Thursday, 2 July 2009

The PETRONAS issue again.

If push comes to shove, the PM in asserting his will can do the following.

* Re-constitute the entire PETRONAS BOD.
* The PM can also replace the PETRONAS advisor.
* If the government is answerable on its financial management of this country, make PETRONAS answerable to parliament.

It would be interesting to have PETRONAS answerable to parliament. People have been complaining that PETRONAS is not answerable to parliament. Yes, they do read what PETRONAS published in their books and publications. But nowadays people are more critical. Since PETRONAS is owned by the people through agency of the PM, it must be brought to bear for its activities in Parliament.

Insulated from public and political scrutiny has allowed PETRONAS to behave beyond reproach. Maybe it has also spawned a nose thumping attitude among its employees. Maybe they think themselves as the privileged few. Perhaps like one blogger suggested, they represent the epitome of Malay management success. Perhaps all those are correct.

It is also true that, these days we must avoid blind trust. Why should anyone accept in good faith whatever PETRONAS employees think of themselves? Many of them think the world of themselves judging from the vitriolic responses whenever doubts concerning their professionalism and hear this, their patriotism were made. They are just the same like you and I.

We are actually tired of claims by PETRONAS employees that they are very patriotic people and that to keep PETRONAS within their exclusive control reflects their patriotism. When it comes to money, PETRONAS employees are likely to throw out their patriotism. Just like many people too. In recent years, PETRONAS has been losing many staff to Middle Eastern oil companies because of higher pay checks. So, money is the great humbler.

The public has a right to see how PETRONAS conduct itself in business affairs. Maybe the PM, like the public, wishes to see a greater sense of accountability. The people want to know how are the three agreements with Uzbekistan on production-sharing, exploration and petrochemical projects. What has happened to its purchase of FL Selenia, Europe's largest independent producer and marketer of branded automotive lubricants, for about US$4 billion? Has its purchase of Woodside Energy Ltd's Mauritanian subsidiaries for US$418 million resulting in PETRONAS gaining significant interests in eight upstream units in the country been good? The people also may be interested in finding out whether its purchase of US$1.1 billion worth of shares in the IPO of the troubled Russian oil giant ROSNEFT was a sound business decision? Or was that decision out of bounds from prying eyes?

In spite of its prowess in overseas ventures leading it to claim that 40% of its revenues are generated from these ventures, how did PETRONAS then lose out or ignored the chance to participate in developing Iran's GOLSHAN and FERDOWSKI gas fields? Has PETRONAS been less diligent in this deal allowing instead the business chance to be taken by Syed Mokhtar Al Bukhary's SKS ventures? SKS is a private business entity who succeeded in the deal. How was its possible for PETRONAS to not sight the possible deal on its business radar screen? Either PETRONAS management or its 'must-protect-at-all cost' BOD have been negligent in their duty to at least participate in the bid to get these fields.

How did the BOD conduct itself on the affairs surrounding SCOMI for instance? It has not explained how SCOMI has managed to secure sizeable business deals when Pak Lah was the PM. Scomi Group Bhd is a listed company provides oilfield drilling lubricants, engineering services, and other petroleum-related services. It has been said that Scomi has received RM1 billion worth of government contract. It got a contract from PETRONAS that was valued at approximately RM157 million in Turkmenistan.

Many regard PETRONAS as Malaysia's best-run government-linked company. We can accept that. Many of its employees are highly trained and dedicated. Its management is highly regarded too. These would support our contention, that PETRONAS and the government should not restrain itself from being upfront about its financials. If decisions made were sound business ones, PETRONAS shouldn't hesitate to allow scrutiny by parliament.

What was the BOD's stand when in the 1980s, PETRONAS was forced to purchase a Boeing 747 jumbo jetliner and lease it to the government-owned Malaysian Airline System? MAS had signed a letter of intent to use only Rolls-Royce engines on its 747s. This particular Boeing 747 uses engine made by Pratt and Whitney. To skirt around the contractual obligations and to push through the purchase of the Boeing 747 with Pratt and Whitney engines, why not ask PETRONAS to buy instead? Then PETRONAS can lease it to MAS saving MAS from being accused to have reneged on its agreement. Brilliant maneuver! But, this would have meant, the PETRONAS BOD was powerless.

To suggest now, that PETRONAS BOD must stand its ground and assert its 'independence' is irresponsible. My contention is it has never been independent. Placing it answerable before parliament is better. How independent was PETRONAS BOD previously? Well, in 1998, the oil company was forced to use its shipping arm, Malaysian International Shipping Corp Bhd, to acquire a debt-laden Konsortium Perkapalan Bhd (KPB), which faced debts, estimated at about RM1.7 billion. It also became the anchor tenant in PETRONAS Towers, the two iconic buildings that were also critically short of tenants in the years after they were completed. In other words, it has been used as a salvaging crew. Link here…