KUALA LUMPUR - Opposition-ruled Terengganu plans to sue the Malaysian government to try and recover oil revenues worth millions of dollars, an official said yesterday.

'The Terengganu state government has exhausted all avenues to get back the oil-royalty revenue,' said Mr Nasharuddin Mat Isa, secretary-general of the Parti Islam (PAS) which rules the north-eastern state.

'Within the next six months, we will take the government to court,' he said.

Mr Nasharuddin said a legal committee of party leaders and lawyers had been formed and PAS would enlist the help of other legal experts.

'We will try our best. We are sceptical of the legal system ... how independent it is. But we will take legal action,' he said.

He also said PAS would continue to organise protests unless the government reversed its stand.

In September the federal government seized control of the annual oil payments which previously went directly to the state government, sparking a storm of protest.

Kuala Lumpur said the state had no legal right to oil royalties since its oil reserves were too far offshore. It said the annual payment from national oil firm Petronas had always been a 'goodwill contribution'.

The federal government also said it would spend the money directly to help the people of the state. Opposition parties have accused it of 'hijacking' the payment and trying to undermine the Terengganu administration.

This year's payment is worth an estimated RM810 million (S$362.3 million).

Commenting on the issue, the Minister in the Prime Minister's Department, Datuk Dr Rais Yatim, said the federal government was prepared to face the possibility of being taken to court.--AFP, Bernama