GE 13 : The Role of Petronas in Malaysia’s Rapid Development

Pakatan Rakyat proposes to alter Petronas' relationship with the Government, by increasing from 5 to 20 per cent the royalties paid to oil-producing states and by using oil royalties to pay for programmes such as further subsidising the cost of petrol.
Yet these funds are already used for the rakyat's benefit. Over Petronas' life, it has contributed at times 50 per cent of Government revenue. In 2012, Government revenue totalled RM200 billion. Petronas' net revenue was RM59.69 billion, much of which went to the Government.
Its extensive operations, its downstream associated firms, and the many small enterprises that survive by servicing Petronas, account for tens of thousands of employed Malaysians, an enormous portion of the economy, and a significant share of Government revenue.
Modern Malaysia was built on Petronas' oil royalties. Petronas has climbed to the ranking of the 68th largest company in the world, 12th most profitable globally and most profitable in Asia, and Malaysia has grown with it.
Yet oil and natural gas are not prone to stable prices. In the last two quarters of reported data, Petronas has seen its profit fall compared to the year before. The last quarter of 2012 saw a decrease by 45 per cent, and for the year, net profit declined by 17 per cent.
The oil industry faces enormous challenges in the face of a slowdown in Europe, China and the U.S. Petronas suffered as the price of crude oil fell below USD100 per barrel, something Pakatan Rakyat's manifesto assumes will never happen.
Petronas will need to significantly increase the net profit dedicated to developing more oil fields and natural gas wells in order to stabilise and return to growing profits.
Yet Petronas does not merely fund today's Malaysia, it is vital in funding tomorrow's. A new deposit in an existing field can take two years to become available. A new oil field struck and developed today may not come on-line until 2023 or even later. Petronas will be part of the landscape for decades to come.
Unlike other major firms, Petronas is part of the lifeblood of Malaysia. Its investment funds must come after it has made its payment to the Finance Ministry to help the Government fund its many programmes and to provide development and subsidies for the rakyat. Where Exxon-Mobil and Shell can dedicate tens of billions of ringgit to exploration, Petronas must manage its development funds carefully.
Petronas has therefore moved abroad, developing oil fields in Sudan and Vietnam and acquiring target assets such as Progress Energy in Canada. Malaysia's future demands spending and investment now.
It is from that spending and investment that Pakatan would take the subsidies it promises. Removing an additional 15 per cent of its net profit to give to the states and spending billions subsidising petrol is doubtless appealing, but it will be done at the cost of the future rakyat.
Petronas has helped build Malaysia. If it is to continue doing so, it must not be drained.