OBSERVERS LAUD PETRONAS’ BIG RENEWABLES PUSH
Petronas continues to make hefty contributions to country and people
WE are all Petronas-watchers, so to speak. Well, if you are the only company in the country to have made the Fortune 500 Global list, you are bound to be in the watch-list. Fame and fortune comes with a price-tag. Petronas has come a long way since it was given RM10 million as a start-up capital in 1974. It continues to make hefty contributions to the country and its people. This comes in the shape of royalties, taxes and jobs, though its contributions have been reduced somewhat with the crude oil prices taking a deep dive in recent years.
Last year, Petronas reported a 12 per cent increase in after-tax profit of RM23.5 billion, a jump from RM20.9 billion in 2015. The company attributed the increase to lower operating expenditures and tax expenses partially offset by lower average crude prices.
Petronas’ cost-cutting measures have also brought in RM4.1 billion, a hefty sum in anyone’s reckoning. Cost-cutting, especially when it comes with retrenchment, sometimes sends shivers down the nation’s spine. Again, this is a cost of being a national icon.
Petronas has also played an important role in growing the local oil and gas services sector since its incorporation in August 1974, though the latter has been hit badly by the slump in oil prices. Our estimate indicates more than 4,000 oil and gas services company in the country.
And they are too reliant on Petronas to dish out projects. It may have been a natural thing to do during their infancy but the reality of depleting reserves at home and the low-for-long oil prices make the reliance on a single domestic source unwise. Definitely not a strategic one.
But many of the companies lack the size and capacity to bid for international tenders, though we must credit some who have tried and succeeded against all odds. But these are few and far between. According to a study done in 2011 by Malaysia Petroleum Resources Corporation (MPRC), 61 per cent of our oil and gas services companies have paid-up capital of RM 1 million and below.
Although as a total the services industry may employ a good number of people, individually they are not such big employers. Close to 80 per cent of the companies employ less than 50 people. Consolidation may be a strategy the companies may want to pursue. Being a small fish in a crowded pond is not an option.
It is good to learn from Petronas that it is making a big push into renewable energy (RE) as part of the national giant’s energy mix. Bio-fuel and solar energy may be the way to go given the fast depleting reserves.
Wind may be an added option but other than offshore there isn’t a a place in Malaysia where there is enough gusts to turn the turbines. But RE is the way forward as it will keep the engine of the economy moving and homes lit when we run out of fossil fuels.