KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) has announced yet another year of record profits but warned that cost pressures and shortages in the industry are a serious threat to future production.
The national oil company said yesterday that ventures into international markets were reaping huge benefits and that it would begin oil production from its first deepwater field in September.
Tan Sri Mohd Hassan Merican
For the financial year ended March 31, 2007 (FY07), Petronas posted a net profit of RM46.4bil, up 7.7% from RM43.1bil in FY06. Revenue jumped 10% to RM184.1bil from RM167.4bil while shareholders' funds improved 16.3% to RM170.9bil. Of the total revenue, RM67.6bil came from abroad, exports added RM73.4bil and domestic operations contributed RM43.1bil.
“The year has been a tough one for the industry,'' president and chief executive officer Tan Sri Mohd Hassan Marican told a press conference.
He was referring to the cost increases that have eaten deeply into the business as the industry is now plagued by a shortage of skilled manpower and equipment such as rigs.
Hassan said upstream costs had risen nearly twice as much as the average increase in the Brent crude price and the demand for rigs had outstripped supply.
He said the shortages plaguing the industry threatened to crimp future oil production as they brought into question the economic viability of some projects and caused delays in other planned developments.
A big portion of Petronas' improved revenue was due to not just higher prices but also improved sales volume. But the strengthening ringgit had seen its revenues drop by RM7.2bil as the oil business is generally conducted in US dollars. Manufacturing activity contributed 56% to total group revenue and without that cog of its business, Hassan said, total group revenue would have dropped by a third annually.
In terms of payment to the Government, Hassan said that for FY07, RM52.3bil, or 66.2% of the total profit was paid to the Government as tax, dividends, royalties and export duties.
Over the past 33 years, Petronas had returned RM336bil to the Government.
At the company level, nearly 77% of the profit, or RM44.7bil, was paid to the Government in FY07, compared with RM41.7bil in FY06.
Petronas' total borrowings for FY07 fell to RM35.9bil from RM43.9bil the year before. Return on capital employed for FY07 was 40.9% which, Hassan said, was better than what the oil majors had achieved.
Return on total assets at 25.9% was rather low in comparison but it would have been higher if Petronas did not have the property assets in its books, he said.
As for capital expenditure (capex), RM21.6bil was spent in FY07 compared with RM18.7bil in FY06, and two-thirds of that was invested domestically.
“This is to sustain production capacity in the country,'' Hassan said.
Exploration and production accounted for 57.9% or RM12.5bil of the capex. Total reserves in Malaysia were 20.18 billion barrels of oil equivalent (boe) with natural gas accounting for 14.82 billion boe. Total daily crude oil production in Malaysia fell 5.4% last year to 661,000 barrels a day and natural gas declined by 0.7% to 950,400 boe per day.
Hassan warned that if consumption of oil in Malaysia did not drop from the growth rate of 4% a year, the country would be a net oil importer by 2010.
Petronas was also concerned about the amount of subsidy it was giving, via the supply of gas, as the total subsidy rose to RM15.6bil last year. Total subsidy since gas prices were fixed in 1997 amounted to RM58.2bil.
From the subsidy last year, Tenaga Nasional Bhd received RM5bil while independent power producers received RM6.7bil.
Gas prices in Malaysia are regulated and Petronas has to import gas and pay market prices to supply gas to the power and non-power sectors.
Hassan also said the subsidy to the non-power sector, which includes small industrial, commercial and residential users, rose 39.3% to RM3.9bil in FY07.
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