Since the statement by the Government on the 40% fuel price increase on 4th June 2008, much commotion has been happening in Malaysia. I am much inclined on the recent issue, where chain mail and various blogs are relentlessly attacking and making baseless and inaccurate allegation towards our national oil company, PETRONAS. A lot of people are questioning on PETRONAS role, function and contribution to the country especially on the money that it has provided to the government.

For the record, here’s the fact:

1. PETRONAS is essentially a company, a business entity, which operates on a commercial manner. Therefore, its main objective would be to generate income and value for its shareholder (which is the Government).
2. The Government gave RM10 million to PETRONAS as seed capital in 1974, when PETRONAS was set up. I supposed, this is merely peanut figure as opposed to other projects.
3. PETRONAS made RM570 billion in accumulated profits (from 1974 to 2007), and returned to the Government a total of RM335.7 billion. That is about 65% of the profits - meaning for every RM1 that PETRONAS makes, 65 sen goes back to the Government.
4. Last year, PETRONAS made a pre-tax profit of RM86.8 billion. The amount given back to the Government (in royalty, dividends, corporate income tax, petroleum products income tax and export duty) was RM52.3 billion. The rest of the profit was used to pay off minority interests and taxes in foreign countries (Yes! PETRONAS now operates in more than 30 countries), and the remaining figures was reinvested. The amount reinvested seems a lot, but the oil and gas industry is technology- and capital-intensive. Costs have gone up exponentially in the last couple of years. Previously, to drill a well, it cost about US$3 million; now it costs US$7 million. The use of rigs was US$200,000 a day a couple of years ago; now it costs US$600,000 a day.
5. A lot of people also do not realise that the amount returned by PETRONAS to the Government makes up 35% of the Government’s total annual income, to be used by the Government for expenditures, development, operations, and yes, for the various subsidies. That means for every RM1 the Government makes, 35 sen is contributed by PETRONAS.

So, instead of asking what happens to PETRONAS’ money or profits, people should be questioning how the money paid by PETRONAS to the Government is allocated.

Note: PETRONAS President cum CEO will be on TV1 at 0930pm tonight so stay tuned.