POLITICAL POWER FAILS VILLAGE HERO PETRONAS

I think Petronas is too comfortable. There is not much of new things from them in recent years. If left to their own devices without proper pressure, it could lead to be like the tin mining industry of yesteryears.  As a friend rightly pointed out, tinggal kapal korek je la...

This week most of the oil and gas majors have announced their 1st quarter performance. Exxon & BP didn't do that well. Shell and "surprisingly" Chevron did well considering the plunge in the oil market. 

But how about Petronas? Well... normally they are a "bit" slow. 

Expect by end of May or early June to hear from them.

Talking about being slow, the talk in the industry is that they are slow in making decisions. But that is another story.

Back to the quarterly performance reports, one consistent attribute of these big boys is they are very transparent and forthcoming in sharing their performance.

Aside from the usual indicators like revenue, profit, operating margins, they also share their daily production during the quarter. 

With breakdown of domestic vs international production and profit. 

Profits from their domestic vs international downstream operations. 

Some also shares performance by sectors like gas, refining, chemicals and even contribution from trading. 

From this transparent reporting, we can find out which sectors are good contributors to their bottomline. Or are they relying on their respective domestic markets?

Can we get the same level of transparency from Petronas? 

• Don't just lump everything into one - macam jual baju bundle - and tell the public that they make huge profits? 
  
• Profits are definitely expected from Petronas since all the rights to develop the oil and gas resources in this country is given to them. No competitor! There is no competition. Petronas is a monopoly.  

Plus, Malaysian basins are not as challenging as in the North Sea or the Gulf of Mexico.

• We want to know whether they are an efficient producer. 
• How much is their production cost per barrel? 
• How are they benchmarked against regional and global producers? 
• How much of their production in terms of volume and profit are from international ventures? 
• Ke just jaguh kampung?

In terms of downstream, which is about adding value to their resources and margin play, does Petronas have any significant presence regionally? Forget globally. Regionally first.

And there is no need to heboh macam ayam bertelur about their domestic achievements. In domestic market Petronas is a monopoly.

Petronas is approaching 50 years old! 

Look at Exxon and Shell when they were in their jubilee years.

Can Petronas develop retail business in the Phillipines just like Petron do in Malaysia? 

Why did Petronas fail in Indonesia and Thailand in retail business? 

Shell and Petronas were the first foreign companies to compete with Pertamina in Indonesia. But Shell is still there and growing. Now, even BP is flourishing with their local partner-AKR in Indonesia.  What happened to Petronas in Indonesia?

If Petronas has no significant presence in overseas markets, maybe it is time to review their sponsorship of the F1. And the F1 sponsorship is not cheap. Since Petronas gives away berpuluh puluh million USD, do they at least get exclusivity to supply to Daimler? Tak ade pun. So what is the benefit in burning hundreds of millions of Malaysian Ringgit in F1 sponsorship?

It is not about glamour je. Branding should follow with sales of product globally. There are other effective (and cheaper) strategies to promote the Petronas brand. After all, Sepang International Circuit doesn't host F1 anymore. So can Petronas' lubricant business cover the cost of the F1 sponsorship? Is their lubricant business even profitable? Are they in the top 10  of Asia Pacific ranking? 

SINGAPORE 

• Just to share, Singapore which doesn't have any natural resources in oil and gas aside from their manpower capability is the biggest refiner (1.4 million bpd) and petrochemical business in ASEAN. 
• Singapore also is the hub of Oil & Gas in the Asia Pacific. 
• They positioned themselves to cater for the inefficiencies and shortcomings of the regional players. 
• Indonesia which is short of refining and petrochemicals capacity has been a big market for Singapore players.

THAILAND : Similarly, Thailand has been successful in developing petroleum / petrochemical business in Indochina and Myanmar.   The whole ASEAN continent is their backyard for their petroleum, petrochemical and lubricant business. That is how they get to develop their refining and petrochemical capacity to be no 2 in the region. Now, Thailand is developing their LNG logistics capability to be LNG regional hub.

What is the difference between Singapore and Thailand vs Petronas? 

The answer :  Ambition and Planning !

Petronas seems to be contented. Indonesia which is a huge market could provide a great opportunity for Petronas to expand regionally. 

No doubt, the present oil market is bearish. 

But in the long run, investment in refining and petrochemical plants in Indonesia will provide a significant footing for Petronas. 

Just like Shell and Exxon when they started in Malaysia and Singapore many decades ago. (The Shell Singapore refinery is Shell's  biggest refinery in the world).

Petronas used to be the top LNG exporter in the world. Now they are no 5 behind Qatar, Australia, US and Russia. What is their ambition in LNG? To be an LNG bunker player! Compare that to PTT Thailand which is a major LNG importer in ASEAN. Apa la...

On the same note, it would be good to get updates about Petronas' investments in Canada. In a few years, it will be a decade since they bought Progress Energy Resources for about USD5.0 billion. 

Yet, according to 2020 World LNG Report, there has been zero LNG export from Canada in 2019. Tanam musang king pun dah dapat hasil... 

Petronas leadership always state that they have been in the business long enough to persevere during market downturns.  Is that the right mindset to have? Remember Bear Stearns collapsed during 2008 global financial crisis.

• It is time to look at Petronas' leadership capability. 
• Does Petronas have the right leadership to bring Petronas forward? 
• Is Petronas leadership too top heavy? 
• Too many GMs, SGMs, VPs and EVPs? 
• Do they have the right business acumen? 
• Is there too much cronyism? 
• Are new ideas welcome in the organization? 
• Or are there too many circuit breakers in leadership positions?

Maybe it is time to bring an outsider to be Petronas CEO. 

The notion that the Petronas CEO has to be an internal candidate should be challenged. 

Most important is to have someone who is a professional with a strategic mind and excellent business acumen. This sort of professional normally posessses great ability to adapt and learn fast. Furthermore, he or she will be supported by his lieutenants.

OSTB's comments :  

To summarise - bukan duit bapak dia. Duit orang lain. Duit kita. 

My view is Petronas has been Malaysia's largest wallpaper supplier for over 40 years now.  

Dr Mahathir got the ball rolling by taking all the cash money generated from our oil wealth and using it to simply wall-paper all the cracks in his economic policies.  

If something cracked (like Bank Bumiputra) then just get oil money generated through (not by) Petronas and cover the Bank Bumi cracks. Bail them out.

When MAS went bust (for the 1st or 2nd time),  just take the oil money and wall paper the cracks in MAS. Bail out. 

Bail out Proton, build Putrajaya, the FI races, the KL Twin Towers - all these were built or bailed out - using WALL PAPER supplied by Petronas. 

Don't forget Petronas' disastrous foray into private hospitals. They built that super 5 star hospital in KL that was later sold to that other GLC for over RM1.4 billion - after making losses. They were so adventurous. Bukan duit bapak dia.

Petronas has been Malaysia's largest wall paper supplier.

So I am not surprised at all to read these comments above - that even internally Petronas is very wanting.  Still lacking in many ways. 

The writer above has listed quite a few non-achievements by Petronas - which he says they should have achieved by now.

That lubricant business and the F1 sponsorships are points to note.

In meetings with Dr Mahathir,  I have personally brought up at least twice, Petronas' (US5 Billion?? - I thought it was more) investments in Canada. Habuk pun tak ada.

The writer now says that in 2019 there was zero gas output from the Canada investment.  So apa sudah jadi duit kita? 

I know that Petronas spent billions building pipelines and gas terminals in that Canada project  that became underutilised or unused. They also had to pay millions to Canadian natives (1st Nations) for trespassing on native lands. And the process caused massive delays. 

Well will Petronas answer all these points? I don't think so. 

Transparency is not a great friend of inefficiency or ineptitude. 

For starters Petronas should just tell us how many barrels of oil they are producing per day?  And how much gas? 

Itu pun rahsia besar kah?  

If they do not divulge such basic information then it will lead to speculation that they cannot justify their spending. Otherwise why so shy with information?