Petronas is, in many ways, a cash cow.
Starting with RM10 million from the government in 1974, the national oil company has grown it to RM157 billion (cash and its equivalent) against RM93 billion in total debt. Petronas could have had more if it were allowed to.
Data on how much of Petronas' money went the government way is hard to come by. We have to live with estimates. One media estimate puts the total payments made by Petronas to the government from 1974 to 2011 at RM529 billion. Nine years on, it must be at least RM700 billion.
If the money had gone into a fund like the Norwegian Oil Fund (NOF), Malaysians, the present and future generations, would have a handsome sum to live on. But not all are agreed on the NOF being the right model for Malaysia.
Unfortunately, such views are often privately held, especially among senior Petronas officials, and do not see the light of day in the media. Debates, constructive ones that is, often lead to good ideas.
The New Straits Times is generous when it comes to op-ed space, but there are few takers. Corporate figures are strangely opinion shy. Absent this, we think the NOF is worth considering. We offer two reasons.
Firstly, in just 24 years, the NOF has built up more than US$1 trillion, which roughly translates to US$200,000 for each Norwegian. We are not saying that we could have hit the same target if we put aside our petroleum money in such a fund. It needs expertise. Those who are good at producing crude are not necessarily good at growing cash. Fund management is a different ball game. Plus, the future, by definition, is not predictable. When NOF started in 1996, none knew what the 24 years to come would be like.
Secondly, NOF was certainly not the making of an eureka moment. It was a studied answer to a pressing need by Norway's Skanland Commission in 1983. As far as we can tell, the NOF leaves the oil revenues untouched for Equinor ASA (formerly Statoil), the national oil company since 2018, to spend on extraction of oil and gas. Equinor is given a free hand to grow its business. What goes into the NOF are corporate taxes, a whopping 58 per cent.
In comparison, Malaysian corporate tax is a low 24 per cent. Today, the 20,000-strong Equinor is ranked 113 among the Fortune Global 500. And it has been on the Global 500 list for 25 years. It is not that the Norwegian government doesn't tap into the NOF. But such withdrawals are rare. Bloomberg reported the first such withdrawal in 2016, when oil prices collapsed that year. The government withdrew US$400 million in August last year, again when oil prices plunged to a seven-month low. The NOF has been a huge fiscal buffer for the country, according to Bloomberg.
It is not only the NOF-like fund that Malaysia needs. The government has to find a way to wean Malaysians off petroleum subsidies. According to the Treasury's Economic Report, petrol subsidies alone amounted to RM515 billion between 2004 and 2019, money that could have been put to better use. The NOF, or a version of it, is an idea whose time has come.
Malaysia needs it. Crude prices are going to be low for long. And peak oil is, well, just a peak away.