For most of us, Petronas is just another Malaysian GLC – one that we see every day, and possibly even give business to on a regular basis – same la… like Unifi, or Tenaga Nasional.
However, you don’t see your former PM geting booted off the board on those other companies.
In fact, Petronas has been in the news recently for cutting 1000 staff, and needing to borrow money! But aside from being Malaysia’s only oil and gas company, what makes Petronas so special, and so important to Malaysians? As we started exploring, we realised one thing – there’s ALOT we don’t know about Petronas, and we should. Why? Because it supplies around 30% of our GDP. Yep. One company pays for 30% (some even say 40%) of Malaysia.
If that blew your mind, wait till you see what else we found out…
1. Forbes named them the most profitable company in frickin’ ASIA (!)
Back in July 2008, crude oil reached a historic peak of US$145 per barrel, which would of course move many petroleum companies to the top of Forbes list, making Petronas the most profitable company in ASIA that year. Yep… that beat Samsung, Sony, and even Toyota (!).
Coincidentally, that was also the first year that Petronas listed its annual reports publicly on their website. Keep in mind they don’t ACTUALLY need to do this, since they aren’t publicly listed. They’re actually 100% owned by the Malaysian government (which technically makes them a GOC, not a GLC). More on this later 😉
But it’s comforting to know that even in recent times with prices of oil down to an all time low (1 litre only RM1.60 in Malaysia – cheaper than Teh Ais), Petronas is still the only Malaysian company on Forbes Global500 (still number 68 in 2015). However, the sheer drop in price of oil has slashed their profits by more than half from RM53.7 billion to a ‘mere’ RM19.6 billion.
When everything billion billion, it’s easier to consider that…
2. They have never cut staff before 2016
First of all, 1000-staff cut from Petronas is actually a speck of their total 51,000 total staff count! BUT, what is remarkable is that Petronas have never done any sort of company-wide staff reduction policy (although they were rumoured to have done salary reductions in early 2015, which they denied). That’s great for the employees because based on this 127-page Lowyat Forum thread about working in Petronas, it seems like a pretty sweet place to work. Even freshies can earn up to RM4k a month!
Sadly, the place is also known to have its share of lazier employees, with one of their ex-employees sharing this experience.
“Because there are login checks,they come in at 730am sharp and switch on their computer. Then they go for breakfast come back at 930 do some work until 12 they go out for a 2-hour lunch. By 5pm, finish work” – anonymous ex-Petronas employee.
Which is probably why Petronas are looking at these staff cuts in the first place. Between 2008 and 2014, employee count almost doubled, which means that even with this 1000-staff cut, they aren’t going much lower than their 2015 figures.
UPDATE: Some fans on our Facebook page have responded by standing up for Petronas employees.
Having said that tho, staffing only represents 3% of their total cost. But with oil prices dropping thru the floor, every bit counts…. especially when…
3. They pay DOUBLE the tax of a normal Malaysian company
So corporate tax is what us poor companies pay the gomen everytime we earn money. If you’re below RM500k in revenue (which CILISOS was last year), you pay 19% of your revenues. If you earn more? 24%.
Unfortunately for Petronas, there’s something called the Petroleum Income Tax, which is taxed at 38%! So this means for every RM1 they earn, the government gets RM0.38. They also have to pay state taxes as well, in the states they mine out of, resulting in mind-boggling amounts of annual payments between RM50-80billion (although it’s expected to be less than 50 billion in 2016).
ON TOP of that, they also pay a dividend to the government which varies depending on their profit. While we’re not sure of the exact formula, in 2015 it was RM26billion, and this year it’ll be RM16 billion.
Actually, this isn’t TOO BAD a deal because…
4. ALL oil deposits in Malaysia automatically belong to Petronas
Yep. Some of you might’ve known about this already, but way back in 1974, a new law was passed called the Petroleum Development Act (PDA).
“Petronas is vested with the entire ownership of, as well as rights, privileges and benefits in relation to exploring and producing oil and gas, offshore and onshore in Malaysia. Petronas is also the responsible authority for licensing any third party contractors wishing to participate in upstream petroleum activities and licensing goods and service providers operating in the upstream sector, including providers of rigs and drilling services and supply of general goods and services related to upstream operations.” – The Sun Daily
TLDR: Petronas owns everything, and anyone wanting to get ANY oil out of Malaysia has to go through them. This includes people like Esso and Shell, which have to co-develop, or at the very least lease areas from Petronas to look for oil. If you’re from the Oil&Gas industry, you can read more about how you have to work with Petronas here.
So actually, it’s quite fair la. Malaysia gives them the rights to the oil, and in return, Petronas pays a crapload of tax, and RM16 billion in rental to the gomen. But despite that…
5. They don’t like gomen using them as their “piggie-bank”
Despite Petronas’ entire board being entirely elected by the government, and then having the power to fire Tun M, you’d actually be pretty surprised to find out that Petronas is surprisingly independent, and hasn’t been shy in showing it. 4 years ago at the World Gas Conference, PETRONAS CEO Shamsul Azhar Abbas made a speech on stage about how the government’s fuel subsidy was plain wrong, resulting in “a murmur from the crowd“.
Why? Cos PM Najib was also there, and took the stage shortly after to remind everyone that the subsidies, which Petronas foots, have “Social-economic objectives”.
“The polite but pointed disagreement was the latest sign of assertiveness from an oil company that prime ministers have treated as a piggy bank for pet projects since it was established in 1974. Interviews with current and former officials and an examination of Petronas and government documents show that strains have been building behind the scenes over how much money the company hands over to the government in the form of fuel subsidies, dividends and taxes.” – The Star.com.my, July 2012
And it’s not an empty accusation either, seeing as how Najib has even insisted on RM1,000 bonuses for Petronas employees just before GE13.
In fact, there are other signs that Petronas and the government have a very thorny relationship. Back in 2009, Najib appointed one of his closest aides, Omar Ong, into the Petronas Board of Directors. The move wasn’t very welcome by the board, and its official advisor, Tun M, with some even crediting the incident to be the start of Tun M’s vendetta against Najib.
In the meantime, the top guys at Petronas have never shied away from a fight, with former CEO Tan Sri Shamsul Azhar Abas even hinting that he’d rather be fired, than give in to political will. In fact, his predecessor Tan Sri Hassan Merican was also rumoured to have been replaced because of disagreements with Najib.
“Petronas’ CEO and board, however, serve at the pleasure of the prime minister. Over the years, prime ministers have tapped into Petronas funds to build their dream projects and bail out their mistakes. Political leaders were used to dealing with yes-men in the company, which on Malaysia’s organization chart is part of the prime minister’s office.
Now Petronas is trying to say no.” – Reuters, July 2012
Why is Petronas so brave to stand up to the government? Well on one hand, they are appointed by the gomen, but on the other, they are also its biggest financier. If Petronas were to fail or even underperform, the government loses its #1 cash cow.
And why do you need to know all about Petronas?
Well, like it or not, 20-40sen on every ringgit made in this country is by Petronas. Just think about that for a second. This means that if they’re not doing so well, or if Malaysia runs out of oil, you can say byebye to 40sen out of every ringgit you earn.
“Friends, colleagues, the reality of the situation is in the numbers. Brent closed at USD 28 dollars per barrel on Friday, and continues to slide. There are still no signs of recovery.” – Petronas CEO Wan Zulkiflee Wan Ariffin, Oilpro.com
As belts in Malaysia get tighter, and less people seem to trust what the gomen is doing, it’s worrying that even Petronas is another one of those companies that reports directly to the Prime Minister (not to Parlimen). Because of that, it’s more important than ever for Petronas to maintain its current progression towards transparency.
The move to transparent annual reports on their site was a great step forward in 2008, and it seems to be getting even more transparent. In fact, in 2013, Petronas was actually lauded by Transparency International for their progressive policies in revealing information.
So show a wee bit of respect to Petronas… not for what the PM makes them do, not just for contributing 40sen for every Ringgit, but for also being quite responsible to Malaysians in general for it 🙂
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