The role of petronas: Check your facts on the oil issue

I'M tired of people criticising Petronas after the fuel price hike of June 4.

This shows how uninformed some people are about the role of Petronas as the national oil company.As a retired Petronas engineer who served the company for 28 years and had been posted to North Africa, the Middle East and Central Asia, I am qualified to talk about the company and its operations. First, the salaries paid to Petronas employees are not as high as people think. At best, they are industry average. Some even left the company to work with companies that paid more. Bonus? I worked with Petronas for almost three decades and never received a bonus amounting to six months or 12 months. On average, it was two months.
Let's shed light on the quality of the country's crude oil and refined products, especially the ones processed by Petronas. Malaysia produces about 600,000 barrels of crude oil per day (and about 100,000 barrels condensate). Of this crude volume, 339,000 barrels are refined locally for local consumption.The rest is exported (and yes, because it has lower sulphur content, it fetches higher prices). The Malaysian crude oil, known as the Tapis Blend, is the most expensive in the world. Malaysia also imports about 230,000 barrels of crude oil per day, mainly from the Middle East, to be refined here. This crude oil contains higher sulphur and is less expensive (so the country gains more by exporting its crude). In Malaysia, this crude is processed by Petronas at its second refinery in Malacca, and also by Shell at its Port Dickson refinery. Different refineries are built and configured to refine different types of crude. And each crude type yields different percentage of products (diesel, gasoline, kero-sene and cooking gas) per barrel.But most importantly, products that come out at the end of the refining process have the same quality, regardless of the crude types. That's why Petronas, Shell and ExxonMobil share the same pipeline to transport the finished products from their refineries to a distribution centre in the Klang Valley. The three companies collect the products at this centre to distribute them to their networks. What makes Petronas' petrol different from Shell's, for example, is the additive that each company adds. Many people also do not understand the role and function of Petronas. It is a business that generates income and value for its shareholder. In this case, Petronas' shareholder is the government. In 1974, when Petronas was set up, the government gave it RM10 million as seed capital. From 1974 to last year, Petronas made RM570 billion in accumulated profits, and returned RM335.7 billion to the government. That is about 65 per cent of the profits. That means for every RM1 that Petronas makes, 65 sen goes back to the government. Last year, Petronas made a pre-tax profit of RM86.8 billion. The amount given back to the government (in royalty, dividends, corporate income tax, petroleum products' income tax and export duty) was RM52.3 billion. The rest of the profit of about RM7.87 billion was used to pay off minority interests and taxes in foreign countries (Petronas operates in more than 30 countries), and the remaining RM26.7 billion was reinvested. The amount reinvested seems a lot, but the oil and gas industry is technology and capital-intensive. Costs have gone up exponentially in the last couple of years. Previously, to drill a well, it cost about US$3 million (RM9.6 million); now it costs US$7 million. The use of rigs was US$200,000 a day two years ago; now it costs US$600,000. The amount returned by Petronas to the government makes up 35 per cent of the government's total annual income, to be used by the government for expenditure, development, operations, and yes, for subsidies. That means for every RM1 the government makes, 35 sen is contributed by Petronas. So, instead of asking what happens to Petronas' money or profits, people should ask how the money paid by Petronas to the government is allocated. A lot of people also ask why Malaysia exports its crude oil.Shouldn't it stop exporting and sell at lower prices to local refiners? If Malaysia is an oil-exporting country, why can't it sell petrol or diesel at lower prices like other oil-producing countries in the Middle East? I don't have to answer the first couple of questions. It's simple economics, and crude oil is a global commodity. Why can't we sell petrol and diesel at lower prices, like in the Middle East? Comparing Saudi Arabia and other big producers with Malaysia is like comparing kurma with durian, because these Middle Eastern countries have bigger oil and gas reserves. Malaysia has 5.4 billion barrels of oil reserves, and about 89 trillion cubic feet of gas.Compare that with Saudi Arabia's 260 billion barrels of oil and 240 trillion cubic feet of gas. Malaysia produces 600,000 barrels per day of oil. Saudi Arabia produces nine million barrels per day. At this rate, Saudi Arabia's crude oil sales revenue could amount to US$1.2 billion per day.At this rate, it can afford almost everything -- free education, healthcare and subsidies -- for its people. However, these countries have in the past few years come up with policies and strategies to prolong their reserves and diversify their income bases. In this sense, Malaysia (and Petronas) has had a good head start, as it has been doing this a long time. Fuel prices in Malaysia are controlled by the government based on a formula under the automatic pricing mechanism introduced more than two decades ago. It is under this mechanism that the calculation of prices is made, based on the actual cost of petrol or diesel, the operating costs, margin for dealers, margin for retail oil companies (including Petronas Dagangan) and the balancing number of duty or subsidy. No retail oil company or dealer makes money from the hike of fuel prices. Oil companies pay for the products at market prices, but have to sell low, so the government reimburses the difference; hence, the subsidy. The subsidy as a concept is OK as long as it benefits the lower-income group. But there has to be a limit to how much and how long the government should bear and sustain subsidies. An environment where prices are kept artificially low indefinitely will not benefit anyone. That's why Indonesia is more proactive in removing subsidies. Even Vietnam (which is a socialist country) is selling fuel at market prices. As for the allegation that Petronas is not transparent in terms of its accounts and business transactions, I would point out that it is first and foremost a company, operating under the rules and regulations of the authorities, including the Registrar of Companies, and the Securities Commission and Bursa Mal-aysia for its four listed subsidiaries (Petronas Dagangan, Petronas Gas, MISC and KLCC Property Holdings). Petronas, the holding company, produces annual reports that are available to whoever wants them, and are distributed to many parties and places; including to the library at Parliament House for members. Petronas also makes the annual report available on its website. The accounts are audited. Although Petronas is not listed on Bursa Malaysia, it could be considered a listed entity as its bonds and financial papers are traded overseas. This requires scrutiny from investors and rating agencies such as Standard & Poor's and Moody's. I hope this will help people understand the oil and gas industry. Apart from being capital-intensive, it is also complex and volatile. Don't simply attack Petro-nas. Check your facts first.

Shocking semis

Haha...all of my prediction went wrong...except for spain...russia and turkey qualify magically...favourites portugal and netherlands stumble only in the quater final.... sob sob sob...sedih siot...

My new prediction based on the quater final matches:

1. Russia - After defeated the mighty oranje...nothing can stop them if they are to display same quality as the shown against netherlands
2. Germany - the awakening of ballack, schweinteiger, podolski and klose make them more stronger than the group phase
3. Spain - Good quality in all department...but always fail to deliver when it comes to an important matches
4. Turkey - Good spirit...but will have to face the super ballack's team with a numbers of key player being absent due to injury and suspension

So, let us see who will go to the final stage
Semi final 1
Germany vs Turkey

Semi Final 2
Russia vs Spain

Magic of Hiddink

1. Brought Netherlands to semi final WC 98
2. Brought South Korea to semi final WC 02
3. Brought Australia to Second Round WC 06 before lose to WC Champion, Italy
4. Brought Russia to EURO 08 instead in a group with ENGLAND
5. Brought Russia to ........ EURO 08 (the moment this write is posted they are at quaterfinal)

Who will win?

This is my prediction for EURO08...GO ORANJE!!!...hihi

Week 3 At KLCC

Aigooo...dah lma xupdate blog ni...pejam celik pejam celik aku dah msk mggu ke 3 intern kat klcc...fuhhhh...aku tgh menulis kat PRC ar blum dpt pc...huhu...dah lma xonline gtalk, friendster...dc++ jauh skali...haha...nak main babo...wuuuuu...

haha...dah la 2 far kat PETCHEM aku bru wat 2 assignment...blum wat project lg...xtau la dpt ke x...asek tgk chemical structure je...pening kpala...xpe2...aku kat sini insyaAllah smpi 4bln je...last 4month aku maybe kena antar p plan...aku dah apply kalo bleh nk p kerteh...sbb kat situ kan rmi bdk2 utp yg intern...ok gak ar...4 months blaja business...4 months lg blaja kat plant...tak sabarnya...bdk2 kat kerteh ckp best je kat kerteh...huhu...

euro pn aku tgk mamak je...2 pun xsuma...pagi td xtgk pun portugal kalah...czech pn klh...haha...apa pun Go Oranje!!!

smlm kalo xsilap bdk2 basf germany dah btolak pegi la dorg...8bulan wooo...huhu...xpe la 2 rezeki namanya...kat sini pun ok gak...(nak sedapkan ati)

ok la...dah ckp curi tulang...haha...pttnya dtg PRC cri info about update blog plak...hihi...ok la...nnt aku update lg...
Related Posts with Thumbnails

Design in CSS by TemplateWorld and sponsored by SmashingMagazine
Blogger Template created by Deluxe Templates