Thursday, February 11, 2010

Petronas Change of Guard

Here's another take on the change of guard at Petronas, by The Financial Times, UK. Concerns are being expressed everywhere internationally on this issue as the Government desperately seeks to gain easier access to the cash pile within our national oil company.

Malaysia on Tuesday ended the 15-year tenure of the executive who transformed its state-owned energy company from a natural gas exporter into one of the very few sophisticated state-owned oil and gas companies with a broad international presence.
Uncertain circumstances surrounding the replacement of Hassan Marican as chief executive of Petronas have intensified concern that one of the world’s only successful state-owned energy groups – or national oil companies (NOCs) – will suffer at the hands of its own government.

“NOCs survive or thrive on whether they are left alone,” said an oil executive, adding that the issue of autonomy was part of the reason for Mr Marican’s departure. He noted that Statoil of Norway was the only other national oil company of a resource-rich state that has become an international player.

Mr Marican, who was fiercely protective of Petronas’s autonomy, had opposed the board appointment of an important ally of Najib Razak, Malaysia’s prime minister. Mr Marican’s internationalisation of Petronas has resulted in the company sourcing more than a third of its oil and gas from outside Malaysia, whose own production is falling.

Christophe de Margerie, chief executive of Total, which has several partnerships with Petronas, called Mr Marican “an excellent leader,” while Alexander Medvedev, deputy chief executive of Russia’s Gazprom, said he was sad to see such a “high-level executive” leave.

In the dysfunctional world of state-owned oil companies there are very few “excellent” or “high-level” leaders. That lack of leadership has prompted the International Energy Agency, the rich countries’ watchdog, to warn of another possible supply crunch by mid-decade.

Mr Marican contributed to reduce the risk of such a shortage by his relentless search for oil development deals overseas until the final weeks of his tenure.
Late last year Mr Marican struck three deals to tap some of Iraq’s biggest oil fields, adding up to 800,000 barrels of potential production to Petronas’s portfolio.
Petronas has also done well in trickier places – such as Iran and Sudan – where international oil companies fear to tread.

He persuaded Tiaa-Cref, the large US asset manager, to keep its stake in Petronas in spite of misgivings about the company’s impact in Sudan, where the government has been condemned for human rights abuses. Three Chinese companies and an Indian company also involved in Sudan were unwilling or unable to assuage Tiaa-Cref’s concerns and lost its investments.

Petronas’s ability to invest in oil and gas could be curtailed if the Malaysian government were to decide to take a more hands -on approach, analysts and government officials said.

Tony Pua, an MP for the opposition Democratic Action party, said: “The fear is that the wealth of Petronas is now at risk of further plunder by the government.” Petronas amassed a $30bn cash pile in the past decade.

The balance sheet of Malaysia’s finance ministry is not so healthy. The country’s budget deficit reached a 20-year high of 7.4 per cent of gross domestic product in 2009 after the government introduced two fiscal stimulus programmes.

There was no direct government reply to Mr Pua but many Malaysians saw the appointment of Shamsul Azhar Abbas to succeed Mr Marican as chief as a sign that Petronas would remain relatively free of government interference.

Mr Shamsul was previously chief executive of Misc, Petronas’s shipping subsidiary. Robin West, an industry consultant, said changing the policy of allowing Petronas to make decisions with minimal interference would be a disaster. Mr West, chairman of PFC Energy, said Mr Shamsul was capable and experienced. But much of his success will depend on whether he is forced to compete with Malaysia’s prime minister for control of Petronas.
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