Sale of Petronas assets in Azerbaijan based on commercial decisions, not political, says Mustapa

Datuk Seri Mustapa Mohamed  (Photo by Patrick Goh/The Edge filepix)

Datuk Seri Mustapa Mohamed (Photo by Patrick Goh/The Edge filepix)

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KUALA LUMPUR (Oct 27): The decision to sell Petronas' gas assets in Azerbaijan is based on a long-term commercial valuation, as well as cost compression to ensure resilience and operational and commercial excellence.

Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed said it was part of the ongoing revaluation of Petronas' assets and business portfolio.

“These measures need to be taken to maintain a strong financial position. In this case, not only the assets in Azerbaijan are involved, but also other assets that have fulfilled their potential are also given consideration, either for sale or for reduced asset ownership.

"The decision taken by Petronas is also in line with the group's strategy to ensure a focused, competitive and sustainable upstream portfolio," he said at the Special Chambers of the Dewan Rakyat on Wednesday.

He was referring to Opposition Leader Datuk Seri Anwar Ibrahim's (PH-Port Dickson) motion on Wednesday on reports that Petronas had sold gas assets in Azerbaijan for almost RM10 billion, following the government's insistence on raising Petronas' dividend payments by RM25 billion to the government for the year 2021.

Mustapa also stressed that the sale decision was not due to political pressure, although Petronas was directly under the Prime Minister.

According to him, the assets in Azerbaijan had been identified as among the assets for sale or "candidate for exit" since 2019. However, the sale process took time to ensure the sale price of the assets could provide a fair and reasonable value and could only be implemented in 2021.

"2020 was a very challenging year and the sale of assets in Azerbaijan last year was definitely not appropriate," he said. The sale of these assets is also in line with Petronas' three-pronged strategy of maximising cash generation, expanding core businesses and stepping-out or venturing into new business sectors.

On the payment of Petronas dividends to the federal government, Mustapa said it was based on a careful assessment by the company's board of directors and the payment was based on the current financial situation and performance.

“The approval of the RM18 billion dividend payment in February 2021 was based on performance and the market for the year ending December 2020.

“This amount was lower than that of the previous year due to the impact of a very weak market and low global crude oil prices as a result of the Covid-19 pandemic.

"The approval of an additional RM7 billion dividend was made in July 2021, based on the ability and projected better performance of the oil market for 2021," he added.

In addition, Mustapa said, the market in Europe was very competitive, where Russia dominated the gas landscape in Europe raising many problems, and were among the reasons Petronas had sold assets in Azerbaijan to Russian companies.

Meanwhile, according to him, for the first ten months of this year, the average price of Brent was about US$69 per barrel compared to the average of US$64 per barrel in 2019, and which had dropped to US$17.32 per barrel on April 21, 2020.

As a result, Mustapa said Petronas had achieved a higher net profit of RM9.3 billion in the first quarter of 2021, compared to RM4.5 billion recorded in the same quarter last year.

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