Saturday, February 06, 2010

Government to raid Petronas?

I've written a few times over the past few months that the Government is bleeding Petronas dry. For example, despite Petronas profits before tax dipping 50.7% for its first half of the financial year ending September 2009, Petronas will still maintain its record dividend payout of RM20 billion to the Federal Government this year.

Now we fear worse is to come with the unwelcome change at the helm of Petronas. Below is my comments to AFP on the change of guards.

Malaysia's opposition Friday accused the government of meddling in cash-rich energy giant Petronas after a new chief executive was named for the state-owned company.

The government announced on Wednesday that Shamsul Azhar Abbas, 57, would replace Hassan Merican, who has led the company since 1995. In a statement, it noted that Hassan's contract expires next Tuesday but gave no more explanation.

Analysts have lauded Hassan for his independence. Petronas -- Malaysia's only Fortune 500 company -- contributes almost half the country's budget revenues.

Its cash is all the more valuable after Malaysia last year ran up its highest budget deficit in 20 years, at 7.4 percent of gross domestic product, during the global financial crisis.

"The fear is that the wealth of Petronas is now at risk of further plunder by the government," opposition parliamentarian Tony Pua told AFP.

"There is fear that (Prime Minister) Najib Razak will arm-twist Petronas into providing more funds than Petronas can afford into funding the federal government," said Pua, who is from the Democratic Action Party.

The prime minister's office declined to comment to AFP.

But analysts at AmResearch said the company was in safe hands under Shamsul, formerly the chief executive of shipping giant and Petronas subsidiary MISC.

"We are positive on this development as Shamsul's extensive experience with Petronas should ensure that the group's strategies, direction and policies remain intact," AmResearch said in a report.

"This is vital given the group's thrust in further developing deep-water and overseas projects such as the four recent oil well concessions in Iraq," it added.

Petronas is part of a consortium led by PetroChina that has formally signed a 20-year deal with Iraq to develop the Halfaya oil field, which has proven reserves of about 4.1 billion barrels.

Petronas is also helping to develop offshore gas resources from the vast Sunrise field off East Timor.
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