Petronas has no value without Sabah, Sarawak

Saturday, 26 April 2014

Considering, oil and gas fields off Terengganu and Kelantan are now marginal the only plausible reason for Musa Aman to eye Petronas shares is “self-preservation”.


As it is now Petronas owns all the oil and gas reserves in Malaysia. This enables it to be listed as a Fortune 500 company.

An estimated 60% of the oil and gas recovery in Malaysia comes from the Sabah and Sarawak fields. This rate is going to increase substantially as more new fields are discovered and become operational in Sabah and Sarawak territorial waters.

Meanwhile oil fields in Terengganu are increasingly mature and being considered as marginal fields.

In this situation the value of Petronas shares will depend much more on the Sabah and Sarawak fields than the Terengganu fields.

Once the ownership of Sabah and Sarawak territorial waters are taken back by the respective states, then the only thing of value in Petronas would be the oil and gas fields off Kelantan and Terengganu.

This also means that at least 60% of Petronas’ value as a company will be automatically taken over by whichever entity that Sabah and Sarawak will use to maintain and develop its own petroleum and gas industries.

In such a scenario Petronas will only be left with fields off Kelantan and Terengganu.

In this situation, Sabah and Sarawak’s petroleum and gas entities will have a higher value than Petronas itself.

As such Chief Minister Musa Aman’s idea of securing Petronas shares for Sabah does not make any sense.

The only reason for Musa to acquire Petronas shares instead of taking ownership of the territorial waters is because Musa may be “strongly” advised to do so.

If Musa takes equity in Petronas, it also means it will still have the Sabah and Sarawak territorial waters as its assets.

This also means that Petronas will retain its position as a Fortune 500 company.

But the question is at what cost to Sabah and its people?

Self-preserving Musa

Also worthy of note is, why would Sabah or for that matter Sarawak want to have equity over the ageing Kelantan and Terengganu fields?

This is the only thing left that can provide value to Petronas once Sabah and Sarawak take ownership of its respective territorial waters.

There is actually no reason to do so, either from a business perspective or for political reasons.

The only reasoning then is Musa’s self-preservation and self-interest.

The other consideration is to preserve Petronas, vis-a-vis safeguarding the Option Holders.

This is of no consequence to the 59 assemblymen (outside of Musa) in Sabah and the 25 Members of Parliament. It is certainly of no value to the people in Sabah.

Sabah and Sarawak have a much larger territorial water area and a whole bigger oil and gas reserve to play with.

My believe is that Sarawak leaders may not want to go the same route as Sabah because by taking ownership of its territorial waters and all the oil and gas reserves, Sarawak now has an option to its SCORE (Sarawak Corridor for Renewable Energy) development.

Sarawak will then no longer need to built contentious dams for hydro-power. It will have all the gas in the world to power its industrial development.

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