State govt wants active participation of Sarawakians in O&G

Taib (sixth left) and Ragad together with Abang Johari (on Taib’s right), (from left) Dr Abdul Rahman, Chan, Lee, Hii, Wong (on Ragad’s left) with others performing property toss ceremony of Yee Sang. 

MIRI: State government wants Sarawakian oil and gas (O&G) companies to take part actively in the exploration of O&G industry in the state, particularly in Miri which housed Malaysia’s first oil well in Canada Hill.

Chief Minister Datuk Patinggi Abang Johari Tun Openg said the state government has issued a license to its wholly-owned O&G company, Petroleum Sarawak Berhad (PETROS) to explore the oil and gas industry in Miri.

“We will pursue participation in term of economic diversification including digital economy and agriculture.

“Sarawakians have to be part actively in what Miri is famous for its oil and gas industry. Thus, we have given license to PETROS to explore the oil and gas in Miri,” he stated when delivering his speech during Chinese New Year (CNY) Gathering organised by Federation of Miri Division Chinese Associations Sarawak at Imperial Hotel on Friday.

The gathering, attended by some 700 guests, was graced by Head of State Tun Pehin Sri Abdul Taib Mahmud and wife Toh Puan Datuk Patinggi Ragad Kurdi Taib.

To protect the rights of the state, Abang Johari said the state is now exercising its power under the Constitution which demanded non-Sarawakian oil company to get license for operating in Sarawak.

Thus, he assured Sarawakians that there is room for local participation not only in oil and gas industry but also explore the hydrocarbon within the state borders.

“Last time, there is no opportunity for Sarawakian companies to be involved in oil and gas industry but now we can because we have the right to exercise our power.

“That is the strength that we have and I urge the people in Miri to stand behind us. It is because there are a lot of thing that we can do to further transform Sarawak into a real progress state by 2030.”

Also present were Assistant Minister of Tourism, Arts and Culture Datuk Lee Kim Shin, Assistant Minister of Rural Electricity Dr Abdul Rahman Junaidi, former deputy chief minister Datuk Patinggi Tan Sri Dr George Chan and wife Datin Patinggi Puan Sri Datuk Lorna Enan Muloon, Miri mayor Adam Yii, president of the Miri Division Federation of Chinese Associations Sarawak Hii Teck Yun, organising chairlady Wong Siew Wei and other Chinese dignitaries.


Don’t drop austerity mindset

Petronas tells O&G players sustainability of stronger oil price remains to be seen

WHILE the worst of the downturn in the oil and gas (O&G) industry is now over, the outlook is not blue skies. Cost is already showing signs of increasing at a worrying rate, and there is now some premature exuberance among the industry players.

Players should not drop the austerity mindset otherwise all the previous efforts from Petronas’ intensive cost-efficiency efforts over the last three years will be negated.

This was the key message that Petroliam Nasional Bhd (Petronas) president and group chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin wanted to highlight when he presented Petronas’ stellar full year financial results to Dec 31, 2017 to a room full of reporters.

Wan Zulkiflee also emphasised that the current stronger oil price was now supported by production cuts of the Organisation of Petroleum Exporting Countries (Opec) and non-Opec countries, hence the sustainability remains to be seen.

“Therefore, it is imperative to continue to keep costs under control, increase efficiencies and drive up value,” he said.

Certainly, oil prices have recovered remarkably since it started crashing from its high of US$110 in mid-2014. It hit its low of US$27 in January 2016, and has since been on a steady uptrend.

For the most part of 2017, oil prices hovered between the US$50 and US$65 level. Brent traded at US$64 as of press time yesterday.

Overall, Petronas announced strong financial results, both for its fourth quarter as well as its full year to Dec 31, 2017 due to stronger oil prices along with the group’s ongoing transformation efforts which focused on cost optimisation and efficiency improvements.

For the fourth quarter to Dec 31, 2017, Petronas’ profit after tax increased by 61% to RM18.2bil from RM11.3bil in the corresponding quarter last year due to higher revenue and lower net impairment on assets and well costs.

As a result, earnings before interest, taxation, depreciation and amortisation (ebitda) was also higher by 15%, at RM25.3bil compared to RM21.9bil in the corresponding quarter last year.

The group’s revenue rose to RM61.8bil, 14% higher compared with the corresponding quarter last year. This was contributed by higher average realised prices recorded for major products and higher sales volume mainly from LNG and petroleum products, partially offset by the effect of the ringgit strengthening against the US dollar.


The positive fourth quarter results were also driven by the upward trend of key benchmark prices and better margins.

“The continued drive for higher productivity and operational excellence have placed Petronas in a stronger position to execute its long-term growth strategy. Subject to sustainability of price recovery, the group expects to deliver a satisfactory performance in the next financial year,” Wan Zulkiflee told a press conference.

Meanwhile, for the full year, Petronas’ profit after tax jumped by 91% in 2017 to RM45.5bil, compared with RM23.8bil recorded in 2016.

The increase was achieved on the back of higher revenue, lower net impairment on assets and well costs and continuous efforts to optimise costs in 2017.

The group’s revenue increased by 15% to RM223.6bil compared with RM195.1bil recorded in 2016. The increase was mainly due to higher average realised prices recorded for major products coupled with the effect of weakening of the ringgit against the US dollar. This was partially offset by lower sales volume for crude oil & condensate and petroleum products.

Cumulative 2017 ebitda rose to RM92bil compared with RM70.7bil recorded in 2016, in line with higher profits.

Ratilal: At current price levels, we have done a lot of adjustments to our asset values, and these have been done over the last three years.

Cash flows from operating activities improved to RM75.7bil, an increase of 41% from RM53.8bil in 2016.

Total assets as at Dec 31, 2017 was slightly lower at RM599.8bil compared with RM603.4bil as at Dec 31, 2016 primarily due to the impact of the ringgit strengthening against the US dollar.

Shareholders’ equity of RM389.8bil as at Dec 31, 2017 increased by RM9.4bil compared to last year mainly due to profit generated during the year.

The group’s gearing ratio remained stable at 16.1% compared to 17.4% recorded last year. Return on capital employed (ROACE) increased to 9.8% compared to 5.4% in 2016, in line with higher profits.

Capital investments for the year ended Dec 31, 2017 totalled RM44.5bil, mainly attributable to the Refinery and Petrochemical Integrated Development (Rapid) project in Johor.

Below are excerpts from the Q&A session Wan Zulkiflee had with reporters. Also present was Petronas executive vice-president and group chief financial officer Datuk George Ratilal.


Petronas paid RM16bil in dividends in 2016. What was Petronas’ dividend payment in 2017 and what is it planning to give out in 2018?

WZ: We gave out RM16bil in 2017. For 2018, we are planning to give out RM19bil in dividends


Petronas spent RM44.5bil in capex for 2017. Will this increase in 2018?

WZ: Yes, this year Petronas is planning to spend more, around RM55bil.

Oil price estimation when planning its budget:

When Petronas planned its budget and capital expenditure in 2017, it planned it based on oil prices of US$45. What is Petronas’ estimation of oil prices when it plans its budget for 2018?

WZ: We will be basing our budget similar to the Government’s budget, which is at Brent oil prices of US$52 per barrel.

Outlook for oil price in 2018:

WZ: There are many things that affect oil prices. The Opec voluntary cuts, supply and demand, and also the speculative element. As a company, we are very conservative, and our forecast is somewhat lower than current prices, and this morning Brent was US$64.

In the bigger scheme of things, we are such a small player.

I think the global demand is about 97 billion to 98 billion of barrels a day, and we produce only half a million barrels a day. So in the overall scheme of things, we are small.

Going forward, I think oil prices will be decided by the bigger players. I think we need to look at inventory levels. That is the criteria we know that we have to achieve collectively, for Opec and non-Opec countries. Based on the inventory levels, Opec will decide whether they want to continue with the production cuts.


WZ: I have been on record to say that we welcome any such state-owned bodies or business entity in the oil and gas business. We welcome their participation, as long as it is set up within the proper arrangements that have been made.

Who decides on Petros’ investments, and who will be the governing body for Petros?:

WZ: I think since this involves Petros, it is better you ask them. I don’t think I am in a position to respond for Petros.

Level of consolidation among the oil and gas players:

WZ: There have been attempts by a few industry players in Malaysia, but I think it is not as material as we had hoped for. I know its not easy. But I think going forward, we still need competitive big companies to serve the industry in Malaysia and in the region. So we are still encouraging companies to consolidate.

Petronas’ Canada project:

In 2017, one of the significant decisions made by Petronas was not to proceed with the Final Investment Decision on the Pacific North West LNG project and the Prince Rupert Gas Transmission project in Canada. However, Petronas will continue to evaluate options to monetise gas in Canada. So what is the status on Canada?

WZ: Yes, we are producing about 600 million standard cubic feet of gas for the local markets.

And we have world-class gas assets. The proven resources are about 23 trillion standard cubic feet. So, yes we will definitely continue to explore all options that we have to monetise this resource. This is an ongoing process.


GR: At current price levels, we have done a lot of adjustments to our asset values, and these have been done over the last three years. So if prices remain at this level, we don’t see any significant impairments. Impairments happen for two reasons – one is price levels and therefore future cashflows need to be adjusted lower.

The other reason is a breakdown in operational aspects. So that is if something happens somewhere in the business. That, we can’t quite predict. However, besides that, we don’t expect any substantial level of impairments similar to what happened in the last two years.


WZ: Today, we dont’ have any big plans for retrenchment. However, as an ongoing exercise and this is nothing new and special, we have got a process where repeated non- performers will have to leave. But this is normal and has been done for many years now.

There is now no specific programme for retrenchment.

FLNG 1 and FLNG2:

Petronas has commissioned the world’s first floating liquefied natural gas (FLNG) liquefaction, storage and offloading vessel – Petronas FLNG Satu – which is now operating offshore in Sarawak. What are the plans to set up a second FLNG?

WZ: FLNG 1 has delivered six cargoes, and we are happy with its performance.

FLNG 2 is now under construction. It will be in operations in 2020. We are confident that we are on track to be operational by then.


Sarawak govt ‘disappointed’ with decision by Federal Court to postpone hearing on Petronas case

KUCHING: The Sarawak government has expressed its “deep disappointment” with the decision by Federal Court to postpone to June 21 a hearing over the state rights on its oil and gas resources.

In a statement yesterday, the state government said it will consider all other options to protect and enforce its constitutional rights in this matter, 

On June 4, Petroliam Nasional Bhd (Petronas) filed a suit seeking a declaration from the Federal Court that it is the exclusive owner of petroleum resources in the country, as well as the only regulator of upstream activities nationwide, including in Sarawak.

The case was supposed to be heard on Monday, June 11.

“It is surprising that Petronas who made the application and sought an urgent hearing has no objection to the postponement of hearing of the case,” it said.

The postponement, according to the statement, was granted without according the Sarawak Attorney General legal team the courtesy of being heard on the state government’s objection.   

“The state government would not allow Petronas to disrespect and disregard our rights to regulate the upstream activities under our laws such as the Oil Mining Ordinance and the Land Code,” it said.

Over the past year, Sarawak has embarked on several initiatives that would see Petroleum Sarawak Bhd (Petros) come into force from July.

An official letter from Sarawak Attorney General (AG) Datuk Talat Mahmood Abdul Rashid to Petronas president and chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin on April 13 stated that from July 1, the state government would regulate the downstream and upstream O&G industry in accordance to state laws.


‘S’wak set to be high income state by 2030’

Abang Johari (left) explaining government policy during the ‘Randau Petang’. With him is Abang Sardon.

KUCHING: Sarawak will emerge as a high-income state by 2030 in terms of technology advancement and development.

But for the state to achieve this status, its people must be willing and know how to apply advanced technology in their daily lives, said Chief Minister Datuk Patinggi Abang Johari Tun Openg.

“If not, we will not be able to achieve the status and also we will be left behind, especially in Industry 4.0 revolution,” he pointed out at the ‘Randau Petang’ with the Information Department, Broadcasting Department, National Film Development Corporation of Malaysia (Finas), Department of Community Development (Kemas), Special Affairs Department (Jasa), Biro Tatanegara (BTN) and National Security Council (MKN) here on Tuesday night.

He added: “In order to achieve this, several technologies will be developed in the state such as digital technology and the use of new technologies; namely satellite macro, will be intensified to overcome the slowdown of the Internet.”

In addition, he emphasised technology development for modernisation and efficient agriculture method in order to increase the income of farmers, especially those in rural areas.

“Whereas for the infrastructure facilities such as water supply in the rural areas, the state government will develop a water grid system to address the problem of dirty water.”

For the convenience of the people in the whole state, he said besides the construction of Pan Borneo Highway, the state would develop a coastal road that would connect all the people in the state.

“Meanwhile, to make the transport system more sophisticated and efficient in the state, the government will introduce a bus that uses hydrogen energy and LRT facilities from Kuching to Serian for the people in the city to travel conveniently.”

He said all this is to address the increasing population density, as well as to increase tourist facilities in the city.

The Chief Minister also informed that the state government had set up the Development Bank of Sarawak (DBoS) to raise funds for strategic projects and opening its own oil and gas company, Petroleum Sarawak Berhad (Petros), which could provide economic benefits and employment opportunities to the people.

He also emphasised the importance of developing human resources to develop the state.

During the dialogue, Jasa state director Hassan Busu was appointed moderator in the first session of the Digital Economics briefing which was delivered by the general manager of Sarawak Multimedia Authority (SMA) Dr Zaidi Razak while Sarawak Information director Abang Sardon Abang Hashim was the moderator for the session with the Chief Minister.

Also present were Deputy Chief Minister Datuk Amar Douglas Uggah Embas, State Secretary Tan Sri Datuk Amar Mohamad Morshidi Abdul Ghani, Deputy State Secretary (Rural Transformation) Datu Jaul Samion and heads of departments.


State Water Grid project to start in October, RM8 billion set aside for first phase

Student showing Abang Johari (third right) with (from second left) Len Talif, Abdullah, Sudarsono and others his work at the fair.

KUCHING: The first phase of the State Water Grid project is expected to start this October.

Chief Minister Datuk Patinggi Abang Johari Tun Openg said he is hopeful that the laying of pipelines for the water supply works would commence before end of the year.

“We will start laying the pipelines from Batang Ai to Tanjong Manis in October,” he said when launching the Sarawak Career and Training (SCaT) Fair 2018 at Borneo Convention Centre Kuching here yesterday.

Prior to the SCaT launch, Abang Johari announced that the state government would have to set aside at least RM8 billion for the first phase of the water supply project.

The State Water Grid will provide constant treated water supply to residents of all longhouses and villages across Sarawak.

He said the state government will make sure that longhouse and village folk have access to water supply.

He asserted that Sarawakians need to have a dream before they could embark on a journey to move the state forward.

“Our dream is to make Sarawak an advanced state in Malaysia by 2030, so we have to groom our talents. You (young Sarawakians) will be the engine of growth.”

Abang Johari said he had pledged RM30 million for the development of a Digital Village in the state during the SCaT Fair last year.

He said he would not hesitate to increase the funding, if need be.

“The Digital Village is going to commence end of this year, and RM30 million may not be enough. I will add more if it is not enough,” he said.

He called upon Sarawakians, particularly the young generation, to embrace innovation and be more creative as Sarawak moves forward with its digital economy agenda.

He said the word ‘innovate means making changes and if you are to make changes, you have to change’.

He added that people would have to have ecosystem and knowledge in order to initiate change.

Citing China as an example, Abang Johari said mainland Chinese “ have a philosophy on the train, that if you are travelling on a train, you are in the speed of the train otherwise you are left behind”.

“And if you’re in a train, and the speed of the train is 80kph, you’re not as fast as a bullet train which goes about 300kph.”

He said people would have to get on the bullet train in order to reach the destination quicker.

“You cannot tell the train to slow down. And Sarawak wants the train with speed of 300kph. Which is why we say we want to leapfrog and we cannot be 80kph all the time.”

He therefore advised Sarawakians to practise ‘destructive thinking’ which he explained as ‘going against the norm’ to figure out a new way to do things.

He said they have to be willing to take calculated risks where “destructive thinking” was concerned.

“There will be risks because to achieve destructive thinking, you have to go away from your comfort zone. You have to learn more and apply technology,” he added.

Students of Chung Hua Middle School No 1 invented the ‘Kenyalang Robot’ for the launch of SCaT Fair 2018 themed ‘Be A Change-maker’ organised by Tabung Ekonomi Gagasan Anak Bumiputera Sarawak (Tegas).

Abang Johari also witnessed the exchanging of a memorandum of understanding (MoU) between Tegas and five companies namely Azendian Solutions Sdn Bhd, Chumbaka Sdn Bhd, EFXCO Sdn Bhd, Petrosar Sdn Bhd and Satu Creative Services Sdn Bhd.

Minister of International Trade and E-Commerce Dato Sri Wong Soon Koh, Assistant Minister of Urban Planning, Land Administration and Environment and Tegas chairman Datu Len Talif Salleh, Assistant Minister of Education and Technological Research Dr Annuar Rapaee, Assistant Minister of Corporate Affairs Abdullah Saidol, and permanent secretary to the Ministry of Education, Science and Technological Research Datu Sudarsono Osman were also present.


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