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Malaysia: New Year – New Leader

04.02.2015 / Energyboardroom

Next week, PETRONAS is set to announce if there will be a change in leadership at the top, as current CEO and President Tan Sri Dato’ Shamsul Azhar bin Abbas’s contract will expire on February 8. Several possible scenarios present themselves. Tan Sri Dato’ Shamsul’s contract may be extended by one or two years, as was the case in 2013, or a new CEO may be designated. Malaysia’s Star newspaper also reported on February 5 that Tan Sri Shamsul could be offered a seven-month contract extension.

Tan Sri Dato’ Shamsul Azhar bin Abbas has led Malaysia’s NOC since February 4, 2010, when he replaced Tan Sri Dato’ Sri Mohd Hassan Marican. Marican had overseen PETRONAS for the fifteen previous years and had been largely responsible for its internationalization strategy. Prior to becoming PETRONAS CEO and President, Tan Sri Shamsul served as Chief Executive Officer, Managing Director and President of MISC Berhad and as Vice President of PETRONAS Exploration & Production Business.

Any news regarding Tan Sri Shamsul’s continued leadership at PETRONAS will cause major ripples in Malaysia and further afield, as his tenure has not been without its share of controversy. The political and social expectations placed on the leader of PETRONAS, Malaysia’s only Fortune 500 company, are acute. Tan Sri Shamsul’s critics have accused him of favoring foreign companies and not promoting sufficiently Malay business interests. Even Tan Sri Shamsul’s attitude towards oil and gas resources and Malaysia’s ethnic mix have stirred controversy. The CEO’s statements last year to the effect that Malaysia’s oil and gas revenue does not belong to Malays (the bumiputera) but rather all Malaysians caused Malay right’s group Persaka to call for his resignation.

Rather than give into the pressure, Tan Sri Shamsul has unabashedly stressed the importance of meritocracy and competency to promote Malaysia’s oil and gas future rather than unveiled favoritism. Within PETRONAS, Shamsul instituted a Corporate Enhancement Program upon his arrival at the top in 2010, has brought more non-Malay voices into the organization, and has constantly aimed to put PETRONAS on par with the IOCs in terms of competency and governance. Furthermore, Tan Sri Shamul has not shied away from affirming the company’s independence from the Malaysian government. He has supported a policy of caping PETRONAS dividend to the Malaysian federal government at 30% of the company’s net profit, a major step in a country where PETRONAS contributes a third of the nation’s annual income.

Next week’s announcement comes at a critical juncture for the company since the drop in oil prices to below $50 a barrel has further complicated the task of running PETRONAS, a behemoth charged not only with the role of custodian of Malaysia’s oil and gas but also that of a contractor locally and internationally like any other operator. In November 2014, PETRONAS announced that it would cut capex for new projects in 2015 by 15% to 20%, and rumors have abounded that opex would also be cut in the neighborhood of 25% to 30% to maintain profitability. PETRONAS’s drop in revenues also impacted national finances, and, in January, Prime Minister Najib Razak revised the budget to correspond to the hit the state coffers will take with a lower oil price. The dividend paid by PETRONAS will surely be lower in 2015 as compared to 2014, although the official figure yet to been announced.

PETRONAS’s full agenda of projects in Malaysia will also keep the CEO occupied. The PETRONAS FLOATING LNG 1 is slated to launch operations in Q4 2015 and will be the first FLNG facility in operation worldwide. The country’s first large-scale EOR project, the Tapis field JV between ExxonMobil and PETRONAS Carigali, commenced operations last year, while marginal field development is being undertaken via a new subsidiary, Vestigo. In the downstream sector, the RAPID mega-project in Johor, a $28 billion investment, is now underway, while a ninth train is being added to the Bintulu LNG Complex, one of the world’s largest LNG production complexes.

Internationally, PETRONAS has been actively pursuing opportunities, especially in new geographies such as Canada, Australia, and Argentina. The company inked a deal with YFP in Argentina for shale oil exploration last year and is a JV partner in Australia’s Gladstone project. PETRONAS has also devoted resources to the Pacific Northwest LNG project, but, in December, the company delayed a final investment decision on this venture due to concerns over costs. PETRONAS also continues to keep a broad international portfolio today covers a vast geographic sweep from Southeast Asia to Central Asia, the Middle East, Africa, and Latin America.

Lips are sealed for now but rumored possible successors include current Downstream Vice President Datuk Wan Zulkiflee Wan Ariffin, President of PETRONAS Carigali Datuk Mohd Anuar Taib, CEO of Engen Petroleum Datuk Ahmad Nizam, and CEO of MISC Datuk Nasarudin Md Idris. Other names that have been evoked include former PETRONAS Gas Head Datuk Anuar Ahmad, Sime Darby’s President & Group Chief Executive Tan Sri Dato’ Seri Mohd Bakke Salleh, and Lembaga Tabung’s Group Managing Director and Chief Executive Officer Tan Sri Ismee Ismail.

Article written by Marie Kummerlowe

To read more articles and interviews from Malaysia, and to download the latest free report on the country, click here.

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