Petronas tires of being piggy bank
Interesting signals from Malaysia that Petronas may be tiring of being used as a piggy bank by the government, which relies on the state owned national oil company for more than a third of its revenues.
By Kevin Brown, beyondbrics
Shamsul Azhar Abbas, chief executive, disclosed to local reporters in Kuala Lumpur that Petronas is in talks with ministers over proposals for a dramatic shift in the way it pays dividends to its sole owner.
Up to now, the government has taken a flat M$30bn ($9.9bn) a year in dividends from Petronas, whatever its performance. That is a hefty contribution to federal government revenues, which last year amounted to M$199bn.
However, it is only a fraction of the oil company’s total bill. On top of the dividend, Petronas also pays petroleum income tax, corporate income tax, export duties and royalties.
It’s not clear how much all that will amount to this year. But Hassan Merican, Shamsul’s predecessor, said in mid-2008 that the total for the 12 month to March of that year amounted to a staggering 44 per cent of government revenues.
When you take account of the oil company’s additional role in financing prestige projects such as the twin towers building in Kuala Lumpur and the new national administrative capital at Putrajaya, it’s not hard to see that the government would be hard pressed to continue without its oil-generated revenues.
Yet, according to Shamsul, ministers are discussing a switch from the flat divident payment to a system under which Petronas would hand over 30 per cent of its net profit.
That would not be a small sum. The company’s net profit soared 36 per cent to M$54.9bn for the year to March, which would have prompted a payment of $16.2bn to the government under the proposed system. But the question is, how would the government make up for M$13.bn in lost revenue?
