Petronas-Petros Collaboration: A Must for Malaysia’s Interest

The Market’s Buzz

The market has been abuzz with the most recent developments in Malaysia’s energy sector. This refers specifically to the ongoing dispute (and eventual resolution) between Petronas and Petroleum Sarawak Bhd (Petros), the move by Petronas to restructure (or “rightsize”) its workforce, and the most recent statement by the economy ministry regarding Malaysia’s Natural Gas Roadmap, which will involve breaking up the monopoly held by Petronas and Gas Malaysia Berhad.

Natural Gas: A Crucial Component

Natural gas is a crucial component of Malaysia’s energy mix, estimated to constitute 56% of the country’s energy generation by 2050. It is also an important component of Petronas’s portfolio, with 30% (RM101 billion) of its revenue in 2023 coming from the natural gas sector while accounting for 22% of its capital expenditure.

Petronas’s Portfolio

It is clear that the resolution of the Petronas-Petros dispute will have a substantial impact on Petronas’s bottom line as a large portion of its gas business relies on extraction from Sarawakian oilfields – a key reason why the state government pursued the matter so resolutely. However, I believe the impact on Petronas will not be as significant as some may fear.

As a multinational company, with a diverse business portfolio that spans over 100 countries, Petronas’s capabilities and revenue streams are not heavily dependent on Sarawak. Its global nature and diversification provide a broad range of strategies to mitigate any potential impact of its situation in Sarawak.

Regulator and Operator

For this reason, Petronas should not be unduly concerned about the minister’s announcement to end its monopoly with the upcoming implementation of Malaysia’s Natural Gas Roadmap. In one sense, Petronas has never truly held a monopoly as it has always functioned as both regulator and operator.

As a regulator, Petronas has had complete authority under the PDA Act 1974. As an operator, its business units – including Petronas Carigali Sdn Bhd, Petronas Gas Berhad, Petronas Dagangan Berhad, and MISC Berhad – already compete in the open market, both in Malaysia and abroad.

Petronas’s Restructuring

Petronas’s decision to “rightsize” more than 50,000 of its staff is, in my opinion, inappropriate. A much more harmonious approach would be to make the restructuring global, allowing workers affected by the dispute to be absorbed into other business units, whether in Malaysia or abroad.

Until now, Petronas has not announced the exact number of affected employees but has indicated that the restructuring will involve the “enablers” group, which will likely include thousands of workers. It is difficult to comprehend how such a disruptive action could be justified, given that the Petronas-Petros saga should not have such a substantial impact on Petronas as a whole.

Political Considerations

We know that not all business resolutions are based solely on commercial considerations. Political considerations often override economic ones, more so in Malaysia’s current political landscape. Given the composition of the federal government, its priority is to preserve its position in power.

And to remain in that power, every measure of support is crucial, especially from Sarawak. To be realistic, Petronas’s fate, or that of its employees, may not be the federal government’s primary concern at this moment.

Conclusion

For the record, at the time this article was written, the proposed Petronas-Petros collaboration had yet to be finalised and remains under discussion. The resolution will undoubtedly be complex, but we all hope it will ultimately serve Malaysia’s best interests.

FAQs

What is the impact of the Petronas-Petros dispute on Petronas’s bottom line?

The impact will be substantial, but not as significant as some may fear, given Petronas’s global nature and diversification.

Will Petronas’s restructuring have a significant impact on its employees?

No, not necessarily, as Petronas has indicated that the restructuring will involve the “enablers” group, which will likely include thousands of workers, and a more harmonious approach would be to make the restructuring global, allowing workers affected by the dispute to be absorbed into other business units, whether in Malaysia or abroad.

What is the significance of natural gas in Malaysia’s energy mix?

Natural gas is a crucial component of Malaysia’s energy mix, estimated to constitute 56% of the country’s energy generation by 2050.

What is the role of Petronas as a regulator and operator?

Petronas has always functioned as both regulator and operator, with complete authority under the PDA Act 1974 and business units that compete in the open market, both in Malaysia and abroad.