Opinion

A new Malaysia, a new Petronas?


image
 

It has been over a week since the landmark general election in Malaysia, which saw the ruling coalition swept out of the government for the first time in 61 years. In its place is a new coalition, led by none other than the fourth Prime Minister of Malaysia – now the seventh Prime Minister – Tun Mahathir Mohammad. The impact of the election is broad and seismic, and while the promises of clean governance and the abolition of money politics is significant, we are curious about the impact on one of the country's corporate crown jewels – Petronas.

From the new government's manifesto, there is already an immediate effect. Alongside weeding out corruption, Pakatan Harapan also promised to re-instate petrol and diesel retail subsidies. This – along with the abolition of the unpopular GST, which is now zerorised – were part of series of measures that were criticised as being a burden on the population. The new government seems to be adhering to its promises, and in response, Petronas Dagangan – Petronas's public trading arm – saw its share price slip by nearly 5% on worries that the re-introduction of subsidies would impact the state firm's financials, with weekly market-derived prices introduced in 2015.  The re-introduction of subsidies does not directly impact Petronas, given that the previous subsidy structure in Malaysia places the burden on the federal budget, unlike in Indonesia, where Pertamina shoulders a direct burden. And even if it did, Petronas is on far better financial footing than Pertamina.

With crude prices currently far above the US$52/b budgeted for 2018, the revenue windfall will increase Petronas' contributions to the federal budget naturally, which would temporarily mute the burden of the subsidies. In March, the Petronas announced that revenues rose almost 14% to 61.8 billion ringgit. The Petroleum Economist reports that “While chief executive Wan Zulkiflee Wan Ariffin has talked of the premature exuberance over the oil price recovery, he also said the company is in a stronger position to execute its long-term growth agenda and that it would explore new business areas, such as speciality chemicals and new energy. The purse strings have already been loosened, with capital forecast expenditure in 2018 of some 55bn ringgit, some 23% higher than last year.” Would future investment plans for Petronas be affected now with the re-introduction of subsidies? Seeming so, as it impact Petronas's ability to re-build its coffers for future capex opportunities and research.

Tun Mahathir had also recently expressed concerns over the dominance of Chinese companies in the Malaysia economy, standing at 7% of total FDI in the country in 2017. Inflaming tensions could also bring risks to disputed claims over rich oil territories in the South China Sea, including fields new Sabah and Sarawak.

Would Petronas's autonomy be eroded with the new Government in power? This seems unlikely, given that Petronas' historic independence in terms of operations, as well as with former Petronas chairman Hassan Merican sitting on the newly appointed Council of Eminent Persons tasked with recommended federal policies for the new government. Petronas is already fairly well run with proper governance structures in place and the new government is unlikely to shake its precious boat.

However, with upstream production faltering in Peninsular Malaysia, Petronas has been depending on oil and gas volumes from East Malaysia to grow operations, including maintaining its status as the third largest exporter of LNG in the world. Part of the Pakatan's manifesto included returning state rights to Sabah and Sarawak eroded over the course of the years. This would include returning rights to manage oil and gas blocks to both states, which has already begun in Sarawak where a state oil company has been formed. This would blunt Petronas' grip over upstream production in East Malaysia – though it will remain a partner in most projects, its share or management of blocks would be reduced. Sabah fell in the election and with a state-focused new coalition government there, the demands for autonomy will increase. It's something that Petronas should have no problem adapting to, given its vast reserves from international investments, but would have rather wished that it didn't happen at all.



New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site

https://nrgedge.net/article/1527226659-a-new-malay...

MalaysiaPETRONAS

More items from easwaran


Q2, 2018 - Accelerated Profit Growth in the Oil & Gas Sector

  In a quarter where oil prices were at their strongest levels since early 2015, the oil industry largely reported a healthy bump in revenues and profits. Investors and institutions had anticipated this, expecting strong results, but although numbers were healthily in the black all around, not e ...

Easwaran Kanason


Posted 1 year agoOpinion > ProfitsQ2Oil Companies +6

BP’s US$10.5bn acquisition of shale oil asset re-confirms the importance of shale oil in the energy market

  Shale oil is the most significant development in the energy industry ever since coal was replaced by oil as the principal fuel. The noteworthy rise of shale oil extraction over the last few years has taken the market by surprise. The combination of drilling techniques together with developed h ...

Easwaran Kanason


Posted 1 year agoOpinion > Shale GasTight OilOil And Gas Industry Latest News +1

Oil Royalties in Post-Election Malaysia

Last Updated: August 1, 2018   136 views    Business Trends   Here is a brief background story of the growing debate about the allocation of oil royalties in select states in Malaysia.  The election that swept the former ruling coalition out of power in Malaysia three months ago was h ...

Easwaran Kanason


Posted 1 year agoOpinion > PETRONASMalaysiaPakatan Harapan +5

List of Upstream Operators in Malaysia (PSC Contractors)

  Petronas Carigali Conoco Philips Lundin Petroleum JX Nippon Mubadala Petroleum Ophir Energy HESS Kebabangan Petroleum Operating Company, KPOC TOTAL E&P RHP Mukah  Enquest Petroleum Sapura Energy Repsol Exxon Mobil Shell PEXCO N.V. Murphy Oil Ophir Production PCPP Operating C ...

Easwaran Kanason


Posted 1 year agoOpinion > MalaysiaupstreamOil Companies

5+ Do's and Don'ts, Dress code and Interview Aesthetics for the Perfect First Impression!

  An interview offers you a chance to make an impression on a prospective employer. Since it's often the first impression that matters most, what you wear to an interview becomes a powerful tool for projecting an image of skill, competence, and experience. Every industry has expectations when i ...

Easwaran Kanason


Posted 1 year agoOpinion > Interview Dos And Don'tsInterview Dress Code
All posts from easwaran