One of the largest land acquisition projects in South Johor may hit a major snag over a dispute regarding the quantum of compensation for the landowners, with a conservatively estimated sum at RM130 million or more.
The land in Pengerang, to be developed as one of the largest oil and gas (O&G) services hubs in the region, is already at the centre of a brewing problem as to the amount of compensation that landowners stand to gain when the 6,000 acres of land is acquired for industrial development.
Those familiar with the ongoing negotiations with the landowners say a conservative estimate could reach RM130 million, but may more than double if the landowners get what they are asking for in a loss of income court case.
The Malaysian Reserve has learnt that Prime Minister Datuk Seri Mohd Najib Razak, who has deemed it as a "critical issue", will plan a visit to Pengerang soon to personally give the details of the compensation to the landowners.
Petroliam Nasional Bhd (Petronas) will be spearheading the RM60 billion petrochemical project in Pengerang as part of the government’s Economic Transformation Programme project in Johor.
The project, named Refinery And Petrochemical Integrated Development (Rapid), is set to be the largest infrastructure development project in the country and, arguably, in the Asia-Pacific region.
Rapid will feature a crude oil refinery with refining capabilities of 300,00 barrels per day, a naphtha cracker and 22 mini petrochemical complexes.
It is estimated that the entire region in southeast Johor could attract investments of up to RM170 billion, transforming it into a major O&G services hub.
Rapid is projected to create at least 40,000 contract job opportunities and a further 4,000 permanent jobs by the time it is completed in 2016.
At face value, Rapid will dwarf other infrastructure projects such as the Sarawak Bakun Dam (estimated at RM7.3 billion) and the much maligned Port Klang Free Zone (original costs estimated at RM1.96 billion, which later ballooned to over RM7 billion).
Petronas will be working together with private sector entities such as Dialog Bhd and another Dutch company, Vopak Asia.
While Petronas is spearheading the development of Rapid, Performance and Delivery Unit, Malaysian Petroleum Resources Corp, the Johor government and Malaysian Industrial Development Authority also have stakes to ensure that the project goes forward smoothly.
A key hurdle for Rapid to take off is the sensitive negotiations between the state authorities, Petronas and the landowners and residents in affected areas.
The government and Petronas will be walking on a tightrope to ensure that all parties are reasonably compensated, thereby averting a crisis with those affected by the development.
It is understood that the government is also including sweeteners such as houses and alternative agricultural land to those who qualify for the compensation.
In early April, it was reported that 578 traditional fishermen have filed a suit seeking compensation of at least RM500,000 each for loss of income. They are also seeking an injunction to prevent the continuation of development works.
If the court allows the claims, the compensation to the 578 fishermen alone would amount to RM289 million. According to sources, the local population in Pengerang is estimated at over 3,100 within the seven villages. There are about 1,000 houses with 927 families.
On April 5, Petronas announced that it had completed a detailed feasibility study in October. However, Petronas has yet to decide on the actual land area that it would acquire.
Last week, Johor State Economic Planning Unit director Elias Hassan said the compensation deal has already been worked out, with media reports quoting Elias as saying only legitimate landowners, whose land would be acquired, will be eligible for compensation.
However, whatever the final outcome, the Johor government will want to settle the matter amicably to ensure all parties are adequately compensated.
“Again, this is subject to the final land Petronas would want to acquire under Section 8 (of the Land Acquisition Act).
Only when these are known would we have the total number of landowners. Please bear in mind, a land title might have more than one name.
Sometimes up to 10! But all of them will be fairly compensated," said a source, giving assurances that Rapid will bring great economic benefit to Pengerang.
"The profession of the landowner is not a factor in deciding the value of compensation for the land,” he added.
It is in the interest of Petronas and the government to quickly settle the land acquisition quickly as the land price might increase dramatically in the next few years.
The first phase of relocations are expected to begin in March 2013.