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Sakmongkol ak 47

ariff.sabri@gmail.com

Thursday, 2 July 2009

The PETRONAS issue again.

If push comes to shove, the PM in asserting his will can do the following.

  • Re-constitute the entire PETRONAS BOD.
  • The PM can also replace the PETRONAS advisor.
  • If the government is answerable on its financial management of this country, make PETRONAS answerable to parliament.

It would be interesting to have PETRONAS answerable to parliament. People have been complaining that PETRONAS is not answerable to parliament. Yes, they do read what PETRONAS published in their books and publications. But nowadays people are more critical. Since PETRONAS is owned by the people through agency of the PM, it must be brought to bear for its activities in Parliament.

Insulated from public and political scrutiny has allowed PETRONAS to behave beyond reproach. Maybe it has also spawned a nose thumping attitude among its employees. Maybe they think themselves as the privileged few. Perhaps like one blogger suggested, they represent the epitome of Malay management success. Perhaps all those are correct.

It is also true that, these days we must avoid blind trust. Why should anyone accept in good faith whatever PETRONAS employees think of themselves? Many of them think the world of themselves judging from the vitriolic responses whenever doubts concerning their professionalism and hear this, their patriotism were made. They are just the same like you and I.

We are actually tired of claims by PETRONAS employees that they are very patriotic people and that to keep PETRONAS within their exclusive control reflects their patriotism. When it comes to money, PETRONAS employees are likely to throw out their patriotism. Just like many people too. In recent years, PETRONAS has been losing many staff to Middle Eastern oil companies because of higher pay checks. So, money is the great humbler.

The public has a right to see how PETRONAS conduct itself in business affairs. Maybe the PM, like the public, wishes to see a greater sense of accountability. The people want to know how are the three agreements with Uzbekistan on production-sharing, exploration and petrochemical projects. What has happened to its purchase of FL Selenia, Europe's largest independent producer and marketer of branded automotive lubricants, for about US$4 billion? Has its purchase of Woodside Energy Ltd's Mauritanian subsidiaries for US$418 million resulting in PETRONAS gaining significant interests in eight upstream units in the country been good? The people also may be interested in finding out whether its purchase of US$1.1 billion worth of shares in the IPO of the troubled Russian oil giant ROSNEFT was a sound business decision? Or was that decision out of bounds from prying eyes?

In spite of its prowess in overseas ventures leading it to claim that 40% of its revenues are generated from these ventures, how did PETRONAS then lose out or ignored the chance to participate in developing Iran's GOLSHAN and FERDOWSKI gas fields? Has PETRONAS been less diligent in this deal allowing instead the business chance to be taken by Syed Mokhtar Al Bukhary's SKS ventures? SKS is a private business entity who succeeded in the deal. How was its possible for PETRONAS to not sight the possible deal on its business radar screen? Either PETRONAS management or its 'must-protect-at-all cost' BOD have been negligent in their duty to at least participate in the bid to get these fields.

How did the BOD conduct itself on the affairs surrounding SCOMI for instance? It has not explained how SCOMI has managed to secure sizeable business deals when Pak Lah was the PM. Scomi Group Bhd is a listed company provides oilfield drilling lubricants, engineering services, and other petroleum-related services. It has been said that Scomi has received RM1 billion worth of government contract. It got a contract from PETRONAS that was valued at approximately RM157 million in Turkmenistan.

Many regard PETRONAS as Malaysia's best-run government-linked company. We can accept that. Many of its employees are highly trained and dedicated. Its management is highly regarded too. These would support our contention, that PETRONAS and the government should not restrain itself from being upfront about its financials. If decisions made were sound business ones, PETRONAS shouldn't hesitate to allow scrutiny by parliament.

What was the BOD's stand when in the 1980s, PETRONAS was forced to purchase a Boeing 747 jumbo jetliner and lease it to the government-owned Malaysian Airline System? MAS had signed a letter of intent to use only Rolls-Royce engines on its 747s. This particular Boeing 747 uses engine made by Pratt and Whitney. To skirt around the contractual obligations and to push through the purchase of the Boeing 747 with Pratt and Whitney engines, why not ask PETRONAS to buy instead? Then PETRONAS can lease it to MAS saving MAS from being accused to have reneged on its agreement. Brilliant maneuver! But, this would have meant, the PETRONAS BOD was powerless.

To suggest now, that PETRONAS BOD must stand its ground and assert its 'independence' is irresponsible. My contention is it has never been independent. Placing it answerable before parliament is better. How independent was PETRONAS BOD previously? Well, in 1998, the oil company was forced to use its shipping arm, Malaysian International Shipping Corp Bhd, to acquire a debt-laden Konsortium Perkapalan Bhd (KPB), which faced debts, estimated at about RM1.7 billion. It also became the anchor tenant in PETRONAS Towers, the two iconic buildings that were also critically short of tenants in the years after they were completed. In other words, it has been used as a salvaging crew.

16 comments:

Siti Kemboja,  2 July 2009 at 10:28  

Kami tidak faham, mengapa, kita Melayu2 begitu menitikberatkan apa saja company besar kepunyaan melayu sedang perbuat.

Tidak sepertimana kaum2 lain atau bangsa2 lain, tidak pernah saya mendengar, rungutan mereka tentang apa tycoon2 kaya bangsa mereka sedang perbuat, sedang invest, sedang beli, sedang berjudi. Tiada. Mungkin kerana mereka tak punya halal haram. Sedangkan Melayu ada halal haramnya.

Adakah sikap kita yg suka menjaga setiap tepi kain melayu (ada kala atau kebiasaan nampak seperti perihatin dan ambil peduli, ada bagusnya) tapi sebenarnya mungkin menjadi punca mengapa Melayu tidak berjaya.

Tentu kita boleh terbayang cerita ketam dan kaumnya yang sedang cuba keluar dari sebuah bekas. Apa berlaku ye? Tentu ramai dah maklum, menjadi bahan seloroh oleh yang lain.

Kami tidak mengatakan betul dan salah, cuma meminta semuanya berfikir. Mungkinkah ini faktor penyumbang kepada kegagalan Melayu? Tapi didalam kes negara Malaysia, bukan sahaja Melayu, malah warga2 lain juga teramatlah suka menyumbang fakta. Apakah belajar dari sikap Melayu, kerana ada juga baiknya disitu, iaitu sokong yang membawa rebah!

Mungkin diakhirnya, ramai yang akan menjawap,padanlah muka.

Tetapi yang lebih sengsara, adalah kami,orang-orang yang hanya melukut di tepi gantang.

Anonymous,  2 July 2009 at 11:09  

Great article, sir.

I like the part where you propose the Petronas be answerable to the Parliament!

Nik 2 July 2009 at 12:06  

Dato'

In Priciple, PETRONAS has FAILED to properly disemminate up to date information on its activities to its stakeholders, namely the People of Malaysia..

What is simply needed is a Petronas Carigali Website Providing an Up to Date Report of all Its Activities Worldwide.
This will include Exploration Wells, Appraisal Wells aor development wells currently Drilling. Where it is located and the depth drilled. Is it a discovery or dry well.. If dry, why is it dry?

The website should have maps showing locations where Petronas Operate and what shares they own if they are simply partners in a consortium. They can obtain progress of operations from their Partner/Opertor's website.

One can find such information on the Website of all Oil Companies Operating Worldwide. Go to any of the Australian Oil Company Websites or the Website of Share Trading Houses belonging to Aussie Banks and you will find an update of all drilling and production activities of these companies, as well as new deals done on acreages worldwide...

Is that too much to ask??

kuldeep 2 July 2009 at 12:43  

Dato...
magnificent analysis..

The issue whether Petronas is well managed or not will never be answered completely...I recall that the companies cited as being examples of "excellence" in that book by Peters all had difficult times just a few years later incl IBM.

But,when a company has a significant "cashcow" a lot of the bad decisions can be glossed over.Only during the low tides can one see all the accumulated debris...

But,your suggestion that the Board should be restructured and reports directly to the Parliament (maybe a sub committee with representation by all incl opposition parties) is definitely the preferred way to ensure that there is better oversight.And...the same structure should also be practised for other GLCs rather then the current practise of having one supremo Minister .

I would love to see a genuinely "rakyat sensitive" intelligent and experienced( in biz and academics) directors instead of the current crop of tired ex civil servants/politicians populating most GLCs Boards.

Dato..I hope someone is listening to you.You are voicing out the real concerns of the people.

Anonymous,  2 July 2009 at 12:54  

The grand thing about having lots of cash is you can do many non core stuff without it impacting the bottom line.

As an example,one can spend RM 70 million to renovate a golf course..have all the mod cons and spanking club house designed to the head honcho taste..

The RM 70 m gets capitalised and written off over 50 years? i.e an annual charge of RM 1.4m..and if no borrowings the interest income loss myb only another RM 1.4 m >>thus in total a loss of RM 2.8m less "presumed" additional profits due to the revamp>>thus to bottomline not significant if ur making RM 1 billion profits.

But RM 70 million can kickstart at least 140 SMEs ...that will create real lasting income and wealth.And they can provide the supplychain/support for the GLCs..

But revamping the golf course is more interesting to the Board?

Anonymous,  2 July 2009 at 14:19  

Good food for thought datuk.

Zheng Zhilong 2 July 2009 at 15:12  

Tun AAB could also have remained as PM despite resigning as UMNO President

Pak Zawi 2 July 2009 at 17:42  

Dato' Sak,
Wow this is great revelation. Let us see more of this. The MAS - Petronas link is interesting as RPK in his blog has indicated something is amiss somewhere.

Al-Capone,  2 July 2009 at 19:21  

You seem to be so frustrated with PETRONAS !! You either fail to get a job or fail to land a contract with PETRONAS or worst an-ex PETRONAS employess! Who says PETRONAS is NOT answerable to Parliament? When politicians highlight or raise questions on PETRONAS, the Prime Ministers's office and/or ruling govt. minister will response to these queries. Are you suggesting all major business decisions by PETRONAS to be tabled out or debate at the parliament before PETRONAS proceeds with major decision or business investment? If we do this, PETRONAS will never go anywhere and will not be able to proceed with any business opportunities when endless debate will occur between the politicians as to how PETRONAS should be doing (like they knows best of the business!!). At the end of the day, the Govt will shoot themselves in the foot because PETRONAS would not be able to contribute 45% of Govt. income. Why? Because you let the politicians decides (or no decisions at all!)how to run PETRONAS. Yes, PETRONAS is owned by the Malaysian people, and yes it is own by Malaysian ruling Govt via the PM office. But you must remember, PETRONAS is a business entity and mixing business with politics(in particular with Malaysian politics) is a disaster!. The oil and gas is not like 'kedai runcit' business. You have to look from a very long-term perspective, not only for the success of the company but also for the best interest of the nation (in this case for Malaysia Govt.). Of course you can't see the real benefit NOW of acquiring Selenia, the upstream project investment in Uzbekistan and Mauritania. It's all long-term!. If you expect a quick-fix profit kind of thing, you go and join Mr Madoff or Pak Man Telo! If that Iran project seems to be economical for PETRONAS (as well as for the nation), they would have done that! (Pssst - I wonder what happen to that hype Kedah refinery-oil pipeline from Kedah to Kelantan).
Last but not least, pls do check your fact before you write anything. Don't be like Mr Lim Guan Eng who barks out like a mad dog about PETRONAS and keep saying about the wrong fact about PETRONAS(read Malaysian Insider). If you don't know, you can always ask question, not making a false fact or conclusion. The Twin Towers started to be occupied by PETRONAS employees in 1998 in Tower 1 ONLY. Tower 2 was rented out to other private companies. While Tower 1 is fully occupied, I agree Tower 2 only has 30-40% tenants for the first 3-4 years. However, it begans to increase up to 70% occupancy after 4-5 years the Twin Towers was first occupied. As PETRONAS grows its business, PETRONAS manpower also grows. Hence, more spaces needed and so PETRONAS offices has also started to occupy Tower 2. Today, both towers are almost 100% occupied. Yes, majority are PETRONAS offices but there are still private companies renting the office space in Tower 2. So Mr AK47, even if you did not get the job with PETRONAS, whether as employees or as contractor, as a Malaysian (are you?), you should be proud of having a successful Malaysian company who can deliver 45% of Government income and for the wealth being of the Malaysian economy. You should appreciate the people who works for PETRONAS with lof of sacrifices of time and family. Forget about those who leave the company for Middle East Oil Companies. Appreciate those who has been working with PETRONAS for 20-30 years. You can't generalize every PETRONAS employees as being arrogant. Also, these days you just cant' brand PETRONAS as a Malay company. It's a Malaysian company(heck they have a Chinese and an Indian Vice President!). PETRONAS is multinational and a global company, like any other oil company around the world. They have a lot of non-Malaysian employees as well. Believe me, you don't want to leave to the Parliament to steer PETRONAS business. Look at PERTAMINA (Indonesia) and PDVSA (Venezuela) and you know what I mean.

donplaypuks® 2 July 2009 at 20:08  

It's not just Scomi but also KLSE listed Kencana Plc (major shareholder is Dr.Mahathir's son, Mokhzani Mahathir) whose fortunes have risen through Petronas contracts. And when Perkapalan was recued by Petronas to the tune of a whacking $1.7 billion, Dr.M was quoted as saying that the bailout was in the national interest!! How convenient!!??

Did these companies really rise through open competition or did they get a leg up, directly or indirectly, through their famous and well-connected fathers?

As you have pointed out, Petronas maintains a facade of independence while giving in to the excesses of people like Dr.M.

Also, whenever you criticize Petronas, the staff always come out with 'we are doing national service' otw we will go to Shell or Exxon or Saudi. My view - Go, if you are that good and the foreign oil cos are really camping at your dooorstep! There are thousand of local graduates waiting for an opportunity to show their mettle.

The fact is there is a serious conflict of interest and dangerous lack of internal control in Petronas having the same guy as Chairman and CEO and that for so many years. This has to be
rectified first.

Then the mix and composition of its BoD, Management, Staff and participants in Vendor Programmes has to be redressed from its current lopsided ethnic bias.

More than that, the information disclosure on many of Petronas' investments, like those of Khazanah, Prasarna, PNB and EPF are often sketchy and not transparent.

I repeat what I said earlier. Petronas is not the personal property of 1 man, a Group of elitists, the PM or UMNO/BN. it belongs to all M'sians and must be operated as such.

There is a tendency to to fudge over these issues by saying 'Don't fix it it it ain't broke'.

But, Petronas and its performance should be benchmarked against its competitors in the International Market; not against cosseted and mollycoddled local MNC's and GLC's!!

Anonymous,  3 July 2009 at 00:03  

Having been in PETRONAS for many years, I have seen many cases of non-prudence and non-professionalim by petronas staff in their supervision of works by contractors. Cost overruns of 100-200% due to work variations appear to be the norm, which mean the staff has not been competent in planning of works. As oil/gas works are high cost > few millions USD each piece of works, that translate into many millions USD cost overruns. I have seen recent cases of 500% cost overruns!! Annually, based on feedback of additional cost (in Malaysia nd overseas), I'd expect cost overuns >USD 1 billion each year!! A big % of the annual PETRONAS budget

Anonymous,  3 July 2009 at 00:19  

donplaypuks said:
"But, Petronas and its performance should be benchmarked against its competitors in the International Market; not against cosseted and mollycoddled local MNC's and GLC's!!"

Isn't Petronas on Fortune's Global top 500 companies list? Isn't this an international benchmark, which is published annually by Fortune magazine? If I remember correctly, Petronas at one time was even ranked as the second most profitable company in the world, in terms of profit margin, with Microsoft taking the top spot. Don't have the latest Fortune rankings, but I don't think that Petronas would be lagging too far behind Shell and Exxon by much, despite these companies having almost 80 years head start in the oil business.
Petronas CEO said recently when announcing its latest financial results that Petronas hasn't been able to reinvest its profits as much as other oil companies due to growing payments (dividends, taxes etc,) to the government. That is what should be worrying Malaysians, because the impact of the underinvestment would only be felt by our children and the future generations.
I nevertheless agree that Petronas should be made to, at the very least, comply to international financial reporting standards and disclosures (since it's a global company) when publishing its accounts.

ARGUS

Abdullah AR 3 July 2009 at 00:50  

kemboja

Sebabnya company Cina tu Cina yg punya, Petronas bukannya Melayu yang punya, tapi Negara (Rakyat) yg punya.

Suci Dalam Debu 3 July 2009 at 12:04  

Dato,

May I also ask if PETRONAS $$$ are in anyway part of the dividends given out to ASB holders?

Truly, PETRONAS & ASB should be answerable to Parliament.

Anonymous,  9 July 2009 at 11:16  

Guys, leave Petronas alone. They are doing great!

Anonymous,  26 July 2009 at 01:54  

This is not about Melayu or racist reason cik Siti Kemboja..bukan melayu je keja kat Petronas tu, its about Malaysian..bkn kita nak halang mana2 'ketam' yang nak keluar dri sebuah bekas, its just that kalau nak keluar tu mintalah izin..Malaysian ada budi bahasa, ada adat2nya..bukan senang2 nak keluar dan masuk sesuka hati mcm org tak tau adat..furthermore, bukan kita nak halang Petronas nak tambahkan revenue negara, kita cuma nak minta ketelusan pentadbiran Petronas tu shj, sbb kita rakyat Malaysia, kita ada hak nak tahu semua tu..lagipun, pd asasnya Petronas ditubuhkan by Malaysian for Malaysian, silalh merajinkan diri buat research on Petronas history..

Betul kata blogger ni, Malaysian nowadays are much more critical, kita bkn mcm 20,30 yrs ago yg hnya terima 'wahyu' drpd kerajaan n just comply to it..now, kita ada kekuatan dan kebijakan utk mempersoalkan segalanya..its our rights to know..afterall, Petronas just sumbang 40% to the govt revenue, the other 60% comes from us, including u cik Siti, as taxpayers...

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