KUALA LUMPUR, Nov 4 2009 (Bernama) -- Kelantan will receive compassionate payment from the federal government from the state's offshore oil production revenue starting next year, Datuk Seri Najib Tun Razak announced on Wednesday.

The prime minister said that just like for Terengganu, the compassionate payment was being given after taking into account the need to continue developing Kelantan and to enhance the wellbeing of the people in line with national development trend.

"To ensure that the money is enjoyed directly by the people of Kelantan, the allocation will be in the form of development projects and poverty eradication programmes and will be channelled directly by the federal government after discussion with the state government," he said in the Dewan Rakyat.

Najib was replying to questions previously raised by several MPs from Kelantan regarding oil royalties for the state.

He said the federal government had thoroughly studied the petroleum royalty issue mooted by the Kelantan government, including the legal aspects related to the powers of the government and the management of the country's petroleum revenue.

"From the legal aspect, Kelantan is not entitled to make such a claim and neither is Terengganu," he said.

Najib, who is also finance minister, said that based on the law, Kelantan and Terengganu were only entitled to claim royalty if there was a petroleum source in their waters.

A state's waters was defined as waters located not more than three nautical miles from the low watermark or offshore, he said.

"Currently there is no petroleum production in the waters of Kelantan and Terengganu. So from the legal aspect, the Kelantan state government is not entitled to claim petroleum royalty and neither is Terengganu.

"Although this legal provision is clear, the federal government had previously given compassionate payment to Terengganu by taking into account the petroleum production outside the state's waters, also based on development and the income of the people," he said.

The federal government started giving compassionate payment estimated at RM1 billion a year to Terengganu in 2000 after PAS took over the state government in the 1999 general election.

Najib said the federal government was committed to giving fair consideration to all states and Kelantan deserved the same consideration.

He said that based on information from Petronas, only one oil field known as Medan Bumi Kelantan was currently productive but it was located outside Kelantan waters.

Salahuddin Ayub (PAS-Kubang Kerian) then got up to say that Kelantan was not a "beggar" and continued pressing for oil royalty for the state.

Najib said he was purposely politicising the royalty issue.

"He's politicising this issue...there's no end to his politicking. I don't know what's important Mr Speaker, we provide these funds for the benefit of the people of Kelantan on the same principle as Terengganu," he said.

Tension reigned when several opposition MPs including, Salahuddin, Khalid Samad (PAS-Shah Alam) and Dr Dzulkefly Ahmad (PAS-Kuala Selangor) sought clarification on the difference between oil royalty and the compassionate payment given.

Datuk Mohamad Aziz (BN-Sri Gading) tried to calm the situation by asking a supplementary question but failed and Dewan Rakyat Speaker Tan Sri Pandikar Amin Mulia told all the MPs to sit down or be sent out.

"Honorable members...if the prime minister, ministers don't come, you want them to come. But when they come to answer your questions you don't want to listen. You get carried away with you own stories," he said before asking Najib to proceed with his reply.

To a question from Siti Zailah Mohd Yusoff (PAS-Rantau Panjang), Najib said the compassionate payment was not given before this because based on the legal provision, Kelantan was not entitled to receive it.

"It involves overlapping areas...now Petronas has confirmed that there are blocks that can be considered, because we consider, besides ensuring that the people of Kelantan get the benefit," he said.

The opposition MPs then bombarded Najib with questions until Pandikar Amin had to stop them by asking Datuk Ismail Mohamed Said (BN-Kuala Krau) to proceed witht he next question.