PETROS, PETRONAS and PETRA – who’s really oiling the business for Sarawak ?

 PETROS, PETRONAS and PETRA – who’s really oiling the business for Sarawak ?

In June 2017, the Chief Minister of Sarawak, Datuk Patinggi Abang Johari Openg, announced that Sarawak will establish a state-owned oil and gas exploration company which will work on ‘equal terms’ with Petronas, the national oil company.

Petroleum Sarawak Berhad (Petros) - a Malaysian oil and gas company 100% owned by the state of Sarawak owned by the Sarawak State Government was thus formed on 7th August 2017.

This attracted much attention and generated feverish excitement among Sarawakians that finally, the oil and gas would be ‘flowing home’ as anticipated, as part of the on-going negotiations with Putrajaya  over what belonged to Sarawak, including our Oil & Gas Resources under the Malaysian Agreement, popularly referred to as MA63.

That said, we are then made to understand that ‘Petros is not Petronas’ but will be working with it, AMONG OTHERS, as YAB Chief Minister Datuk Amar Patinggi Abang Johari mentioned that “all these initiatives by the State Government would ensure greater opportunities for Sarawakians and Sarawak companies to participate and invest in the oil and gas industry and to acquire expertise, knowledge and technology that would contribute to the continued growth and development of the oil and gas industry which will contribute to the economic success of the State and of Nation.”

Chairman of Petros, Tan Sri Datuk Amar (Dr) Hamid Bugo added that “we have revisited our purpose – that is to harness our resources for the sustainable progress of Sarawak and deliver on our growth strategy both in the upstream and for downstream Sarawak.” PETROS will be taking over the stewardship role of Sarawak onshore oil and gas activities.

‘State-owned Petroleum Sarawak Bhd (Petros) is expected to award petroleum contracts for the first two onshore blocks in northern Sarawak in first-quarter 2021 - Block SK 433 in the Miri area and Block SK 334 in the Engkabang area south of Marudi.

“We will encourage open bidding,” according to Petros Upstream executive vice-president James Foo, in his presentation on “Harnessing our resources, rejuvenating onshore” at a Sarawak oil & gas briefing for industry players last Friday.

He said Petros intends to package the prospecting licence and mining lease for both Block SK 433 and 334, adding that the petroleum contracts would be based on production/profit sharing between the investor and resource manager (Petros).

“Block SK 433 is the onshore extension of the prolific Baram Delta, which has been producing oil for decades.

Oil exploration and production activities have been concentrated offshore Sarawak where abundant resources have made it more lucrative for investors.

“Petros as onshore manager is to drive a focused programme to assess the remaining hydrocarbon potential for the entire Sarawak onshore aimed at early commercialisation of any discoveries and encourage prospecting and de-risking of frontier areas.

“Initial focus will be SK 433 and SK 334,” he added.’ [ TheStar, Tuesday, 03 Nov 2020 ]

Fast Forward – 2021  PETRA ENERGY, UZMA JV bags E&P contract from Petros for Block SK433 in Sarawak

‘A joint venture (JV) between Petra Energy Bhd and Uzma Bhd has secured a contract from Petroleum Sarawak Bhd (Petros) for the exploration, development and production of petroleum in Block SK433, onshore Sarawak.

According to both companies' filings this evening with the local bourse, the 29-year contract was secured by Petra Energy Development Sdn Bhd (PEDSB) and Uzma Engineering Sdn Bhd (UESB) JV — wholly-owned subsidiaries of Petra Energy and Uzma, respectively.

PEDSB will be the operator of the contract on behalf of the JV. Phase 1 of the job is for an initial period of four years, with a one-year extension option. Phase 2 involves development and production activities, which will start upon the successful outcome of Phase 1.

"The opportunity to explore, produce and develop the onshore block SK433 is a progression and an extension of its activities within the oil and gas industry. In addition, the Petra Energy group has the right capabilities and partner (UESB), bringing expertise and experience spanning sub-surface know-how, well services capabilities and production optimisation," it said.

The value of the contract, however, is not determinable, Petra Energy said, as it is based on the production of the asset, although both companies expect the contract to contribute positively to their future earnings.

[The EdgeMarkets June 18 2021]

‘BUSINESS POLITICS’ or POLITICS in BUSINESS – which is which ?

It is said that business and politics in Malaysia, including Sarawak, are inevitably related, if not ‘intertwined’. While it may be argued that both need each other for a ‘mutual and smooth co-existence’, this relationship is also a potential breeding ground for corrupt practices, notwithstanding the ‘checks and balances’, which are often overlooked, if not ignored for expediency.

Doubts were raised on whether ‘questionable deals’ had been concluded at the expense of prudency and good governance, as noted in the timber and plantation industries. If these were any guide, the oil and gas industry will be no exception, especially when it has all the signs of coming home to roost with the millions, if not billions to be made.

Hence eyebrows were raised among the oil and gas fraternity when Datuk Ibrahim Baki was appointed as a director of Petroliam Nasional Bhd (Petronas) on 17th August, 2020.

‘For one, while Ibrahim is not a prominent mainstream politician, he is the deputy secretary-general and supreme council member of Sarawak-based Parti Pesaka Bumiputera.

Since when, have politicians been appointed to the national oil corporation’s board?

Datuk Ibrahim is also executive chairman and non-independent director of Hubline Bhd, with a shareholding of 11.09% in the shipping company.

Hubline was quoted in new reports as saying that ‘the company was eyeing long-term contracts with the Sarawak government and Petronas for the transport of methanol products from an RM8 billion plant that is set to come onstream in Tanjung Kidurong, Bintulu, in 2023’.

While there should not be any objection to Petronas appointing a director from Sarawak, maybe it should consider a candidate with no conflict of interest.

Even though Ibrahim may not be involved in the award of contracts to Hubline, or declare his interest upon joining the board, a director with a major stake in a company bidding for deals with Petronas may make some uneasy.

As the guardian of the country’s oil and gas assets, Petronas must hold itself to a higher standard of governance.’  [TheEdge Malaysia September 1st 2020]

A Voice in the Wilderness ?….

but still a voice worth listening to….

The appointment of corporate figure Ibrahim Baki, a member of the ruling Parti Pesaka Bumiputera Bersatu’s supreme council, as the state’s representative on the Petronas board of directors was also singled out by Parti Sarawak Bersatu member See Chee How who ‘said the state government should have allowed the state assembly to deliberate, debate and decide on the appointment of Sarawak’s representative on the Petronas board.’

See, who is assemblyman for Batu Lintang, reiterated that “the Sarawak government must clarify and explain whether it was consulted and if it had recommended the appointment of Ibrahim to the Petronas board.” [FMT 21st August 2020]

PETROS….PETRONAS…..PETRA – what’s next ? Big, Bigger, Biggest ?

Connecting the dots…..

FACT No. 1 – PETROS was formed on 7th August 2017 ‘to ensure greater opportunities for Sarawakians and Sarawak companies to participate and invest in the oil and gas industry’.  

Question : Who are the ‘Sarawakians’ who will really benefit from Petros 

FACT No. 2 -- Datuk Ibrahim Baki, deputy secretary-general and supreme council member of Sarawak-based Parti Pesaka Bumiputera  was appointed as a director of Petroliam Nasional Bhd (Petronas) on 17th August, 2020.

Question : As YAB CM’s close associate and a PBB Deputy Secretary-General and Executive Chairman of Hubline Berhad, whose interests is Datuk Ibrahim Baki’s actually serving, in his capacity as a Director of Petronas ?

FACT No. 3 – With Tan Sri Bustari Yusuf’s Petra Energy Berhad inking a JV with Uzma Berhad to secure a contract from Petroleum Sarawak Bhd (Petros), doesn’t this come across as a ‘business tinged with politics’ or a ‘politics mired in business’ deal ?  

Tan Sri Bustari is well-connected with Umno-BN and KL Leaders. He has the wealth and power to influence the Sarawak ‘political landscape’.

His brother Fadillah Yusuf, the current Minister of works, has been rumoured to be ‘positioned’ as the ‘future Chief Minister of Sarawak’ – if GPS still holds the reins.

Is this a case of – ‘You help me, I help you’ ?

FACT No. 4 – With Petros, Petronas and Petra coming together with a ‘oneness in purpose’ – what holds for the ‘rights and interests’ of ordinary Sarawakians ‘pursuant to MA63’ insofar as our Oil and Gas resources are concerned - if the ‘track record’ of the timber and plantation industries were to taken as a guide ?

We would expect ‘leakages and seepages’ to happen as soon as the oil starts flowing from the wells.

It’s an oily and slippery road ahead for Sarawak with many ‘hands in the gloves’.

As John Travolta would have said – ‘Grease is the word’.

On the dot.

SELF-PRAISE IS NO PRAISE

  SELF-PRAISE IS NO PRAISE

‘Sarawak has sound financial and resource management and this has helped the state to implement various development projects.

                 Chief Minister Datuk Patinggi Abang Johari Tun Openg pointed this out at a community                           dinner  held at the Kapit Civic Centre on Sunday evening (Oct 4th 2020)’

Those were the opening lines in a news report captioned  ‘State has sound financial, resource management’ and carried by the New Sarawak Tribune dated the 5th Oct 2020.

The claim is something all Sarawakians would be proud of it was a completely truthful statement. Unfortunately, truth sometimes can be stranger than fiction and in this case, it is a fiction worthy of a literally award. The only thing that Sarawakians will agree about in the matter of financial management is Sarawak finances is shrouded in secrecy.

In June 2018, shortly after the GE14 in which the Pakatan Harapan (PH) showed Barisan Nasional (BN) the exit door, Sarawak DCM Tan Sri James Masing was reported as having said the the Sarawak BN government should use up all the state’s reserve in the amount of RM31 billion for projects before the PRN12. That was the first and the last time Sarawakians ever heard of the financial strength of the Sarawak government because after that revelation from James Masing there was no farther mention from any of the government leaders including from the chief minister himself. Indeed, I am inclined to think that most of GPS ADUNs including assistant ministers do not know of the existence of the reserve.

Sufficiently piqued by this revelation Sarawakians are now asking where is the money kept. It would not be logical to assume that the entire RM31 billion is kept in low interest paying bank accounts as that would not exactly be sound financial management. So where is the money spread? Treasury Bills, Malaysian Government Securities, Stock & Shares? Real Estate Investments?, Bonds like the 1MDB Bonds? If a significant portion of the reserve is kept in forms other than cash, then what is the current market value now? Is the RM31 billion still there? 

Sarawakians are asking because what they know of from information in public domain does not dovetail with this ‘brief flash in the pan’ revelation from James Masing. There was for example the issuance of USD1.6 billion through Goldman Sachs in 2011 and 2012:  US investment bank Goldman Sachs appears to have turned a blind eye to glaring corruption risks and conflicts of interest in order to underwrite US$1.6 billion in bonds for the Sarawak State Government, Malaysia, said Global Witness today (1). https://www.globalwitness.org/en/archive/goldman-sachs-underwrites-us16-billion-under-radar-bonds-corrupt-sarawak-regime-and-wins/

The scandal ridden jiwa murni roads in central and northern regions of Sarawak is another example which speaks of the possibility of the reserve not existing at all. The jiwa murni roads were crucial network of roads that was intended to provide rural communities with road connectivity. We now know that the ‘contracted’ sum was RM800 million which was less than a billion ringgit. Why did the Sarawak government not use the reserve to construct these roads, so crucial to the well-being of the rural folks? Not to mention the 24 hours electricity and treated water supply to communities that are still deprived of these most basic of utilities. Good financial management would have dictated that financing for these projects would be through sources carrying the smallest interest or opportunity cost burden to the state government and raising funding through issuance of bonds is definitely not the best option.

The Development Bank Of Sarawak (DBOS), incorporated in May 2016 and commenced business in Jan 2018 is one page from the annals of the financial management of the Sarawak government which raised many questions among Sarawakians. The following is an excerpt from a news report carried by Borneo Post on the 13th Jan 2019 :

‘As of Oct 23 last year, DBOS holds a total deposit of RM3.448 billion with credit facilities approved and disbursed standing at RM350 million and RM244 million, respectively.

Assistant Minister of Corporate Affairs Abdullah Saidol said the depositors are government-linked companies (RM7.5 million), local authorities (RM17.6 million), statutory bodies (RM23.2 million), and the public sector (RM3.4 billion)’

https://www.theborneopost.com/2019/01/13/dbos-an-alternative-financing-route-for-sarawak/

At that time DBOS had in their books deposits totaling RM3.448 billion, all from the Sarawak government, directly or indirectly and a paid-up capital of RM1 billion.

https://www.dbos.gov.my/page-0-9-6-tid.html

On the 13th Jan 2020 DBOS homepage published a media statement in which they said ‘ Besides this, he (Sim Kheng Boon,CEO of DBOS) said DBOS had already approved loans amounting to a few billion ringgit. Aside from financing mega development projects, the bank also finances smaller infrastructure projects……“DBOS will offer banking facilities to eligible borrowers which have at least 51 per cent state equity with management control.’

The last sentence quoted here presented at least one area of concern which is that, among the eligible borrowers are those with 51% state equity with the balance of 49% being privately held. What it means here is that DBOS was set up to help finance (with state funds) private business people. Here we are talking about financing for the elites, the privilege few who are able to dip their hands into the 49% share in these very lucrative areas.

https://www.dbos.gov.my/modules/web/pages.php?mod=news&sub=news_view&menu_id=0&sub_id=19&nid=11&m=1&y=2020

An article published in the Home Page of Sarawak’s DAP reveals some names which should ring many alarm bells.

https://en.dapsarawak.org/petros-board-members-beneficiaries-of-petronas-contracts/

Next is Petroleum Sarawak Berhad (Petros), another wholly state-owned enterprise incorporated on the 6th March 2018. Petros presently has an issued and paid-up capital of RM20 million. 

In the words of CM Datuk Patinggi Abang Johari, it was set up by the state government to enable Sarawak to actively participate in the extraction of oil and gas in Sarawak. The thinly veiled objective was to increase the revenue stream from the oil and gas sector as the federal government was saying signs that it will not bow to Sarawak’s demand for an increase in oil loyalty.

What significant success has Petros achieved since incorporation? It was reported in Feb 2020 that Petros has assumed the role of gas transporter and aggregator in Sarawak effective this year following the sales and purchase of gas distribution business and assets in Miri and Bintulu.

Petroleum Sarawak Gas Sdn Bhd (Petros Gas), a subsidiary of Petros, is now the operator of Miri Gas Distribution System (MGDS) and Bintulu Gas Distribution System (BGDS). Both facilities were previously owned and operated by PETRONAS Gas Berhad (PGB), a subsidiary of Petronas.

https://www.newsarawaktribune.com.my/petros-takes-over-gas-distribution-business/

How much is the segment worth yearly to Sarawak or how much did Sarawak compensated Petronas for it was never revealed. What we do know is PDA74 is still very much relevant in the oil & gas industry and will remain as a major damper on CM Abang Johari’s ambitions for Petros and for the ROE and ROI of Petros. 

And there is the matter of the SST payout of RM2.95  billion by Petronas. Sarawakians were told on the 17th Sept 2020 that Petronas has paid to the Sarawak government the sum of RM2.95 billion in court-awarded SST on O&G products. Nine days later, Sarawakians were told that the Sarawak government has agreed to buy all of Tabung Haji oil palm estates in Sarawak. The consideration price was not mentioned but a 2019 valuation of the estates placed the fair value at RM1.42 billion. 

In the final reckoning it was a case of the federal government, through Petronas, putting money through Sarawak’s left pocket and taking it back through the right pocket via the Tabung Haji’s rescue plans. Whether or not there was some arm twisting there is unknown but Sarawak certainly was short changed.

https://www.theedgemarkets.com/article/petronas-says-it-has-paid-sarawak-sst-2019

https://www.theborneopost.com/2020/09/26/swak-government-to-take-over-tabung-haji-oil-palm-plantations-in-the-state-says-cm/

And that, to my mind are unacceptable blunders in the managing of both the state’s financial and natural resources.