September 9, 2017

Petronas Gets Tested by Petroleum Sarawak Petros


As higher oil prices lifted the profit of Petronas Nasional Bhd by more than 100% at the end of its second quarter, it does appear that the vagaries of the oil and gas sector have found some stability.

Oil prices have found stability of late after a period of volatility that saw a number of oil and gas companies endure pain none had seen for years prior to the crash in oil prices in 2014.

With profits on the mend, thanks in part to better cost management, Petronas declared a higher dividend of RM16bil to the Government after its second quarter financial results were announced last month.

With more money to dish out, it then appears the time has come for not only the service providers to ask for greater clarity in the jobs they can expect ahead, but also for states where oil is being produced from.

Sarawak, which has long asked for a greater share of oil revenues from production activities in the state, has decided to set up its own oil and gas company called Petroleum Sarawak (Petros)Indications are that the state is looking for Petros, which was in the works for some time and before Petronas’ profits had bounced, to be an equal partner with Petronas for oil activities in the state, which will dramatically change the dynamics of the oil industry in the state and also the country.

But the move by Petros is not the first by a state in demanding a greater share of oil revenues from Petronas.

Terengganu, which has a big oil and gas industry, used to receive nearly RM6bil a year in royalties from Petronas but that was ended in the year 2000. Reports are that the state and Petronas are back discussing the return of royalties to the state.

Apart from states asking for a greater share of oil revenue, the Government too has in the past made moves to expand to role of companies engaged in the oil and gas business in the country.

Jawala Corp, Crest Petroleum and Ranhill Bhd once formed a consortium to get involved in the country’s oil and gas space through the drilling in marginal oilfields. The creation of the consortium came after the tabling of Budget 2004 where an approval was given to a private consortium to drill for oil in marginal fields.

The stance taken by Petronas then with regard to the consortium entering the oil and gas space was the same taken by the company when it deals with requests from states for more money.

It was reported that Petronas president and group chief executive officer Datuk Wan Zulkiflee Wan Ariffin recently said that he welcomes any involvement by state government entities in the oil and gas (O&G) business, but it has to be within the Petroleum Development Act (PDA).

“We have a strong relationship with the Sarawak government, as such, we welcome its participation in the O&G industry.

“But we also have regulations in place, of which under the PDA, Petronas is the custodian and manager of the O&G resources in Malaysia,” he told reporters at a briefing on Petronas’ mid-year results recently.

Wan Zulkiflee adds in the report that the partnership with Petros could be similar to other Petronas partnerships, either as service providers or as a partner under the production sharing contract (PSC).

“Discussions are ongoing with the Sarawak state government,” he said when asked about the potential partnership between Petronas and Petros.

Chief Minister Datuk Amar Abang Johari Tun Openg officially announced last month the formation of Petros, with a target for the company to be operational in the first quarter of next year.

Source: The Star
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