KUALA LUMPUR (Nov 9): Petroliam Nasional Bhd (Petronas) said the additional RM10 billion dividend it is paying to the government, on top of its scheduled dividend, is affordable.

In a statement, it explained that it is committed to maintaining the scheduled RM24 billion dividend payment to the government, its sole shareholder, for the financial year ended Dec 31, 2019 (FY19), and that it had fully paid the dividend as per the plan for this year.

“However, given the unprecedented challenges brought about by the Covid-19 pandemic, Petronas' board approved an additional RM10 billion dividend to its shareholder by the end of November 2020,” it said.

In determining that the extra RM10 billion dividend is affordable, the national oil company said its board had first satisfied itself that the company could continue to fund its operations, service its debts, meet obligations and invest in its future growth.

“Petronas remains resolute in its efforts to preserve cash and strengthen our financial resilience during this unprecedented time,” it said.

In Malaysia's Economic Report 2021, the Ministry of Finance (MoF) explained that the RM34 billion in dividends from Petronas to the government would largely contribute to the RM74 billion expected to be earned as non-tax revenue in 2020, from RM83.8 billion in 2019.

The RM10 billion of the RM34 billion is a special payment stemming from Petronas' divestment exercise in 2019, it added.

For 2021, the government is expecting to receive RM18 billion in dividends.

Its petroleum-related revenue for 2020, meanwhile, is expected to decline by 40.3% to RM50 billion, from RM83.8 billion in 2019. This is due to the exclusion of a special dividend for tax refund, as well as a reduction in petroleum income tax (PITA) and royalties amounting to RM8.5 billion and RM4.2 billion respectively, due to lower global crude oil prices.

As such, its share of petroleum-related revenue is expected to decline to 22% in 2020, from 31.7% in 2019.

It expects that its share of petroleum revenue will slide further to 16% in 2021, with revenue coming in at RM37.8 billion or 2.4% of gross domestic product (GDP) — as it expects oil prices to average at US$42 per barrel — versus RM50 billion in 2020.

For the first half ended June 30, 2020 (1HFY20), Petronas paid RM16 billion in dividends, compared with the RM26 billion it paid for the previous corresponding period.

Petronas president and group chief executive officer (CEO) Tengku Muhammad Taufik Tengku Aziz previously said in September that the national oil company, which was seeking to preserve cash and liquidity in the current challenging market, would pay the government dividend if it could afford to do so.

(Report updated @19:50)