Friday, July 18th, 2008 1,043 views
Petroliam Nasional Bhd (Petronas) – The national oil company, which posted revenue growth of 40.9% The national oil company, which posted revenue growth of 14.9% with profits of US$18.1 billion is ranked the world’s 8th most profitable company in the recently published ranking by Fortune magazine. 
Top 10 most profitable companies- 2008 ranking (click to see larger image) (source: here)
Petronas is ranked among the big guns in the world namely – Exxon Mobil, Royal Dutch Shell, BP, HSBC, J.P Morgan, General Electric and so on. As you can see, the top 10 most profitable companies are dominated by oil operators – lead by Exxon Mobil (again) in first, followed by 5 others – Royal Dutch Shell, BP, Chevron, Total and Petronas. Notice that Petronas posted the highest profit growth of 40.9% among the top ten most profitable companies.
Most profitable companies – 2007 ranking (click to see larger image) (source: here)
Petronas also moved up ten places from the previous 18th place and now is standing proud as Asia’s most profitable company. Petronas is the only Malaysian company in the list of Fortune Global 500 list. Under the petroleum refining industry, ExxonMobil took the top spot in terms of profits (US$40.6bil) followed by Royal Dutch Shell in second place (US$31.3bil) and BP (US$20.8bil) third.
Petroleum refinining industry companies ranking by revenues, profits. (Click to see larger image) source: here)
Malaysia’s Petronas is ranked 16th in terms of revenue but in terms of profits, it is ranked 5th, just behind Chevron. With the achievement, Petronas beats the likes of Toyota, Bank of America, Microsoft, Vodafone, Wal-Mart, Nokia, Barclays, Goldman Sachs and a host of other industry leaders.
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Thursday, June 19th, 2008 727 views
This is a great piece from Kickdefella. He wrote a lengthy essay to explain the truth about fuel subsidy. I am reproducing his essay here which was written in Bahasa Melayu after translating it into English. My sincerest apology in advance if I did a bad translation job.
Last night, Hassan Marican appeared on National Television willingly to bare all about Petronas. Unfortunately, the only answer he should have given last night to those stupid panels (and moderator) was “Bloody hell, what a stupid question! Go and **PAKLAH** yourself la!” but he remained calm though.
Most probably the instruction was to grill him as though the increase of fuel prices is all Petronas faults.
Meanwhile, Last week, before leaving for Dubai, Dato’ Husam Musa called for a Press Conference to reveal all the facts and to justify his claim that it is not necessary for the government to increase fuel prices. It is also to give his insights on how actually it is possible to reduce the fuel prices.
Unfortunately, none of it ever came out in the mainstream papers although we have about 30 journalist and broadcaster packing the small office. The TVPAS reporter came ten minutes later and arrogantly left the room because the session already started. As a result, the session goes unrecorded. It was a total blackout on what was said and PAS official organ too play a role in it.
I have written in this blog all the facts and have published the figures to justify the claim where many are more interested to use rhetoric and to show the slimy strength by demonstrating and cause misery to the already much affected taxi drivers and shoppers in KL.
To some politicians, it is easier to get your photos and story published in newspaper by behaving like hooligans in public places yet when you got the chance to speak up, only buckets of nonsense do come out.
Today I will continue with my essay and we will discuss how it is possible to reduce the price of fuel prices and to put a stop in the already escalating cost of living.
Government Has Not Been Truthful Regarding the Fuel Subsidy
The government claimed that it would spend close to RM40 billion (I read somewhere it is RM56 billion??) this year for fuel subsidy. This is actually a lie, or an attempt by the government to mislead the people.
The facts are:
• Government does not come up with any cost, even one cent for fuel subsidy.
• Fuel subsidy is not included in government’s expenditure
• There is no actually no fuel subsidy. Zilch. Nil.
• The government only spends money for toll subsidy, public transportation subsidy, food subsidy and other subsidies not for fuel subsidy.
Because of that, the following statement by the Second Finance Minister Nor Mohamed Yakcop is not accurate and intended to mislead the people.
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Data provided by Treasury Malaysia clearly not as mentioned by the Second Finance Minister, Cabinet Ministers, Abdullah Ahmad Badawi and also Khairy Jamaluddin during Umno General Assembly 2007.
Data from the Treasury show the following information:
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According to the Treasury Report in Table 6.3, Federal Government Operating Expenditure, total subsidies spent in 2007 is RM12.1 billion which is 9.8% from RM124 billion government operating expenditure. In 2008, total subsidies is predicted to be RM10.1 billion or 7.8% from the total RM129 billion government operation expenditure allocation that was approved in 2008 Budget.
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This clearly shows that expenditure to manage fuel subsidy is never included in government expenditure because:
• Operating expenditure data by Treasury shows a lesser amount and obviously not sufficient to sustain the total subsidies which allegedly estimated at RM40 billion.
• Total fuel subsidy is not included in other data inside government’s account as recorded in Treasury’s
Annual Report.
So, where the subsidy comes from? The fuel subsidy actually never exists. Fuel for domestic use is obtained through:
• Crude oil exchange mechanism.
• 400k barrels of higher grade crude oil ‘Tapis Blend’ – highest crude oil grade will be exchanged in global market with domestic crude oil demand.
• This crude oil after being processed into petrol and diesel is sold to people at price determined by the government.
• The government gets net profit (because the government never spends anything) from the tax paid by petroleum companies, petrol stations and other suppliers.
Is it true Malaysia’s crude oil reserves will last in another few years?
Lately, the people were told that Malaysia’s crude oil reserves won’t last much longer and this country will be a net importer of oil. This is used by the government to justify the increase of fuel prices and cut ‘fuel subsidy’ to prepare the people with market price when the country starts to import oil for domestic use.
However, Petronas 2006 Annual Report recorded that Malaysia’s crude oil reserves can last until 2024.
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Hassan Marican, Acting chairman, President and Chief Executive Officer of Petronas meanwhile explained to the media that in 2011, Malaysia will become net importer of oil because the domestic demand will exceed the country’s crude oil output. This means that domestic demand for crude oil will be more than 700k barrels per day. But this is in 2011 and coming, the country will still able to produce 700k barrels of crude oil per day, which he never refuted.
According to Petronas Annual Report since 1980, Malaysia’s crude oil reserves is increasing and not decreasing. In 1980, it was reported Malaysia’s crude oil reserves stand at 3 billion barrels, and since then we had produce more than 4 billion barrels and up to now, we still produce around 650k to 200k barrels per day for 365 days and this at this rate we can last for another 20 years.
The fact is that this country’s crude oil reserves are increasing and not decreasing. In 2008, we have crude oil reserves estimated at 4 billion barrels and Malaysia is placed at number 28th among countries in the world with largest oil reserves.
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Malaysia’s crude oil reserves will not finish so soon. This is because Petronas, a petroleum company owned by the rakyat invest hundreds of million every year for oil exploration all over the world. From the investment, we found new reserves and according to the same report, the reserves replacement ratio currently is 1:1.8 liter. This translated as, for very 1 liter used, Petronas found 1.8 liter new reserves. This means the replacement rate is higher than the usage rate.
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Fuel Price Reduction Is Not Impossible
To optimise profit from crude oil, the government does not have to increase fuel price. The government actually can optimise its profit by reducing the fuel price at the same time.
Reducing the Usage of Petrol and Diesel
Fuel price in Malaysia is the highest among oil producing countries. Based on population of 26 million and crude oil output rate at 650k-700k barrels per day, Malaysia has a very high output ratio but this has not benefited its population which is far lower than the rest of the oil producers.
Petrol and diesel priced should be reduced and this is possibly done. Among the measures to reduce the price are:
Changing from petrol and diesel usage to natural gas for cars or NGV (Natural Gas Vehicles) should be done because of these factors:
• Malaysia is the 13th largest natural gas reserves country in the world. In 2004, Dato’ Mustapha Mohamed announced that Malaysia’s natural gas reserves is estimated at around 89 trillion cubic feet.
• The government encourages the usage of NGV because it is cleaner and environmental friendly but never make it compulsory for every petrol station to provide this service. As a result, there are limited number of NGV stations and mostly only available in Klang Valley.
• Wide usage of NGV by vehicles will reduce the demands for petrol and diesel.
• Malaysia can sell more crude oil and this will bring more profit to the country.
• Price of petrol and diesel can be further reduced using this extra profit
National Petroleum Advisory Council
National Petroleum Advisory Council (NPAC) should be formed again to gather experts that will involve in planning the energy usage and shaping efficient energy policies for the country. NPAC was formed together with Petronas before but it does no longer exist now.
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Petronas reaps high profit each year. As a company that is tasked to manage the national treasure owned by the people of Malaysia, Petronas organisation structure should focus on guarding the people’s interest. It is important NPAC to be revived, by choosing credible candidates and not for the sake of ‘political selection’. In other words, revival of NPAC means nothing if it is used to for political mileage by ‘expired’ UMNO politicians such as Abdul Rahim Thamby Chik or Zainuddin Maidin.
Check and Balance in Petronas
Currently, Tan Sri Dato’ Mohd. Hassan Merican holds the three highest posts in Petronas – Acting chairman, President and Chief Executive Officer. Before this, two of these positions were held by different individuals.
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Without trying to discredit the achievements and success brought by Tan Sri Dato’ Seri Mohd. Hassan Marican since helming Petronas, by holding to these three positions, Tan Sri Dato’ Seri Mohd. Hassan Marican becomes too powerful and this hampers check and balance inside Petronas and affects the transparency in managing Petronas.
Conclusion
People should enjoy the benefits of prosperity from the global oil price increase. As a net exporter of crude oil, the oil price increase should be translated as an additional income to the country.
Unfortunately, not only people cannot reap the benefits from the country resources, people are burdened with the fuel price increase which generated ripple effects to the price of consumer items.
Based on the arguments and data provided, it proven that the government decision to increase the fuel price is baseless.
This is the proof of poor planning and management under the government of Prime Minister Abdullah Ahmad Badawi. People should insist for their rights to enjoy benefits as an oil producing country and call the government to reduce the fuel price. If this is not carried out, the country’s economy will decline and people will suffer not only the direct consequences but also need to face the social problems arise from it.
Give Back the People’s Rights Now! 
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Friday, June 13th, 2008 345 views
This is a very good and informative read. Digest the facts and numbers:
WHAT IS NEVER MENTIONED IN Mainstream Media like NST/TheStar/Utusan Malaysia/Berita Harian are these facts….
Malaysian Per Capita Income USD 5000 VS Singaporean Per Capita Income USD 25000
Furthermore, The Star made a comparison of prices in Thailand , Singapore and Indonesia .
For Thailand it is quoted at RM3.90/liter, however are they aware that in Thailand new cars are cheaper than Malaysia by RM10,000? They pay only one life time for their driving license? No renewal fee after that? Also that goes for road tax as well? And do The Star also aware that you can drive all the way from Haadyai to Bangkok on a six lane highway without paying any Tolls ??!! Whereas here in Malaysia you have to pay yearly renewal for road tax , driving license and TOLLS, TOLLS, TOLLS!!!
For Singapore how can you quote RM 5.20 ? Please quote in Singapore Dollars because they are earning in Sing Dollars. You might as well say Europeans are paying RM10/liter. RM5.20/liter = Sing $ 2.20/liter, still cheaper than Malaysia in view of fact that Singapore is not a crude oil exporter. Are you saying that you fill up petrol in Singapore by paying Ringgit? Dumbass!
In economy, dollar to dollar must be compared as apple to apple. Not comparing like durian in M’sia is much cheaper than durian in Japan!! Of course-lah, Japan is not durian producer!!! Comparing Malaysian durian with Thailand durian make more sense!!
For Indonesia we might say is cheaper there at RM2.07/liter but compare that to their level of income!
Now, let us compare the price with OIL PRODUCING countries:
UAE – RM1.19/litre
Eygpt – RM1.03/litre
Bahrain – RM0.87/litre
Qatar – RM0.68/litre
Kuwait – RM0.67/litre
Saudi Arabia – RM0.38/litre
Iran – RM0.35/litre
Nigeria – RM0.32/litre
Turkmenistan – RM0.25/litre
Venezuela – RM0.16/litre
MALAYSIA – RM2.70/litre
RM 2.70!!! Individual perspective:
As of last month a Toyota Vios would ’cause a damage’ of about RM 89,000.
In the international market, a Toyota Vios is about USD 19,000
USD 19,000 = RM 62,700 (using the indicative rates of USD 1 = RM 3.30)
That makes Malaysian Vios owners pay an extra RM 26,300.
This RM 26,300 should be cost of operations, profit and tax because the transportation costs have been factored in to the USD 19,000.
RM 26,300/ RM625 petrol rebate per year translates to a Vios being used for 42.08 years!
I do understand that the RM 625 is a rebate given by the government, but it also means that one has to use the Vios for 42.08 years just to make back the amount paid in taxes for the usage of a foreign car. Would anyone use any kind of car for that long?
Now with these numbers in front of us, does the subsidy sound like a subsidy or does it sound like a penalty? This just seems to be a heavy increment in our daily cost of living as we are not only charged with high car taxes but also with a drastic increase in fuel price.
With all the numbers listed out, I urge all Malaysians to join me in analyzing the situation further.
Car taxation is government profit, fuel sales is Petronas’ (GLC) profit which also translates into government profit. The government may ridicule us Malaysians by saying look at the world market and fuel price world wide. Please, we are Malaysians, we fought of the British, had a international port in the early centuries (Malacca), home to a racially mixed nation and most important is WE ARE NOT STUPID!!!
We know the international rates are above the USD 130/barrel. We understand the fact that the fuel prices are increasing worldwide and we also know that major scientist are still contradicting on why this phenomenon is happening. Some blame Bush and his plunders around the world and some blame climate change and there are others which say petroleum ‘wells’ are getting scarce.
Again we go back to numbers to be more straight forward
1 barrel = 159 liters x RM2.70/liter = RM 429 or USD 134
On 1 hand, we are paying the full cost of 1 barrel of crude oil with RM2.70 per liter but on the other hand the crude oil only produces 46% of fuel.
Malaysia sells crude oil per barrel at USD130 buys back Fuel per barrel at USD134. And not forgetting, every barrel of fuel is produced with 2 barrels of crude oil.
1 barrel crude oil = produce 46% fuel (or half of crude oil), therefore
2 barrel crude oil = approximately 1 barrel fuel
In other words, each time we sell 2 barrels of crude oil, equivalently we will buy back 1 barrel of fuel.
Financially,
Malaysia sell 2 barrel crude oil @ USD 130/barrel = USD 260 = RM 858
then, Malaysia will buy back fuel @ USD 134/barrel = RM 442/barrel
Thus, Malaysia earn net extra USD 126 = RM 416 for each 2 barrel of crude sold/exported vs imported 1 barrel of fuel !!!
(USD 260-134 = USD 126 = RM416)
So where this extra USD 126/barrel income is channeled to by Malaysian Govt?????????
Another analysis:
1 barrel crude oil = 159 liters.
46-47% of a barrel of crude oil = fuel that we use in our vehicles.
46% of 159 = 73.14 liters.
@ RM 2.70/liter x 73.14 liter = RM197.48 of fuel per barrel of crude oil. This is only 46% of the barrel, mind you. Using RM 3.30 = USD 1, we get that a barrel of crude oil produces USD 59.84 worth of petrol fuel (46% of 1barrel).
USD 59.84 of USD 130/barrel turns out to be 46% of a barrel as well.
Another 54% = bitumen, kerosene, and natural gases and so many more.
And this makes a balance of USD 70.16 that has not been accounted for.
So this is where I got curious. Where is the subsidy if we are paying 100% of the price of a barrel of crude oil when the production of petrol/barrel of crude oil is still only 46%?
In actual fact, we still pay for this as they are charged in the forms of fuel surcharge by airlines and road taxes for the building of road (because they use the tar/bitumen) and many more excuse charging us but let us just leave all that out of our calculations.
As far as I know, only the politicians who live in Putrajaya and come for their Parliament meetings in Kuala Lumpur (approximately 60+ km) are the ones to gain as they claim their fuel and toll charges from the money of the RAKYAT’s TAX.
It is so disappointing to see this happen time and time again to the Malaysian public, where they are deceived by the propaganda held by the politicians and the controls they have over the press.
Which stupid idiot economist equates rebates for rich or poor with the cc of the vehicles?! An average office clerk may own a second hand 1300cc proton Iswara costing $7,000 (rebate = $625) while the Datuk’s children can own a fleet of 10 new cars of BMW, Audi and Volvo all less than 2000cc costing $2 millions and get a total rebate of $625 x 10 = $6,250! Wow what kind of economists we are keeping in Malaysia…wonder which phD certificate that they bought from…
Misleading concept of Subsidy:
The word “subsidy” has been brandished by the BN government as if it has so generously helped the rakyat and in doing so incurred losses. This simple example will help to explain the fallacy:
Example:
Ahmad is a fisherman. He sells a fish to you at $10 which is below the market value of $15. Let’s assume that he caught the fish from the abundance of the sea at little or no cost. Ahmad claims that since the market value of the fish is $15 and he sold you the fish for $10, he had subsidised you $5 and therefore made a loss of $5.
Question : Did Ahmad actually make a profit of $10 or loss of $5 which he claimed is the subsidy?
Answer:
Ahmad makes a profit of $10 which is the difference of the selling price ($10) minus the cost price ($0 since the fish was caught from the abundance of the sea). There is no subsidy as claimed by Ahmad.
The BN government claims that it is a subsidy because the oil is kept and treated as somebody else’s property (ehem). By right, the oil belongs to all citizens of the country and the government is a trustee for the citizens. So as in the above simple example, the BN government cannot claim that it has subsidised the citizen!
ps: I am not responsible if you suffer brain damage from trying to understand the facts and calculations above
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Tuesday, June 10th, 2008 686 views
Honestly I am not supportive of subsidy scheme, because I think it reduces competitiveness, creating false impression and sense of security to the receivers. In extreme term, subsidy can be equated as opium. It is addictive, and it is hard to shed especially if you are having it for more than 20 years. (Oil subsidy was introduced in 1982 if I remember correctly.)
Just look at the reactions by Malaysians after the ‘removal of oil subsidy’ (That’s the correct term. oil price hike is not 
). There is a group with the name ‘1 Million Malaysian who are sick of the RM2.70/liter Petrol Price‘ in Facebook and guess what, as of today – less than 1 week – a staggering number of 35,582 people already joined the group. That is roughly 5k new members a day, 200 members an hour, 3 member a minute!! I read somewhere that, less than 24 hours it was created, the group had some 1,767 members! It reminds me of the withdrawal symptoms associated with drugs, alcohol and nicotine. This is a case of when one is hardest hit, one will arise to make noise, if the problem affects others, that individual may just care… less 
Oh, I heard many times “Politics is not important”, “It has nothing to do with me”, “I have no interest in politics”, “I couldn’t care less about politics, as long as I can cari makan enough”, well you get the idea. Yes, it is not important, I guess many still can ‘cari makan’ heh? The ruling government was elected through political process, and the very government that you voted in or could not care less to vote that made the very policy of reducing the oil subsidy last week. Job well done, ignorant retards!! This message is especially for those that:
1. Never aware of what shits are going on around them. Blur sotongs!! Fry them!!
2. Aware but too ‘busy’ to do anything.
Job well done, ignorant-irresponsible-lazy retards!!
I have nothing against those who voted for the current ruling government for they made their choice and they shall live by it. After all they already exercised their responsibility as a citizen and chose their side.
Well, we come to the issue – oil subsidy. Do you think the government is telling the truth? That they can no longer subsidise the petrol? Is there anything we do not aware of? What is the government hiding, if there is anything to hide??
From Chedet, ‘Adviser’ of Petronas:
I believe the people expect the increase of petrol price. But what they are angry about is the quantum and the suddenness. The Prime Minister was hinting at August but suddenly it came two months earlier, just after the ban on sale of petrol to foreigners.
If the increase had been more gradual, the people would not feel it so much. But of course this means that the Government would have to subsidise, though to a decreasing extent.
Can the Government subsidise? I am the “adviser” to Petronas but I know very little about it beyond what is published in its accounts. What I do know may not be very accurate but should be sufficient for me to draw certain conclusions.
Roughly Malaysia produces 650,000 barrels of crude per day. We consume 400,000 barrels leaving 250,000 barrels to be exported.
Three years ago the selling price of crude was about USD30 per barrel. Today it is USD130 – an increase of USD100. There is hardly any increase in the production cost so that the extra USD100 can be considered as pure profit.
Our 250,000 barrels of export should earn us 250,000 x 100 x 365 x 3 = RM27,375,000,000 (twenty seven billion Ringgit).
But Petronas made a profit of well over RM70 billion, all of which belong to the Government.
By all accounts the Government is flushed with money.
But besides petrol the prices of palm oil, rubber and tin have also increased by about 400 per cent. Plantation companies and banks now earn as much as RM3 billion in profits each. Taxes paid by them must have also increased greatly.
I feel sure that maintaining the subsidy and gradually decreasing it would not hurt the Government finances.
Here are some conspiracy theories. 
Could the following events partially related bsides the current hiking of world oil price? Caution: Read for fun!
1. Petronas in RM8b deal – Under an agreement, Australia’s Santos and Petronas will form a joint venture to develop and operate a 450-km gas pipeline and an LNG plant at Gladstone, Queensland. The need of cash flow to pump into the buying of Santos so need to reduce the subsidy? Or the government is unable to negotiate new contract with Petronas on subsidy?
2.) FUEL PRICE HIKE: Oil exploration costs Petronas a bomb, says CEO – Petronas needs extra money for their exploration of deep water in Kikeh??
3.) Petronas starts methanol plant commissioning work – Petronas needs money to pay the contractors to erect this Labuan 2nd phase Labuan Methanol plant??
4.) Somebody dapat ilham (received divine intervention?) to ‘reduce oil subsidy’. Hahaha!
By all mean, wipe out the subsidy because it is good for the long term. Just it is too sudden for us the rakyat to absorb the after effects. Yes, reduce the subsidy but, be TRANSPARENT why you do it. That is what we as Malaysians want to know. So far, we were given half-baked answers, some downright stupid explanations! You justify the reduction of subsidy, if it makes sense why not? Quoting Chedet again:
Obviously our increase in petrol price is far less than in the United Kingdom or the United States. But our per capita income is about one-third of theirs. In purchasing power terms our increase is more than in the UK or the US.
The increase hurts but the pain is greater not just because of the increase percentage-wise is higher than in developed countries but because of the manner the increase is made.
In the first place the Government should not have floated the Ringgit. A floating rate creates uncertainties and we cannot gain anything from the strengthened Ringgit. Certainly the people have not experienced any increase in their purchasing power because of the appreciation in the exchange rate between the US Dollar and the Ringgit.
Actually the Ringgit has increased by about 80 sen (from RM3.80 to RM3.08 to 1 US Dollar) per US Dollar, i.e. by more than 20 per cent. Had the Government retained the fixed rate system and increased the value of the Ringgit, say 10 per cent at a time, the cost of imports, in Ringgit terms can be monitored and reduced by 10 per cent. At 20 per cent appreciation the cost of imports should decrease by 20 per cent. But we know the prices of imported goods or services have not decreased at all. This means we are paying 20 per cent higher for our imports including the raw material and components for our industries.
Since oil prices are fixed in US Dollar, the increase in US Dollar prices of oil should also be mitigated by 20 per cent in Malaysian Ringgit.
Conclusion: I am not against the reduction of oil subsidy, but the manner it is made. I want good explanations. Make me understand. Do not shove funny numbers into my small brain. I have my numbers, like this:
Country GDP – per capita ($)
Hong Kong – 36,500
Malaysia – 12,700
Iran – 8,900
Venezuela – 6,900
Premium Unleaded petrol price in
Hong Kong is : 10.22 HKD per litre = RM 4.27 per litre
MALAYSIA is : RM 2.70 per litre
GDP ratio between Malaysia and Hong Kong is 12, 700 : 36,500 = 1 : 2.87
Re-adjust the petrol price based on income: RM4.27/2.87 = RM 1.47
==> Obviously, our RM 2.70 per litre is far more expensive than Hong Kong’s RM 1.47 after comparing both countries’ GDP. 
Wait.. Hong Kong is a net oil importer. Hmm.. their cars are cheaper too. Oh, in Hongkong having a car is a luxury, not a necessity like here in Malaysia 
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