LETTER | M'sia should form a new energy policy and emulate Norway

LETTER | Prime Minister Anwar Ibrahim’s announcement on an economic advisory Council two days ago, caught my attention.

I think this is a move in the right direction, and I hope this government will take a big step towards realising the much-needed reforms for GLCs in order to rejuvenate our economy and to fulfil our national development agenda.

I tend to think that a reform agenda on our national oil and gas corporation, Petronas, is required and long overdue.

After all, energy drives economies and sustains the entire population, and Petronas is right there in the middle of it all.

Petronas

To begin with, we Malaysians, including our civil servants, never get the chance to sight Petronas’ accounts, except the prime minister.

As such, many of Petronas’ overseas ventures are rather opaque and have become the subjects of much speculation.

For instance, we read from some reports that Petronas lost billions of ringgit in countries like Canada, Azerbaijan, and Sudan. But we do not know any details; how much or what caused the investments to go sour.

In the last decade, our government’s handling of Petronas had been rather curious or alienated, to say the least.

There had been many complaints and disappointments coming from the people involved in the oil and gas sector, in particular on how Petronas personnel (linked to some political elites) have been increasingly getting involved directly in the procurement, tenders, and contracts.

Some stories related to inducements also emanated from Petronas, especially from their Pengerang projects.

Oil royalty

At the same time, frictions between Petronas and the two East Malaysian production regions of Sarawak and Sabah continued, not to mention the overdue payments of annual oil and gas royalty to the states of Kelantan and Terengganu.

Somehow, many clearcut agreements signed with Petronas are often subjected to politicians making the final decisions.

For example, in 2019, then prime minister Dr Mahathir Mohamad decided on the payments of the oil royalty to Kelantan and Terengganu, and also on the quantum itself.

Definitely, something is terribly wrong when a prime minister can bypass any valid agreements between Petronas and the states, and then make a unilateral decision by himself.

Still, we were kept in the dark on how these royalty calculations were arrived at in the first place. Crude oil and gas productions with their respective prices were never revealed.

At one time, there was a strong rumour that our crude sales were handled by only one private person. His business empire also skyrocketed on the sales of “Tapis” crude, attributed to his close association with an ex-PM.

Today, one of his many listed companies continues to benefit from long-term charter contracts with Petronas, especially in the provision of Floating Production and Storage Offshore (FPSO) and offshore vessels.

Far from being independent, Petronas, it seems, is being dictated by political masters and is not free from any unwarranted interference.

Norway

Perhaps, we should now re-formulate a truly independent and transparent Petronas and start with a more sound oil and gas policy like Norway did, when they first discovered oil in the North Sea.

A coastal country, Norway, is similar to Kelantan and Terengganu, with beautiful fjords dotted with many fishing villages before they discovered hydrocarbon in their sub-sea.

Norway had a plan though, a very grand plan to transform the country around with their newfound resources. Their citizens were willing to learn, get educated, and acquire a new trade.

The Norwegian government transformed the entire ecosystem and encouraged the country’s youngsters to learn and be trained to participate in the oil and gas sector.

Many local companies were formed and funded in their research and inventions of new oil and gas technical and sub-sea exploration products.

Today, Norway’s Statoil (now called Equinor) is no longer referring to itself as an oil company, but as an energy company. It has diversified into one of the largest energy companies in the world from oil and gas to wind turbines.

Sovereign wealth fund

Norway’s sovereign wealth fund (SWF), started in 1990, much later than Malaysia, is now valued at US$1.3 trillion. It is the biggest sovereign wealth fund in the world.

Do we have something similar to compare? Despite having produced oil and gas much earlier since 1974, we do not have a similar fund to boast of.

Norway’s approach was also to encourage a proliferation of private sector companies to take up services associated with oil and gas.

Offshore contracts and funding were made easily available by the government to local companies to venture into the sector.

The Oslo Bourse was set up primarily for domestic oil and gas companies to seek for more public funding. Now, Oslo Bourse is regarded as the market and financial leader not only for the oil and gas sector but also for shipping activities and green companies worldwide.

Names like Aker, Lundin Energy, Statkraft, Var Energi, Repsol, Fred Olson, Ulstein, and Kvaerner are some of the well-known brands coming from Norway.

Whereas, in our Malaysian model, Petronas is the key regulator for the entire oil and gas sector via the Petroleum Development Act 1974.

The same Petronas also manages the oil and gas exploration areas and enter into production-sharing contracts with interested bidders.

At the same time, Petronas also sets up its own commercial entities to explore, produce, operate, and run the oil and gas businesses.

Petronas domination was earlier based on the lack of experienced local companies or in their inability to undertake and raise capital for what appears to be technically challenging ventures and operations.

The government didn’t have a plan then, so I reckon that after 59 years they should have a plan now.

Homegrown companies

Like Khazanah Nasional, Petronas also owns many commercial arms in the exploration and exploitation of these scarce resources.

Companies such as Petronas Carigali, Petronas Gas, Petronas Dagangan, Petronas Penapisan and Petronas Chemical, are all owned by Petronas.

They are also involved on the supply chain side of the commercial oil and gas business too, which includes transportation (MISC), ports and terminals (Bintulu, Kerteh, Malacca), shipyard, engineering works (MMHE), as well as property (Twin Towers).

In other words, Petronas dominates in both upstream and downstream activities.

The question to ask is; where are the homegrown companies that are big in oil and gas, similar to those found in Norway?

Locally incorporated companies are needed not only to drive the local economy but also to go out and earn foreign exchange for Malaysia.

Has Petronas nurtured and developed many of them to a point where these companies could now compete and serve internationally?

Clean energy

Another current issue is related to clean or green energy. For instance, TNB spent RM9.1 billion on coal imports last year to fire their power plants, which is against a worldwide trend to reduce the greenhouse effects caused by the burning of coal, a dirty commodity.

Since Petronas produced gas in abundance and spent billions on the construction of gas pipelines, why couldn’t TNB convert their power plants to use gas instead?

This policy should have been put in place long ago. Instead, we are exporting this clean energy to Japan, South Korea, and China, and importing dirty and polluted coal for our power plants. What a contradiction.

Anyway, these are some of the pertinent issues on the subject of energy that I think should receive immediate attention from the government, the prime minister, and his economic advisers.

For the good of the country and the rakyat; I wish this new economic team success.

In the face of many economic and financial challenges in the country today, their appointment is indeed very timely.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.