IT’S HIGH TIME TO REVIEW THE PETRONAS OIL ROYALTY AGREEMENTS






In view of the shicking developments as inevitable results of the sudden oil price hike, I woul like to raise several issues with regards to the situation in Petronas which I believe most people are niot aware of. This is especially pertinent in the face of several revelations, such as the fact that the oil wells in Sabah will dry up six years from now. The issue has also been raised that Petronas “could go bust in 2018”, forcing us to ask: Where have all the huge amounts of Petronas money gone to?
Had Petronas been managed so badly that despite it being the nation’s biggest money earner, it is now facing the possibility of going bust (bankrupt)?


The first problem with Petronas is the fact that it was designed to be a secretive organisation. The Petronas agreements have been claissified secret. Why? What clauses are in the agreement that the people should know? This secrecy also include the secrecy of Petronas’ detailed annual report which is shielded from public scrutiny, making it an organization without pubnlic accountibility.


The other shocking revelation that had came to my knowledge is that 80% of the oil produced by Petronas is not sold directly to the world market but is channelled through six ‘option holders’ who obtain the supply from Petronas below market prices. These option holder agents are the ones reaping the benefits in the oil price hikes. Who are these people? Why are there in the first place? Whty had such a system been created for Petronas? Are these people in fact representing certain private interests?


It is also understood that this supply through the option holders is sold by contracts with a binding agreement for 20 or 30 years, causing huge losses for Petronas when oil price increases, as Petronas would then have to continue selling at the old agreed price. Only 20% of Petronas’s supply is sold through direct open bidding.


Because of these arrangements, Petronas is sadly not maximising its revenue by dealing direct with the open world market. Instead it has been incurring inculculable losses for the nation and for the people. How much this monstrous loss is, we will never know.
The Members of Parliament and the state government should boldly raise up this very important issue in Parliament or directly with the federal government for the benefit of the oil-producing states.
As soon as possible, leaders of the oil producing states should seek for a review of the oil royalty rate and push for a differentiation of prices and benefits for the oil-producing states and the non-oil-producing states.


This review is being offered by the alternative government which is committed to giving the oil-producing states at least 20% oil royalty. This is a window of opportunity for all of us to demand for a review of the Petronas agreements, and to make Petronas more open and transparent.
Parti Keadilan Rakyat also demands that the system of having the six option holders be abolished. A new system should be created in which the three oil-producing states are in control of the marketing arm of Petronas, to make make Petronas trade directly in the world market with the aim of maximising revenue for the benefit of the nation.


Obviously, Petronas is a huge business orgasnisation which is not accountable, secretive, and has been open to a lot of abuses, including the decision to use its revenue to bails out various individuals who faced bankruptcy as results of the Asian economic crisis ten years ago. It the federal government truly wants to be responsible and accountable to the people as it claims it wants to be, it can begin to prove its sincerity for excellent governance by looking into the problems with Petronas.


- DATUK DR. JEFFREY KITINGAN


Comments: Who are these option traders? Its shocking if its true that such a system exist within Petronas.

ACTUAL PETROL PRICE RISE IS 23 SEN



Saw this article on business times today :


PRICES of petrol at the pumps have actually risen 23 sen a litre and not 78 sen, after factoring in the cash rebate of RM625 a year given to vehicle owners, says Second Finance Minister Tan Sri Nor Mohamed Yakcop.


He said the rebate is targeted at helping the needy people, not the rich or unscrupulous such as smugglers.


"Some people question the rationale of increasing petrol prices by 78 sen and then giving rebates. There is a difference.


"If we were to increase petrol prices by 23 sen without giving any rebate, this will benefit all, including the rich and unscrupulous smugglers who do not actually need subsidised fuel," he told reporters yesterday after officiating the launch of AmanahRaya Bhd's Annual Report 2007 and the Safeena Islamic Marine Fund in Kuala Lumpur.

"This was one of the main reasons for the restructuring of subsidies, especially on fuel," he said.


Comments : My dear 2nd finance minister, have you consider the consequences of this drastic hike? Even if your reasonings that the actual hike is only 0.23 is logical,it will not prevent unscrupulous traders to take advantage of this to hike their prices. The enormous inflationary pressure from this hike will harders to tackle then the enforcement upgrade needed to check on those smmuglers. Even with the present rebates system,rich people are still benefitting. A rich man with several BMW or luxury cars below 2000cc will still be getting their rebates even if they only use the cars occasionally. If smuggling is the main issue,then better enforcement is the right and proper solution. You don't burn down the whole house just because of a few mosquitoes.



In the case of diesel, Nor Mohamed said its price remains at RM1.43 a litre as 80 per cent of the users are on the fleet card system.



"The price of diesel was increased by RM1 to RM2.58 per litre, but for those in the transportation business, the price remains at RM1.43. Previously, the difference between those using the fleet card and subsidised diesel was 15 sen. Now, it is RM1.15," he said.



Five billion litres of diesel are used per year, of which four billion go through the fleet card system."This means that 80 per cent of users pay RM1.43. There is no change in price," Nor Mohamed said.



He added that the days of crude oil prices hovering at US$40 to US$50 (RM131 to RM164) a barrel are over."Crude oil prices may fall, but in the long term, it will remain at a high level, probably between US$80 and US$120 (RM262 and RM392) per barrel," Nor Mohamed said, adding that of the current US$130 or US$140 (RM425 or RM458) per barrel pricing, about US$30 or US$40 (RM98 or RM131) are merely "speculation premium".

Hell hath no fury….and the longest medical word….




You know the saying: “Hell hath no fury like a woman scorned”. Certain shocking allegations makes one wonder the possible extent of a woman’s fury. It sort of made me feel uneasy throughout the weekend wondering what might be in store for the nation the coming week. But here’s a joke I read in the MMR forums to lighten up your day. Humor helps in times of trouble

A woman arrived at the Gates of Heaven.While she was waiting for Saint Peter to greet her,she peeked through the gates. She saw a beautiful banquet table. Sitting all around were her parents and all the other people she had loved and who had died before her. They saw her and began calling greetings to her,’Hello - How are you! We’ve been waiting for you! Good to see you.’ When Saint Peter came by, the woman said to him,’This is such a wonderful place! How do I get in?’ ‘You have to spell a word,’ Saint Peter told her.‘Which word?’ the woman asked. ‘Love.’ The woman correctly spelled ‘Love’ and Saint Peter welcomed her into Heaven. About a year later, Saint Peter came to the woman andasked her to watch the Gates of Heaven for him that day. While the woman was guarding the Gates of Heaven, her husband arrived. ‘I’m surprised to see you,’ the woman said.‘How have you been?’ ‘Oh, I’ve been doing pretty well since you died,’ her husband told her. ‘I married the beautiful young nurse who took care of you while you were ill. And then I won the multi-state lottery. I sold the little house you and I lived in and bought a huge mansion. And my wife and I traveled all around the world. We were on vacation in Cancun and I went water skiing today. I fell and hit my head, and here I am. What a bummer! How do I get in?’ ‘You have to spell a word,’ the woman told him. ‘Which word?’ her husband asked. ‘Pneumonoultramicroscopicsilicovolcanoconiosis’, she replied.

In case you’re wondering, Pneumonoultramicroscopicsilicovolcanoconiosis is allegedly the longest English word and according to the Oxford English dictionary, is a factitious word which is supposed to mean “a lung disease caused by the inhalation of very fine silica dust causing inflammation in the lungs”. In real life, we just use the term silicosis, but gee, I don’t think I’ll ever be able to use “Pneumonoultramicroscopicsilicovolcanoconiosis” in a game of Scrabble (and I wonder how much that would score!!)

PETRONAS .. IS IT A WELL MANAGED COMPANY ?



Of late ,many people are questioning Petronas due to the recent fuel price hike by the government. Among the issues are,the missing pages of its financial report,why its only accountable only to the Prime Minister , why are we paying more for fuel when Petronas is experiencing higher profits and many other issues. These problems crop up because it is not transparent with its disclosures and many aspect of Petronas are still opaque.

Some bloggers are saying that we should evaluate Petronas as a business entity but they forget that it is not an ordinary company. It is linked to the government under the Petroleum Act and you can’t just analyze it solely on its own . They are just like Siamese twins and you can’t separate one without having a significant impact on the other. Remember that the person with highest authority over Petronas is not its chairman or board of directors but the Prime Minister of Malaysia which also is the head of gevernment.

Philharmonic orchestra

Petronas spend 500millions to established this orchestra which consist 96% foreign musicians. The reality is that the orchestra is an elitist extravaganza by Petronas which has no real desire to 'Malaysianise' the orchestra. They have toured China and Australia at enormous expense without any apparent realisation that having a European conductor conducting an orchestra called Malaysian with a 4% Malaysian participation is a national disgrace and insults the intelligence of the Chinese and Australians.

Petronas should take a leaf out of the Singapore Symphony Orchestra's book. Its musicians are mainly Asian and they perform Western music to high standards. They even have a recording contract with the respected Swedish recording company BIS. The Singapore government did not fund the orchestra at its inception. It was formed primarily by local classical music lovers who raised funds individually and through business sponsorship.

Such is the nature of Petronas' fiscal responsibility in a time of economic uncertainty and containment. The idea that a country of 25 million people which has the Twin Towers and has sent a Malaysian into space cannot produce a choir of sufficient standard to sing with the Malaysian Philharmonic Orchestra is nothing short of a national insult and tragedy.

Private Jets

Why can’t they fly MAS ? Why can’t they support our own national carrier ? How many planes do they have ? Is it more than one? The cost of maintaining theses planes are not cheap and how sure are they using the planes for their own personal trips? In this current inflationary situation ,the government is asking all Malaysian to help reduce wastages by conserving energy and cut down on unnecessary expenses. Now, using a private jet to fly just a few executives to certain destinations is not exactly leading by example is it? Or is it because they have so much oil that they can afford to waste?

Windfall Tax

If the government can impose a hefty 30% windfall tax on plantation companies, why is it that they can't impose a windfall tax on Petronas ? Crude price has quadruple and Petronas is making hell a lot of money from this .

Petronas is profiting from the country natural resources which rightfully belongs to every Malaysian and it is the only right and proper thing to do by contributing back to the people. Petronas and the government are merely custodians of our country natural resources and they have fail miserably to address the welfare of its people with this abundant wealth .

Petronas had generated a total profit of RM570bil since its formation in 1974 to last year, of which RM335.7bil had been given to the Government (in taxes, royalties and dividends) as revealed by Hassan, Petronas had not explained how the remaining RM55.4bil had been spent after a reinvestment of RM178.9bil of its profits. We currently among the lowest in the world in term of reserves . Hassan Marican's statement that the national oil corporation could go bust by 2018 , did they reinvest well?

UAE
population = 4,380,000
oil reserve = 97 billion barrels
production rate = 2.5 million barrels per day
Reserve life = 107 years

Kuwait
population = 2,851,000
oil reserve = 99 billion barrels
production rate = 2.5 million barrels per day
Reserve life = 108 years

Saudi Arabia
population = 24,735,000
oil reserve = 260 billion barrels
production rate = 8.8 million barrels per day
reserve life = 81 years

Iran
population = 71,208,000
oil reserve = 136 billion barrels
production rate = 3.9 million barrels per day
reserve life = 74 years

Nigeria
population = 148,093,000
oil reserve = 36.2 billion barrels
production rate = 2.3 million barrels per day
reserve life = 43 years

Venezuela
population = 27,877,000
oil reserve = 80 billion barrels
production rate = 2.4 million barrels per day
reserve life = 91 years

Malaysia
population = 27,452,091
oil reserve = 4.8 billion barrels
production rate = 550,000 barrels per day
reserve life = 33 years

Data obtained from EIA shows that last year Petronas contributed 52.3bil to the government when the average crude price was at USD64.20 Average crude price this year,lets assume its only USD 110…as such Petronas contribution this year will be around = 89.6bil. Now my question is…if Petronas is expected to contribute almost 90bil to the government this year and the actual subsidy estimated by Sharir is around 30bil if the fuel price is not increased, why is it that the government still needs to remove the subsidies? The government will still have about 60bil which is more then last year. Last year contribution was 52.3bil but the subsidy was 8.8bil.,so net subsidy, the government still have 43.5bil (last year) This year the net contribution from Petronas should be 60 bil without subsidy and 90bil – 4bil (current subsidies) = 86bil with partial subsidies. So WHY ! must they take away the subsidies? Could it be that Petronas is not generating that much income for the government and thus the removal of the subsidies? If that is the case then I’m not surprise if one day Petronas will end up like Pertamina ,being milked dry by the government. There are also rumours that Petronas sold its crude in advanced at a lower rate to Japan with contracts lasting a few decades. I just couldn’t understand why the government needs to take away the subsidy if they have higher contributions from Petronas this year. Perhaps someone can provide better insight into this...cheers!