Malaysia’s national oil-and-gas company Petroliam Nasional Bhd, or Petronas, may lose a portion of revenue following the appointment of Petroleum Sarawak Bhd (Petros) as the sole gas aggregator in Sarawak.
The earnings impact to Petronas remains uncertain. Depending on the loss, the shift could affect its ability to keep up capital spending in the long term. Its current balance sheet remains solid, even with dividend commitment to the federal government.
The gas segment contributed about RM101 billion, or 30% to Petronas’ revenue in 2023. Petronas also delivered 403 liquefied natural gas (LNG) cargoes from its LNG complex and 38 LNG cargoes from two floating LNGs (FLNG) and 2.2 billion standard cubic feet per day of average sales gas volume in Peninsular Malaysia.
On May 13, Sarawak announced that Petros will take over Petronas' role in all-natural gas trading activities in the state effective July 1. Petros and Petronas also agreed to sign a definitive agreement where Petronas will acknowledge Petros as the sole gas aggregator.
The agreement allows Petros to conclude gas purchase agreements with all upstream producers involved in the production of natural gas in Sarawak and gas sales agreements with all downstream buyers, foreign or domestic.
Consequently, Petronas will cease all buying and selling activities of the product in the state and hand over its natural gas distribution network and system to Petros. The gas business took up 22% of Petronas’ domestic capital expenditure, and the transfer to Petros may lead to a “more prominent” cut in the segment.
The Petroleum Development Act (PDA) of 1974 was an agreement made by all states, including Sarawak led by then Chief Minister Rahman Ya’kub. The deal was simple: if oil was found in waters adjacent to a state, that state would receive a 5% royalty.
This isn’t just about oil and gas—it’s about the future of Malaysia. If the current trajectory continues, we could see the collapse of one of the nation’s most valuable assets, dragging down the hopes and dreams of millions with it. The nation stands at a crossroads, and the decisions made soon will determine whether we remain united and prosperous, or whether we splinter, to everyone’s detriment. The solution isn’t simple, but it is clear: find a way to balance Sarawak’s rightful demands with the broader needs of the Federation. On 12 December, Bernama reported that the Federal Government and the Sarawak administration have decided on the gas distribution in the state between Petronas and Petros. Details are being fine-tuned. If that is the case, it is good!
Reference:
Petronas may lose part of revenue to Petros, capex may be hit — RHB IB, Jason Ng/ theedgemalaysia.com, 22 Jul 2024
PM announces gas distribution issue between Petronas, Petros settled, Bernama, 12 December 2024
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