KUALA LUMPUR – Could the seven-year-old Petroleum Sarawak Bhd’s (Petros) impending entrance as a key player for oil and gas resources in and around the state pose significant challenges to industry giant Petroliam Nasional Bhd (Petronas)?
National oil and gas firm Petronas, which stands as the only Malaysian company to have made it into the Global Fortune 500 list, might be forced to make some hard decisions regarding its workforce due to the gas distribution agreement, details of which have yet to be made public.
According to a source familiar with the matter, Petronas is expected to suffer an approximately 30% revenue loss once the agreed formula for the distribution of natural gas in Sarawak is implemented.
The source, who spoke with Scoop on the condition of anonymity, said Petronas’ department town halls and internal meetings have discussed the potential downsizing as part of the company’s strategy to cope with the projected losses.
Besides potential shifts in the company’s compensation strategy with supposed discontinued bonuses and slashed salary increments for employees across various departments, the source also claimed that Petronas is unlikely to retain most of its contract-based staff.
Asserting that full-time personnel will not be spared from the alleged retrenchment exercise, the source said that Petronas could “trim the fat” within the state-owned oil corporation by reducing allowances for senior and general managers, who might also be asked to vacate their posts in favour of executive-level staffers.
An apparent “project” to oversee the layoffs, some of which could be executed via a voluntary separation scheme, is understood to have been established by Petronas – which has close to 50,000 employees across its global presence spanning over 100 countries.
The alleged reduced workforce is expected to be one of the topics mentioned in the president and group chief executive officer’s address, scheduled to take place sometime in February next year.
Additionally, the potential thinning of Petronas’ profit-loss margin could also affect the firm’s ability to purchase equipment needed for its operations, the source claimed, adding that most team-building programmes have already been halted as part of cost-saving measures.
Certain group projects deemed not vital or purposeful have also been allegedly cancelled as Petronas supposedly steels itself for future losses by cutting back its existing expenditures, the source added.
Earlier this month, PAS information chief Ahmad Fadhli Shaari urged Putrajaya to disclose the terms and potential financial implications of Sarawak’s state-owned Petros taking over from Petronas as the sole gas aggregator in the state.
Claiming that a transfer of rights to Petros could reduce petroleum revenue from Petronas – responsible for 28% of government revenue in 2022 – by 30% to 40%, the opposition lawmaker said the government must draw up contingency plans to address potential impacts to the nation’s coffers.
Last week, Prime Minister Datuk Seri Anwar Ibrahim assured that an amicable solution will be taken to address ongoing disputes between Petronas and Petros over the distribution of natural gas in Sarawak.
Pointing to the Petroleum Development Act 1974, which grants Petronas ownership and exclusive rights to explore and exploit petroleum resources in Malaysia, Anwar said it is vital for the company to be recognised as a national body.
However, he added that Petronas has to recognise the need to support Petros to allow the latter to emerge as an important industry player, noting that both companies must work together for all new oil-and-gas activities going forward.
The dispute is understood to be linked with Sarawak’s bid for greater self-rule, with Sarawak Premier Tan Sri Abang Johari Tun Openg stating on December 10 that the matter could now be considered resolved, pending an official announcement from the prime minister.
While he agreed that there may be a slight reduction to Petronas’s profits due to the gas distribution agreement, he insisted that the matter could be handled accordingly, explaining that the partnership between Petros and Petronas was necessary as they collectively dominate a significant portion of Sarawak’s gas reserves.
In February this year, Petros was appointed as Sarawak’s gas aggregator, allowing it to procure all natural gas produced in the state by upstream gas producers, for the distribution, supply and sale to all downstream gas buyers.
Previously, in 2020, an agreement was signed between Petronas and Petros granting the latter full control and authority over the supply, sales and distribution of natural gas within the state.
Scoop has contacted Petronas on the matter and is awaiting a response. – December 28, 2024