History and creation of the company:

Petroliam Nasional Berhad, known as Petronas to the world is one of the leading oil and gas companies of the world. It was founded on August 17, 1974. In the early years of establishment, it served as a regulator of Malaysia’s upstream sector and within a short span, went on to become the National Oil Company of Malaysia. Ironically, it was not the first company to extract oil and gas in Malaysia. This credit goes to Royal Dutch Shell who first drilled the first exploration oil well in Miri, Sarwak, known as the “Grand Old Lady”.

Various factors contributed to the establishment of the firm.

  • The Five Year Plan was set up in 1971, which involved factors prompting to set up an oil and gas company in Malaysia. This was the period when the focus shifted from majors to OPEC and other private and state firms researching reserves. Malaysia had two choices; either join the trend or continue to let Royal Dutch Shell research and extract reserves.
  • There was an agreement between Malaysia and Indonesia over territorial waters and offshore resources. Both the countries were heavily indebted to Organization for Economic Co-operation and Development (OECD) governments and banks as well as to the International Monetary Fund (IMF) and the World Bank. The debts were thought to be cleared using the revenue generated by the firm.
  • The local geography included a combination of broad basins of sedimentary rock with calm and shallow waters around the Sunda Shelf, making exploration for oil and gas relatively easier and more successful than in most areas of the world. Moreover, Malaysian crude was considered high quality with low Sulphur content. All these combined with recent technological developments in drilling made it easier for extensive offshore exploration and drilling.
  • A final and crucial factor has been the political stability of Malaysia. The New Economic Policy was formed to improve the economic conditions of Malaysia. The difficulties experienced previously by foreign companies and investors were outweighed by the benefits they believe they gain from Malaysia’s political stability.
  • PETRONAS was established in August 1974 and was modelled on Pertamina, the national oil and gas company of Indonesia founded in 1971.
  • In 1976, Malaysia became a net exporter of oil, but low exports level made the country ineligible to join OPEC. But, on the other hand this situation benefitted PETRONAS by allowing the company a degree of commercial and political flexibility.
What Petronas is today?

Currently, Petronas is ranked 184th among the Fortune Global 500‘s listing of largest corporations in the world. It ranks Petronas as the 12th most profitable company in the world and the most profitable in Asia. Currently, Petronas is running over 250 production fields and over 400 offshore platforms. It has business interests in over 35 countries.

Petronas owns literally everything related to oil and gas in Malaysia. Anyone wanting to get any oil out of Malaysia has to go through them. This includes people like Esso and Shell, which have to co-develop or at least lease areas from Petronas to explore for oil. In a nut-shell, Malaysian government gives them all the rights pertaining to oil, in return they pay crapload of tax to the government.  

In Malaysia, if the revenue of the company is below RM500k then it pays 19% of its revenue. But if it earns more, it will end up paying 24% of revenue. Unfortunately for Petronas, there is something called Petroleum Income Tax, which is taxed at 38%. That’s how it ends up contributing to big chunk of country’s GDP.

Petronas contributes to 30 percent of Malaysia’s GDP.  The group is comprised of 103 wholly owned subsidiaries, 19 partly owned outfits and 57 associated companies. ‘One of the new seven sisters’ is the title given by The Financial Times to Petronas as it is most influential state-owned national oil & gas company outside the OECD.

Petronas employs total 51000 staff all across the world. It has never done any sort of staff reduction until 2016, when they cut 1000 people from their staff. It is considered as a great place to work based on 127-page Lowyat Forum thread about working in Petronas. Even freshies can earn up to RM4k a month!

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6 Comments

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