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This article first appeared in The Edge Malaysia Weekly on December 30, 2019 - January 5, 2020

AS a major oil company, and one that is wholly owned by the state, Petroliam Nasional Bhd will always be in the limelight but the Fortune 500 company might have grabbed more headlines in the last 10 years than in previous decades.

It was a decade that has a fair share of ups and downs with the Brent crude prices swung in the wide range range between US$28 and US$122.

The national oil company achieved record-breaking earnings  and paid the most dividends of over RM200 billion, thanks to the sky high oil prices, but no thanks to the government’s stressed finances, to put it bluntly.

The oil  major found that it has been caught between the rock and the hard place in the later half of the decade when it was ging through one of the most severe downturns in history after the collapse of crude oil.

In short, the downturn tested the top guns’ balancing act between doing the best to safeguard Petronas’ interest for better survival and fulfilling the country’s interest as a national oil company. Still, it cut 1,000 jobs and renegotiated contract terms to cut costs which did not go down well with many.

During the decade, Petronas made its first major acquisition abroad in British Columbia, Canada, a bold step forward to diversify into unconventional energy — shale gas, to replenish its natural gas reserves. From 2010 to 2019, Petronas saw the most number of presidents at the helm since its founding.  

 

Tan Sri Hassan Marican

Tan Sri Mohd Hassan Marican stepped down as president and CEO in February 2010, one year after Datuk Seri Najib Razak became the prime minister. The latter then reshuffled the board of the national oil firm.

Hassan had been at the helm for 15 years, since 1995. An accountant by training, Hassan did not start his career at Petronas. He was a partner with local accounting firm HRM. At the age of 36, he was handpicked by then Petronas chairman Tan Sri Basir Ismail and president and CEO Tun Azizan Zainul Abidin in February 1989 to become the company’s senior vice-president of finance and services.

Many felt Hassan left huge shoes to fill as a changing of the guard was a rare occasion at Petronas in those years. No one would have anticipated that the group would change chieftain three times in the decade.

Hassan was the fifth person to hold the reins since Petronas was set up in 1974. He also wore the hat of acting chairman after the demise of Azizan Zainul.

Hassan was known as a strong character who stood up to political interference in the running of the company. Still, he signed a big dividend cheque of RM30 billion for FY2009, months before he retired. He joined Singapore-based Sembcorp Marine as its chairman after relinquishing his post at Petronas.

Hassan is also credited with steering Petronas out of its comfort zone, not to be just a “jaguh kampung”. He was tasked by then Prime Minister Tun Dr Mahathir Mohamad to internationalise Petronas so it would be fit for the international race with the big boys such as ExxonMobil, Shell and ConocoPhillips. The fact that Petronas is one of the most profitable oil majors among Fortune 500 companies says it all.

And it could be because of that achievement that Hassan was brought back from Singapore by Mahathir to be one of the five members of the Council of Eminent Persons.

 

Tan Sri Shamsul Azhar Abbas

When he passed the baton to his successor, Tan Sri Shamsul Azhar Abbas, international operations were the largest revenue contributor of the group, accounting for 42.1% of total revenue in the financial year ended March 31, 2009 (FY2009).

Shamsul returned one year after he had retired when Najib selected him to lead the national oil firm.

During his tenure as CEO and president, crude oil prices recovered swiftly after the plunge in 2008, caused by the global financial crisis. The oil and gas (O&G) industry was back to where it had been before the abrupt fall.

Against a backdrop of strong crude oil prices from 2010 to October 2014, Shamsul declared total dividends of RM144 billion, a time when Petronas was making record high profits.

Shamsul’s challenges in his first three years on the job were certainly not about earnings contraction, but related to the rapid rise in production costs as oil majors were competing for support services, such as oil rigs and storage facilities, to ramp up exploration and development activities.

It was then that the international oil majors started exploring fossil fuel in the ultra-deep sea and the marginal oil fields that had largely been set aside when oil prices were low to replenish the depleting oil reserves.

Shamsul initiated the risk-sharing contract for marginal oil field development in local waters. Four companies —  Scomi Energy Services Bhd, Dialog Bhd , Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd. (SapuraCrest and Kencana subsequently merged to form the current Sapura Energy Bhd.)

Given the persistently high crude oil prices back then, the oil majors, including Petronas, saw the need to diversify into unconventional energy — shale oil and gas. During Shamsul’s five-year tenure, Petronas was evaluating a massive investment of C$10 billion (US$9 billion) in the Pacific Northwest liquefied natural gas development project in western Canada. The move was widely criticised.

The rationale was that the acquisition would become a major LNG source for Petronas to export to countries in East Asia when gas was running out at home.

Shamsul was pushing the envelope, calling for Malaysian O&G companies to become competitive globally by introducing meritocracy, demanding higher qualifying requirements for Petronas contracts and bringing in fresh blood from outside the company.

His attempts met with fierce criticism and he was slammed for not doing enough for the bumiputera agenda. Local O&G players complained about losing jobs to foreign-owned firms. To make matters worse, crude oil prices started falling in the fourth quarter of 2014 and Petronas had to re-evaluate existing contracts and hold back fresh jobs.

Since then, the local O&G industry has been enduring a prolonged, severe downturn and many companies have gone belly-up.

When Shamsul took over at Petronas, many said he was there to keep the seat warm for his successor, who was too young to hold the position.

 

Tan Sri Wan Zulkiflee Wan Ariffin

Tan Sri Wan Zulkiflee Wan Ariffin succeeded Shamsul in 2015. Wan Zulkiflee, or Wan Zul, was said to be one of two candidates who were shortlisted together with Shamsul. Datuk Anuar Ahmad, then the vice-president of human resources management, was rumoured to be the other candidate. In hindsight, Shamsul might now consider it a blessing that he relinquished his post in 1Q2015, when oil prices were sliding fast. Simply put, the timing of Wan Zul taking over the top job was bad. For him to fulfil his fiduciary duty to safeguard the country’s oil wealth at a time when oil prices were tanking could be compared to his walking a tightrope strung between the Petronas Twin Towers. He had no choice but to implement unpopular measures that past Petronas presidents had never done before — retrenching 1,000 employees and freezing salary increments for top management from vice-president onwards. Prior to that, retrenchment would have been unthinkable at Petronas, which was associated with lifelong employment.

Furthermore, he had to convince the federal government not to be too demanding on dividend payments as Petronas was making less money. Wan Zul slashed the dividend to RM16 billion for 2016, from RM26 billion in 2015.

Ironically, two years later, Wan Zul  signed the biggest ever dividend cheque, amounting RM54 billion, in 2018 to help the new government with the RM19 billion refund of the Goods and Services Tax and RM18 billion excess income tax owed — a fiscal problem the Barisan Nasional administration had left behind.

After the change in government, Wan Zul is still walking on thin ice. His colleague, former chief financial officer Datuk George Ratilal, retired before his contract expired. Furthermore, Wan Zul does not agree with the divestment of Petronas’ stakes in public-listed entities and the proposal to list the group’s upstream operations to raise money for the shareholder — the federal government. He believes these are Petronas’ nest eggs, which should be a last resort in desperate times.

Nonetheless, Petronas pared down stakes in the listed entities and managed to raise RM6 billion in December 2019.

Wan Zul’s contract was renewed for three years from April 1, 2018. But market talk surfaces from time to time that he will not be in office for long.

“As long as I am in this position, I will do my best to discharge my responsibilities and duties. And it goes deeper than just discharging my duties.

“This is very much in line with the concept of amanah, or trust that we have in the organisation. When you are in a position of trust, you discharge your duties and responsibilities according to that trust. This concept of amanah is at the very core of the Petronas DNA,” Wan Zul said in a past interview with The Edge when asked to comment on the rumours that he was leaving.

As the decade starts, will Petronas soon see another changing of the guard?

 

 

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