50 per cent of national production – from offshore wells, for the Bintulu liquiefied natural gas (LNG) terminal on the mid-coast. Run by Malaysia’s State company, Petronas, at 23 million tonnes per year output capacity, Bintulu is one of the world’s largest LNG facilities.
The Sarawak Government, apart from its existing five per cent royalty on upstream production, also has a minority stake in the downstream facility. But an additional 15 per cent upstream royalty would be a massive bonus.
It is in Sabah that a 20 per cent royalty would be a real bonanza. This is because a huge increase in oil production is imminent from deepwater fields offshore. Until now, Sabah has been a modest producer, so the impact on political equations has not been great.
All this is changing. New deepwater exploration by Murphy Oil of the US, and Shell, has revealed major deposits. More recently, Australian resources group, BHP Billiton, has joined the hunt. By the middle-to-end of the next decade, this deepwater frontier is expected, by Petronas, to be adding some 300,000 barrels per day of crude and one billion cu ft per day of gas to national output.
Oil production at this scale would be about 45 per cent of Malaysia’s present total output, while natural gas output would be about 16 per cent of present production.
For Sabah members of the Federal Parliament, with all this about to pile onto the plate, Anwar’s promise of a much larger slice could prove very attractive.
Murphy’s Kikeh field, in depths of 1,200 metres about 210 km west of the State capital, Kota Kinabalu, on the maritime border with Brunei, came online in August 2007, becoming Malaysia’s first deepwater operation. Production is estimated to peak at an average of 120,000 barrels per day by the end of 2008. Further output from Shell’s Gumusut-Kakap will follow a few years later.
Oil and gas will be piped to a new terminal under construction at Kimanis, 45 km southwest of Kota Kinabalu. The terminal is to be in operation by 2010. Oil is a relatively easy product to commercialise, as, once in production, it can be easily shipped into world markets. Natural gas is always more problematic as it must either be piped long distance to market, or liquefied and shipped to market.
But plans to commercialise Sabah gas are ambitious. Petronas aims to take gas to shore at Kemanis, then pipe it 500 km overland through Sabah and into neighbouring Sarawak to the Bintulu LNG facility. Pipeline construction, to be completed in early 2011, will be no mean feat. The route runs behind the Brunei borders in Sarawak and passes through rugged mountains and over rivers before running along the more benign Sarawak coastal plain to Bintulu.
Earlier and technically-simpler proposals to commercialise the gas through supply to Brunei’s Lumut LNG facility, run by Shell, and much closer to Sabah, seem to have been abandoned, as has the idea of a maritime pipeline route through Brunei waters, with the Sultanate receiving a transport tariff.
Failure to pursue these options points to the ongoing dispute between Brunei and Malaysia over maritime boundaries between Sabah and Brunei. Kuala Lumpur claims that two deepwater blocks awarded by Brunei in 2002 – in what Brunei determined are within the bounds of its Exclusive Economic Zone (EEZ) – are, in fact, Malaysian waters. The Brunei blocks, also very prospective, extend northwest from the mainland in the more distant waters of Brunei’s EEZ.
Matters came to a head in 2003 when Malaysian gunboats chased off a drilling rig working for Total of France, one of the companies awarded blocks by Brunei, in waters adjacent to Sabah. Since then, discussions have gone on between Brunei and Malaysia, with little being publicly said.
Last August, there was talk of a joint development approach, but, since then, nothing further had been revealed. Meanwhile, exploration in the contested waters has been left in limbo – with companies waiting for resolution.
Complicating negotiations is the fact that the Kikeh and Kakap field structures appear to extend west into waters claimed by Brunei.
Should Anwar in fact achieve his ambition of leading a new government in Malaysia, he also will have to sit down with Brunei and see how the cake can be further shared.
Copyright ©, ATI Magazine, June/July 2008 |
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