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!