KUALA LUMPUR: Economists opine that the government should come up with a long term plan for Petroliam Nasional Bhd (Petronas) and its role in the country's development amid depleting reserves and a focus on energy transition.
Petronas reported a 29 per cent drop in second quarter ended June 30, 2023 net profit to RM16.4 billion from a year ago, on 13 per cent lower revenue of RM79.9 billion, amid a weak energy market.
For the six-month period, the company's net profit fell by 13 per cent to RM40.2 billion in the first half of the year attributable to lower crude oil prices.
Brent crude oil prices hit its lowest in June this year at US$71.84 a barrel.
"We should look at the long-term for Petronas, not just quarterly or even annual returns. We need to understand what Petronas can contribute over the next decades and how it can be best managed as a national asset."
"If Petronas has 15 years of known reserves or 40 years of possible reserves (with the right technology), it will remain a significant contributor to the economy and this must be optimised." "So the short-term performance must be viewed in that context," Malaysia University of Science and Technology economist Dr Geoffrey Williams said.
He emphasised Petronas' pivotal role as a development institution for Sarawak and Sabah as well as all other states in the country.
"It also has significant overseas partnerships which add not just financial value but research and development and innovation benefits."
"It might also be useful to study how its remaining reserves and profits can be best used for economic and social development. Even the use of the income to support social protection, pensions and a new Malaysian Superfund," he added.
Williams opined that with a possible limit to Petronas reserves in 15 years, the government needs to look at how part of Petronas can be turned into a new business or asset to continue its contribution rather than just waiting for it to end when its reserves run out.
"So a partial privatisation can release money now which can be reinvested into new forms of income generating activities for the government," he added.
Malaysian Institute of Economic Research economist Dr Shankaran Nambiar expects no increase in demand for Petronas' products due to softer global activity which could extend to the first quarter of next year.
Nambiar said that Petronas will enter a phase where its demand function will be affected by weaker global activity and energy transition development.
"What affects Petronas affects our fiscal position, so that's another worrying issue," he said.
Bank Muamalat Malaysia Bhd chief economist and head of social finance Mohd Afzanizam Abdul Rashid said the group's fairly stable capital expenditure, which stood at RM10.9 billion in 2Q23, signals Petronas' continued role as a benefactor of players within the Petronas ecosystem and supply chain.
"We believe the outlook for the global economy is highly uncertain owing to restrictive monetary policy along with a weaker outlook on China's economy following weaknesses in their real estate market. By extension, crude oil prices are unlikely to stage further appreciation as demand for fuel would mimic global growth," he said.
Afzanizam added that with the challenging economic outlook, Petronas is expected to continue conserving the company's cash reserve as it needs to prioritise its capital expenditure to grow sustainably and ensure energy security will be intact.