KUALA LUMPUR: Petroleum-producing states and the opposition received a huge boost today when Petroliam Nasional Bhd (Petronas) founder Tengku Razaleigh Hamzah agreed to lead their cause.

Opposition Leader Datuk Seri Anwar Ibrahim had requested the former finance minister to head a parliamentary caucus, an informal body of opposition and government MPs that seek to build consensus on issues but has no legal authority.

"Tengku Razaleigh has agreed to head the parliamentary caucus on oil royalties," Anwar (Permatang Pauh-PKR) told a press conference in his office yesterday.

According to Anwar, who is also a former finance minister, Tengku Razaleigh informed him of his decision yesterday morning. The caucus is aimed at redrafting the Petroleum Development Act 1974.

Tengku Razaleigh, who is Gua Musang MP, was instrumental in the formation of Petronas and the drafting of the Petroleum Development Act.

The longest-serving MP was also Petronas' first chairman when it was formed in 1974.

"We, however, are still in the process of fine-tuning and drafting the amendments and it won't be available yet," said Anwar.

He said that he would inform Minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz on Tengku Razaleigh's appointment soon.

The opposition leader also intends to invite MPs from Barisan Nasional (BN) parties to join the caucus.

Prime Minister Datuk Seri Najib Razak announced in the Dewan Rakyat on Nov 4 that the federal government would pay wang ehsan  ("goodwill money") to Kelantan from 2010 for any petroleum products extracted near the state's shores.

The "goodwill gesture", however, did not go down well with PAS lawmakers, who likened it to "alms" instead of oil royalty.

According to Najib, the PAS-ruled state had no right to claim royalty as the oil came from beyond three nautical miles of Kelantan's shoreline.

The federal government pays 5% oil royalty to Sabah and Sarawak while Terengganu and Kelantan only get wang ehsan, a term which only came into the picture after PAS took control of Terengganu after the 1999 general election.

The federal government stopped paying oil royalty to the state but began paying wang ehsan after BN regained the state in the 2004 general election.

The PAS-controlled Terengganu then sued the federal government for non-payment of oil royalty and the case is pending in the High Court.

During a rare press conference in parliament last week, Tengku Razaleigh said it was the constitutional right of the people to obtain oil royalty and there was no such thing as wang ehsan.

"There is no such thing as wang ehsan because oil is the right of the people and it's not for the federal government to distribute as a largess.

"The government can distribute such funds from the revenue collected from taxes and that is its prerogative; but when it comes to this, it is the right of the people.

"That's why I feel inclined to say my piece because I was involved from the beginning and I know the intention of why we had the agreement with the states," Tengku Razaleigh told reporters.