Understanding Petronas

A lot of people do not understand the role and function of Petronas, which is essentially a company, a business entity, which operates on a commercial manner, to mainly generate income and value for its shareholder. In this case, PETRONAS' shareholder is the Government.

In 1974, when Petronas was set up, the Government gave Petronas RM10 million (peanuts, right?) as seed capital. From 1974 to 2007, PETRONAS made RM570 billion in accumulated profits, and returned to the Government a total of RM335.7 billion. That is about 65% of the profits. That means for every RM1 that Petronas makes, 65 sen goes back to the Government.

Last year, Petronas made a pre-tax profit of RM86.8 billion. The amount given back to the Government (in royalty, dividends, corporate income tax, petroleum products income tax and export duty) was RM52.3 billion. The rest of the profit was used to pay off minority interests and taxes in foreign countries (about RM7.8 billion - Petronas now operates in more than 30 countries), and the remaining RM26.7 billion was reinvested. The amount reinvested seems a lot, but the oil and gas industry is technology- and capital-intensive. Costs have gone up exponentially in the last couple of years. Previously, to drill a well, it cost about US$3 million; now it costs US$7 million. The use of rigs was US$200,000 a day a couple of years ago; now it costs US$600,000 a day.

A lot of people also do not realise that the amount returned by Petronas to the Government makes up 35% of the Government's total annual income, to be used by the Government for expenditures, development, operations, and yes, for the various subsidies. That means for every RM1 the Government makes, 35 sen is contributed by Petronas. So, instead of asking what happens to Petronas' money or profits, people should be questioning how the money paid by Petronas' to the Government is allocated.

A lot of people also ask, why Malaysia exports its crude oil. Shouldn't we just stop exporting and sell at cheaper prices to local refiners? If Malaysia is an oil exporting country, why can't we sell petrol or diesel at cheaper prices like other oil producing countries in the Middle East?

I guess I don't have to answer the first couple of questions. It's simple economics, and crude oil is a global commodity.

Why can't we sell petrol and diesel at lower prices like in the Middle East? Well, comparing Saudi Arabia and other big producers to Malaysia is like comparing kurma to durian, because tese Middle Eastern countries have much, much, much bigger oil and gas reserves.

Malaysia has only 5.4 billion barrels of oil reserves, and about 89 trillion cubic feet of gas. Compare that to Saudi Arabia's 260 billion barrels of oil and 240 trillion cubic feet of gas. Malaysia only produces 600,000 barrels per day of oil. Saudi Arabia produces 9 million barrels per day. At this rate, Saudi Arabia's crude oil sales revenue could amount to US$1.2 billion per day! At this rate, it can practically afford almost everything -- free education, healthcare, etc, and subsidies -- for its people.
But if we look at these countries closely, they have in the past few years started to come up with policies and strategies designed to prolong their reserves and diversify their income bases. In this sense, Malaysia (and Petronas) has had a good head start, as we have been doing this a long time.

Fuel prices in Malaysia is controlled by the Government based on a formula under the Automatic Pricing Mechanism introduced more than a couple of decades ago. It is under this mechanism that the complex calculation of prices is made, based on the actual cost of petrol or diesel, the operating costs, margin for dealers, margin for retail oil companies (including Petronas Dagangan Bhd) and the balancing number of duty or subsidy. No retail oil companies or dealers actually make money from the hike of the fuel prices. Oil companies pay for the products at market prices, but have to sell low, so the Government reimburses the difference -- thus subsidy.

Subsidy as a concept is OK as long as it benefits the really deserving segment of the population. But there has to be a limit to how much and how long the Government should bear and sustain subsidy. An environment where prices are kept artificially low indefinitely will not do anyone any good. That's why countries like Indonesia are more pro-active in removing subsidies. Even Vietnam (which is a socialist country, by the way) is selling fuel at market prices.

I feel I also need to say something on the allegation that Petronas is not transparent in terms of its accounts, business transactions etc.

Petronas is first and foremost a company, operating under the rules and regulations of the authorities including the Registrar of Companies, and the Securities Commission and Bursa Malaysia for its listed four subsidiaries (Petronas Dagangan Bhd, Petronas Gas Bhd, MISC Bhd and KLCC Property Holdings Bhd.

Petronas the holding company produces annual reports which are made to whomever wants them, and are distributed to many parties and places; including to the library at the Parliament House for perusal and reading pleasure of all Yang Berhormat MPs (if they care to read). Petronas also makes the annual report available on its website, for those who bother to look. The accounts are duly audited.

The website also contains a lot of useful information, if people really care to find out. Although Petronas is not listed on Bursa Malaysia, for all intents and purposes, it could be considered a listed entity as its bonds and financial papers are traded overseas. This requires scrutiny from investors, and from rating agencies such as Standard & Poor and Moody's.

There are also calls by the Malaysian public especially through blogs, alternative news portal, Facebook, Friendster, MySpace, Multiply and various social interface networks on the internet to boycott Petronas. Well, the last time I checked, this is still a democratic country, where people are free to spend their money wherever they like.

For those who like to see more of the money that they spend go back to the local economy and benefiting their fellow Malaysians, perhaps they should consider sticking to local products or companies.

For those who like to see that the money they spend go back to foreign shareholders of the foreign companies overseas, they should continue buying foreign products.

I'm sorry if this is rather long, but I just have to convey it. I hope this would help some of you out there understand something. The oil and gas industry, apart from being very capital intensive, is also very complex and volatile.

Don't simply attack Petronas. Check your facts first.

Dr. Faiz Khaled - Don't Push Your Luck!

Tak Ada Maknanya!!

The more I read about our now uncertain astronaut programme, the more I'm convinced that our second astronaut candidate, Major Dr. Faiz Khaled is getting more and more desperate to get his ass to outer space.

I can understand the army dentist's predicament. His colleague - Dr. Sheikh Muszaphar Shukor is already on cloud nine with all the glamour and glory after being the first Malaysian to go to space and spend a few days at the International Space Station, hence earning the UKM physician cum model the undisputable title of "Angkasawan Pertama Negara" or something like that.

But the thing is my dear Dr. Faiz Khaled, more and more Malaysians are now convinced that it is a total waste of money to send you for another excursion to space. Money that we don't have. Faham tak?

Please don't patronise us with your now so boring standard quotes like "the aerospace industry is an investment by Malaysia in education, science and technology" or "the angkasawan programme would inspire more young Malaysians to excel in science and technology" and a million other gobbledygook. Tolonglah!

Newly appointed Minister of Science, Technology and Innovation, Datuk Dr Maximus Ongkili already said that the ministry, which is in charge of the Malaysian space programme, does not have sufficient funds in its coffers to finance Dr Faiz's taxi ride to space because this time around, the government would have to foot the bill in full, about RM100 million or perhaps even more, compared to Dr. Sheikh's taxi ride which was under a contra-deal made with the Russians when we bought the Sukhoi MKM-30 air superiority fighter jets for the RMAF. Itupun the Malaysian government still had to fork out quite a sum to finance both Dr Sheikh's and Dr. Faiz's zig zagging between Malaysia and Russia for training and all. So there you have it - kita dah memang tak ada duit nak hantar awak pergi angkasa lepas, reti?

This is exactly the problem with Dr Faiz Khaled and even Dr Sheikh for that matter. Dua-dua perasan bagus. They think they are so cool already just because they are the country's astronauts (well, almost for Dr Faiz). They should be ashamed if they compared themselves with the US astronauts, Russians cosmonauts and Chinese taikonauts. You know why? I'll tell you why. Let's take US astronauts for example. Most of them are either US Air Force, US Army, US Navy or US Marine Corp pilots who have logged more than 6,000 flying hours (both combat and peace time) which is one of the pre-requisites to even be considered for entry into the coveted US Astronaut Corp under NASA. And that's not all. Being merely military pilots does not qualify them automatically. They must also possess degrees or double degrees in core science disciplines related to aerospace or space science such as nano-physics, nuclear-physics, astro-physics, advanced biology, advanced chemistry etc. etc. etc. This would enable them to either become mission commanders (meaning flying the space shuttle using their military aviation background) or mission specialists (meaning they can conduct high tech and meaningful science & technology experiments in space using their academic background). In short, US astronauts are required to be all rounders.

That's just the paper qualifications. And then comes the training. US astronauts train for a minimum of 7 to 8 years prior to lift off to space. Itu pun belum tentu dapat pergi, tau tak? There is no guarantee by NASA that you will get a seat in the space shuttle even if you have trained for that many years. Because it's so competitive and standards are very, very high. You'd be lucky if you are in the first back-up team or second back-up team.

Having said all that, it is also the same for the Russian cosmonauts and Chinese taikonauts. Most of them are military aviators with superior academic background. Bukannya macam our angkasawan yang undergo abridged training for 18 months. Dr Sheikh and Dr Faiz attended "short-cut" training because the cash-strapped Russians already promised the Malaysian government that by hook or by crook, one of the boys would be in space within the agreed timeframe.

And when Dr Sheikh returned to earth and back to Malaysia, what did we get?? Did we benefit at all? Well, perhaps school kids are inspired and excited to see the angkasawan when he conducts motivational talks at their school but that's as good as it gets. Where on earth are all the end results of the experiments he conducted for the good of mankind? Are we ever going to be at least informed of the end results no matter how long it takes? Hmm, memang tak ada le tu rasanya. As usual, Malaysia end up with dirt again, being suckered big time by Russia.

So, here's an advice to Dr. Faiz - stop whining and if you don't get to go, deal with it. No need to justify with all sorts of comments in the media. Kalau dapat pergi, bagus, Alhamdulillah. Kalau tak dapat, duduk aje diam-diam.

We Cannot Simply Compare Based On Forex

Malaysia's ERL - better than London's Heathrow Express?? Wow!

I'm so sick and tired of both the government and private sector who has the tendency to compare loosely based on foreign exchange when justifying their claims that prices in Malaysia (for whatever products or services) are cheaper than other countries.

The latest was Dr. Aminuddin Adnan, CEO of Express Rail Link (ERL) Sdn Bhd who said that the ERL (Malaysia's high speed train from Kuala Lumpur to the Kuala Lumpur International Airport) is better than the ones in Europe, particularly the Heathrow Express. The story was published in the New Straits Times yesterday. The statement was made by the CEO to refute claims by Keretapi Tanah Melayu Berhad Workers Union president Abdul Razak Md Hassan that the service was not practical and cost-effective in a report in Mingguan Malaysia on Sunday when rejecting a proposal by YTL Corporation (ERL's parent company) to start a bullet train service from Kuala Lumpur to Singapore.

Come on, ERL better than Heathrow Express? Oh please. I've been on the latter during my visits to London - you cannot compare with ERL. Period.

Anyway, what Dr Aminuddin meant by saying ERL is better than the ones in Europe was in terms of cost and also ticket price. The CEO claims that overall expenditure on the project was RM2 billion, which remained the lowest cost per kilometre, or RM35 million, (20 per cent of the cost of Heathrow Express in London).

Aminuddin added that the ERL service was 99.7 per cent reliable, which was much better than similar services in Europe or local train services. He also said the RM35 fee per trip was significantly cheaper than in London which charged STG17 (RM107) for half the distance.

Now, this is what I want to refute - it costs RM107 for a ride on the Heathrow Express from Heathrow International Airport to London's Paddington Station. Of course it would cost that much for a Malaysian but for a British, it is a straight forward 17 bloody pounds! And to the Brits, 17 bloody pounds is the same as RM17, get it?! If Dr Aminuddin really wants to claim that ERL is cheap, why not reduce the price from RM35 to say RM20? I'd say that's a fair price, don't you think?

This is exactly our problem. We like to compare loosely based on foreign exchange. I'll give you a simple example. Say you travel to London for a vacation and you walk into a McDonald's for your favourite Double Cheeseburger. Here in Malaysia, the burger would cost about RM4.75 or let's just round it up to RM5. In London, the same burger would cost about STG3.50 or let's just round it up to STG4. Okay, and now comes the foreign exchange calculation - STG4 x 7.5 = RM30. Would you say that the Double Cheeseburger in London is bloody expensive because its RM30?? Or would you just take it at face value, and pay the bloody STG4 like any other Brit for the burger? If we are so obsessed with calculating forex, don't even bother to holiday in Europe, US, Australia or any country of which the forex is to our disadvantage. Because the fact is, our Ringgit is what it is at the moment, not as strong as the USD, STG, Euro or the AUD.

And I won't even bother to discuss about our government's tendency to compare, again loosely on forex, when claiming that our fuel prices are the cheapest in South East Asia (except for Brunei). Meaning Brunei is still the cheapest, right? And what about fuel prices in the United States? Over there in the great land of Uncle Sam, they charge fuel by the gallons. Miles per gallon. That's why Americans can afford to drive fuel guzzlers with mammoth engine capacity - V8s, V10s, V12s. We're talking 5.0 or 6.0 litres family sedans and SUVs here.

Stop this nonsense comparison please!

Goodbye EPL Title, Try Again Next Season Gunners

It's all cast in stone now. Arsenal will not lift the EPL title this season after losing 1-2 to MU at Old Trafford early this morning (Malaysian time).

This also means no silverware at all for the Gunners this season after failing to advance to the semis of the Champions League (no thanks to Liverfool) and also the FA Cup (again, no thanks to MU). It's a pity really because Arsenal performed exceptionally well at the start of the season on to mid-season but unfortunately, kind of lost its magic towards the end.

Arsenal has two options now. Either win all remaining four games and hope MU loses at least three (yeah, right!) or just take it easy and really focus for next season. I'd say go for option one - win all four games and at least end the season with some dignity. Who knows, Gunners can even secure second spot and knock Chelsea down to third.

Whatever it is, Arsenal played a splendid game against MU yesterday. They fought till the end. Lady luck just weren't on their side. They deserved to win. I hate MU. Period.

Oh, here's a message to Owen Hargreaves who scored MU's winning goal - you're only great in England, you won't even be playing in Euro 2008 because England won't be there. Sucker!

Anyway, to Arsenal, I will always love you guys and support you forever. I've been supporting you guys since I was 8 years old.

Go Gunners!

Keputusan PRU 12 : Melayu Mesti Sedar Bahaya Yang Dihadapi

Keputusan Pilihanraya Umum Ke-12 (PRU 12) telahpun diketahui dan rakyat Malaysia telahpun membuat pilihan.

Saya hanya mampu menggelengkan kepala apabila keputusan diumumkan di kaca televisyen pada malam 8 Mac dan juga awal pagi 9 Mac. Saya bersengkang mata hingga ke subuh untuk mendapat kepastian dan merasa begitu terkilan apabila mengetahui rakyat Malaysia memilih untuk menumbangkan kerajaan Barisan Nasional (BN) di empat negeri pantai barat iaitu Kedah, Pulau Pinang, Perak dan Selangor. Malah, BN telah dinafikan majoriti dua pertiga di Parlimen. Syukur Alhamdulillah kerana BN masih mampu menubuhkan Kerajaan Persekutuan dengan majoriti mudah.

Berdasarkan keputusan PRU 12 tersebut, saya berharap rakyat Malaysia, khususnya orang-orang Melayu yang ”anti-establishment” telah berpuas hati dengan apa yang mereka lakukan. Atas alasan undi protes dan juga emosi jangka pendek, mereka sanggup menggadaikan masa hadapan kaum mereka sendiri hingga menyebabkan Pulau Pinang kini diterajui oleh seorang Ketua Menteri dari parti DAP yang jelas lebih mengutamakan satu kaum sahaja walaupun mendakwa mereka parti pelbagai kaum. Perak juga diambang pemerintahan seorang Menteri Besar dari parti yang sama. Selangor pula mendapat Menteri Besar dari Parti Keadilan Rakyat (PKR) yang bertanggungjawab melumpuhkan kewangan sebuah syarikat besar negara ketika beliau menerajui syarikat tersebut sehingga memaksa ”mega merger” untuk menyelamatkan ia daripada melingkup. Kedah pula bakal mengalami keadaan caca marba seperti Terengganu pada tahun 1999 di bawah kepimpinan PAS. Silap haribulan, destinasi pelancongan tersohor negara iaitu Langkawi bakal menjadi ”sleepy hollow” akibat dasar-dasar PAS yang sudah hampir pasti akan dilaksanakan di Negeri Jelapang Padi itu.

Bagus dan tahniah kepada orang-orang Melayu yang ”anti-establishment” yang memainkan peranan besar menumbangkan BN di negeri-negeri tersebut. Teruskan perbuatan anda di PRU 13 lima tahun dari sekarang. Sudah alang-alang, tumbangkan terus BN di peringkat persekutuan. Ketika itu nanti, barulah tahu langit itu tinggi atau rendah. Lihatlah sahaja Pulau Pinang, baru sehari dua memerintah, DAP sudah tunjuk belang. Tidak perlu saya cerita lebih panjang kerana bimbang akan mewujudkan elemen berbau perkauman.

Kalau orang Melayu tidak sedar lagi bahaya yang sedang dihadapi, bermakna masa hadapan anak cucu kita sudahpun di pahat secara kekal di tembok perjalanan politik, sosial dan ekonomi negara yang amat saya sayangi dan cintai ini.

Pengundi-pengundi kaum bukan Melayu telahpun menunjukkan belang mereka ketika PRU 12 yang baru berlangsung dengan memilih parti yang boleh memastikan kepentingan mereka terus dipelihara malah mungkin juga ditingkatkan ke tahap yang mampu menghakis atau melenyapkan terus ketuanan Melayu di negara ini. Pulau Pinang, Perak dan kerusi-kerusi Parlimen di Wilayah Persekutuan Kuala Lumpur adalah bukti nyata akan langkah nekad kaum bukan Melayu untuk menjadi komponen rakyat yang lebih agresif, yang mampu menepis dan menangkis pengaruh UMNO sebagai parti politik utama yang mewakili kepentingan orang Melayu.

Namun, pengundi-pengundi Melayu sendiri yang telah mencabul penat lelah perjuangan UMNO untuk mereka dengan memilih pembangkang di PRU 12. Merekalah pengkhianat bangsa yang tidak pernah tahu bersyukur atas segala kenikmatan, keistimewaan dan kesejahteraan hidup yang diperolehi dari saat mereka lahir hinggalah sekarang yang semuanya kerana dasar-dasar dan sistem yang dicetuskan oleh kepimpinan negara sejak sekian lama iaitu BN yang diterajui UMNO.

Inilah masalahnya kalau sudah terlebih pandai atau lebih tepat lagi, pandai tidak bertempat. Untuk rekod, saya seorang profesional Melayu dan saya berterima kasih kepada BN dan UMNO kerana mewujudkan sistem yang membolehkan saya berada di kedudukan saya sekarang.

Tiada faedahnya menjadi ”anti-establishment” hanya semata-mata kerana ingin dilihat sebagai golongan yang celik dan cerdik dari segi kesedaran hak untuk memilih pemerintah negara. Macamlah negara kita ini terlalu teruk keadaannya seperti beberapa negara di Afrika, Asia Selatan malah sebuah negara jiran di Asia Tenggara yang mana rakyat memberontak kerana keadaan hidup yang sudah terlalu mendesak dan serba kekurangan. Yang lebih lucu, kebanyakkan orang-orang Melayu yang ”anti-establishment” ini adalah golongan yang berada sebenarnya. Di kawasan DUN Hulu Kelang dan DUN Bukit Antarabangsa di mana saya tinggal contohnya, kebanyakkan penyokong-penyokong PKR malah PAS memandu kenderaan pacuan empat roda mewah dan juga kenderaan mewah Eropah yang kita semua sedia maklum. Itulah ”anti-establisment” mengada-ngada namanya.

Mengada-ngada sehingga menyebabkan ketuanan Melayu kini ibarat telur di hujung tanduk. Fikirkanlah.

2008 - A New Hope

My valued readers,

Happy New Year 2008! I know it's a little bit too late to wish that but what the heck, it's the last day of January, which technically still qualifies my new year wish being uttered in the first month of the year. Whatever.

I know I haven't blogged for a zillion years, well close to 6 months I think, but it was all for a good reason. I was buried with work (the oldest excuse in the world) and more important, I needed to take a back seat in the bloggers' bus to find new inspiration. I guess it finally came today and it felt wonderful. As usual, someone triggered my comeback into the world of blogging. A friend actually. I just got into an argument with her and of course, I ended up on the losing end because she's the type who always have the win the verbal battle.

So, I guess my first entry of 2008 is more to blow off steam rather than to write something more meaningful to kick off the new year (which has 11 more remaining months).

Oh, I also found a new fun thing to do on the internet - Facebook. I love it! Have to admit, I've been more occupied with that rather than updating this blog. You see, FB is fun because it's not really a blog but a visual / pictorial interface where you can just upload your photos for your friends to see. It's more like an online individual directory. Definitely better than Friendster (that's for teens and small kids) and more versatile than MySpace. I found a lot of old friends through FB.

Anyway, watch this space and you won't be dissapointed. That much I can promise you....

Time For Bumiputeras To Compete On Level Playing Field

Suria KLCC - which proudly carries the tagline "Always Something New" That's why tenants are required to remodel their premises every 2 to 3 years to give the swanky mall a fresh look. Do we want Suria to turn into an Arked MARA if bumiputera tenants had their way?

I’m a Malay. A bumiputera. Naturally, I would like to see my people succeed in whatever they do, to be at par with other races especially when it comes to business and getting a bigger slice of the country’s economic pie.

But I’m really sad. I’m sad because after 50 years of independence, my fellow Bumiputera Malaysians still require the virtual crutches provided by the powers that be, to survive in a world which is becoming more and more globalised.

Take the recent outcry by Juhaidi Abdullah, the owner of Kelantan Delights Restaurant whom formerly traded at Suria KLCC, the nation’s premier world class shopping establishment, as an example.

He claims that Suria KLCC’s management enforced Draconian policies which “squeezed” and “intimidated” bumiputera tenants at the mall. He claims that he was forced out of business from Suria KLCC because he refused to agree to the ridiculous rental rates increase imposed by the mall and also for not agreeing to renovate his premises as required in the new tenancy agreement. He claimed Suria KLCC did not give room at all for negotiations. And the list goes on and on.

First, his predicament was highlighted and championed by a major Malay daily which created the issue as follow-up to a previous similar case also involving another bumiputera tenant who claimed they were “victimized” by Suria KLCC (the frachise holders of Levi’s / Dockers). And then the issue cooled down after 3 or 4 stories were published by the newspaper.

Apparently, Juhaidi was not satisfied and decided to seek the sympathy of another media organization – this time around, a major private television station. The first story was aired on 31st August 2007, the day we celebrated our 50th year of independence. And true enough, the station decided to angle the story of Kelantan Delights’ plight in the direction of bumiputera entrepreneurs whom were still being “colonized” by a foreigner running the shopping mall.

The story was so lame, if you ask me. If I was the producer of the news bulletin, I would have angled the story like this – “After 50 years of independence, why do bumiputera entrepreneurs still require special treatment? Can’t they now survive on a level playing field? Don’t they think it’s time to put away the crutches for good?” Something like that. But no, they just had to angle the story in a manner which would make other races in this country look down on bumiputeras, on the Malays.

What does Juhaidi expect Suria KLCC to do? To give him a discount on rental rates and exempt him from doing renovations on his restaurant? What would the other tenants say? Juhaidi should bear in mind that Suria KLCC is not Arked MARA or Kompleks UDA or some such premises established with the sole purpose of helping out bumiputera entrepreneurs. Suria KLCC is a world class shopping mall and it must be managed in a manner which befits its status as an international shopping establishment at the bottom of the world’s tallest twin towers housing one of the seven most influential oil and gas companies in the world.

To me, the success of Suria KLCC mirrors the success of its parent holding company which I need not mention here. Doesn’t it occur to us that this particular company in question has achieved what it has achieved today, being the only Malaysian company in the Fortune 500 list, because of excellent management and best business practices, without fear or favour? And let’s not forget, the people at the helm of the company are bumiputeras. The success of that company is also the nation’s success and we as Malaysians actually get the benefit through billion ringgit repayments back to the government which in turn distributes the wealth back to us. Only we don’t realize it.

So, to Juhaidi and his supporters, please think again. If you’re not up to it, then you don’t actually have what it takes to be a global champion. Not yet.