Petronas pays over 2bn ringgit in sales tax to Sarawak

Malaysia's state-owned Petronas has paid the country's Sarawak state over 2bn ringgit ($480mn) in sales taxes on oil products for 2019, putting a dent in the oil firm's coffers just weeks after it posted a 21bn ringgit loss for April-June.

"The payment represents Petronas' full and final settlement for the sales tax for the year 2019 and is evidence of Petronas' commitment towards achieving a commercial resolution," the company said. "The payment for year 2020 will be made upon assessments by the Sarawak Comptroller of State Sales Tax."

The move follows a long dispute that led to Petronas' former chief executive Wan Zulkiflee Wan Ariffin stepping down after fighting demands by Sarawak, the country's biggest oil-producing state, for additional tax payments.

The Sarawak payment may set a precedent for other energy-rich states in Malaysia, providing them with a basis to demand similar taxes and potentially eroding Petronas' control over Malaysia's oil and gas assets under the Petroleum Development Act 1974. The act gives Petronas the entire ownership of and exclusive rights to exploit Malaysia's petroleum resources. But its decision not to fight the sales tax imposed by Sarawak may send a message that its control over the country's oil and gas assets is not absolute and can be challenged.

Neighbouring Sabah state this year introduced a 5pc sales tax on crude, gas and LNG produced within its territory, and Petronas is discussing future payments with the state government.

By Reena Nathan