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Setting up a state oil and gas company. in the Malay Peninsula. which brought Malaysia's first offshore oil field onstream in 1968. signed in 1969. In 1910. and Mobil. This became the first oil producing well known as the Grand Old Lady. at the end of the 19th century. an agreement between Malaysia and Indonesia. It seemed that Malaysia would either have to join the trend or continue to leave its oil and gas entirely to Royal Dutch/Shell and Esso. The authorities in the two new states retained their links with Royal Dutch Shell. the majors.900 m /d). and became Malaysia. which then controlled more than 90% of the oil trade. It was Royal Dutch Shell that began the oil exploration in Sarawak. Continental Oil. By 1985. Former Chief Minister of Sarawak. 3 Malaysia's output of crude oil stood at about 81. united with Sarawak and Sabah. then under the White Rajahs. the federal government turned to Esso. By 1974. when the Federation of Malaya. Further. the most populous region and the focus of federal power. having achieved independence from Britain six years before. as first proposed in its Five Year Plan published in 1971.000 barrels per day (12. By 1974. Tun Abdul Rahman Ya'kub was one of the people who proposed the idea of Malaysia setting up their own oil company. Shell was still the only oil company in the area in 1963. only Esso was still in the area. multinational corporations necessarily attuned to the requirements of their directors and shareholders. had settled doubts and disputes about each country's claims over territorial waters and offshore resources at a time when both were heavily indebted to Organization for Economic Co-operation and Development (OECD) governments and banks as well as to the International Monetary Fund (IMF) and the World Bank.PETRONAS was not the first company to extract oil or gas in Malaysia. toward the Organization of Petroleum Exporting Countries (OPEC). however. had worked for Indonesia: why not for Malaysia as well? The oil crisis of . both on the island of Borneo. Sarawak. licensing exploration off the state of Terengganu. the first oil well was drilled in Miri. through which the government could get international capital but avoid tangling with foreign oil companies or governments. It made its first discoveries of natural gas in that year and then rapidly made Terengganu a bigger producer of oil than either Sarawak or Sabah. These were years in which power in the world oil industry began to shift away from the majors. reduced in number from seven to five. rather than to the priorities the government of a developing country might seek to realize. were producing less than 20% of the world total. as well as a proliferation of new private and state companies joining in the search for reserves. Meanwhile. Setting up a state oil and gas company: 1970s Several factors converged in the early 1970s to prompt the Malaysian government into setting up a state oil and gas company.

but retained the chairmanship of Bank Bumiputra. management. I have an important job for him. Since the restoration of parliament in 1971. However. PETRONAS' first move was to negotiate the replacement of the leases . Having created PETRONAS. It was modeled on Pertamina. The government wanted. production limits. the heirs to the Alliance Party which had been dominant from 1957 to 1969 and the originators in 1971 of the New Economic Policy. Tun Abdul Razak. which had been set up in 1958. to encourage provision of plant. the Indonesian state oil and gas company founded in 1971 in succession to Permina. According to the 1971 plan. and its continuation in much the same form since. the government had to choose what forms its dealings with private oil companies would take.1973–74 made the government even more aware of Malaysia's dependence on foreign oil and foreign capital in general. or it could make contracts to cover profit-sharing. the country has been ruled by the National Front (Barisan Nasional). along with their capital and expertise. to produce nitrogenous fertilizers. production-sharing. and to spread the benefits of the petroleum industry throughout the nation. has been the political stability of Malaysia. Razaleigh had to relinquish his job as Chairman of PERNAS which he held from 1970. Another factor in the decision was that the technology had recently been developed for extensive exploration and drilling offshore. Starting with its legal monopoly on oil and gas activities and resources. Malaysia's then prime minister. Malaysian crude turned out to be mostly high quality with low sulfur content. altogether. a job as important as that of a Cabinet Minister. PETRONAS' goals would be to safeguard national sovereignty over oil and gas reserves. to take part in distributing and marketing petroleum and petrochemical products at reasonable prices. and needed. announced the appointment of Tengku Razaleigh Hamzah as Chairman and Chief Executive of PETRONAS. leasing. The Malaysian government chose to create a state company. or other familiar instruments of supervision. I have decided to appoint him as Chairman and Chief Executive of PETRONAS. joint ventures—sharing both profits and costs—or all stages of the process. it had several options: it could simply award concessions without taking part in production. On 6 September 1974. The local geography included a combination of broad basins of sedimentary rock with calm and shallow waters around the Sunda Shelf. having both supervisory powers over the majors and production activities of its own. I intended to bring Tengku Razaleigh into the Cabinet. Tun Razak said: "From among the new blood. the cooperation of the majors but also sought to assert national rights over the use of the country's resources. which was designed to improve the economic position of Bumiputras—native Malays and other natives in Sabah and Sarawak—relative to Chinese and Indian Malaysians and to foreign corporations. or profits. was a workable compromise between allowing the majors full rein and excluding them. PETRONAS was established in August 1974 and operates under the terms of the Petroleum Development Act passed in October 1974. and services by Malaysian companies.” Subsequently. it could try offering services at the supply end. A state company. rather than using taxes. which is equivalent to being a Cabinet Minister. The difficulties this policy has caused for foreign companies and investors are outweighed by the benefits they believe they gain from Malaysia's political stability. A final and crucial factor in the creation of PETRONAS. to plan for both present and future national need for oil and gas. under "carried-interest" contracts. equipment. making exploration for gas and oil relatively easier and more successful than in most areas of the world.

When in 1982 PETRONAS Carigali formed an exploration and production company with Société National Elf Aquitaine of France. Allowing for royalties to both federal and state governments. Developing natural gas: the late 1970s to the mid-1980s The government was determined to develop Malaysia's natural gas as well as its oil Shipping Company (MISC). PETRONAS retained its supervisory powers over all oil and gas ventures. Malaysian self-reliance. they laid down that the remainder would go 70% to PETRONAS and 30% to the foreign company. pushing commencement further and further back. a urea plant. PETRONAS Carigali. by allowing the company a degree of commercial and political flexibility and reinforcing PETRONAS' chief purpose. surrendered management rights—leading to a repeal of part of the Petroleum Development Act—and settled for PETRONAS' taking 60% of equity in the new company Malaysia LNG. PETRONAS went downstream for the first time in 1976. Esso began oil production in two offshore fields in 1978. whose share was consumed within the country.granted to Royal Dutch/Shell on Borneo and to Esso in the Peninsula with production-sharing contracts. which have been the favored instrument. These first contracts came into effect in 1976. is based in Sarawak and now exports ammonia and urea all over the world. signed in 1990. when PETRONAS and the government. PETRONAS had concluded contracts with Tokyo Electric Power and Tokyo Gas for the sale and delivery of LNG through to the year 2003. PETRONAS supervised its foreign partners' oil activities. alongside joint ventures. Negotiations went on. and Esso in an attempt to postpone the exhaustion of . This development came against the background of the government's imposition of a depletion policy on PETRONAS. taking no direct role in production until 1978. when it was chosen by the Association of South East Asian Nations (ASEAN) to begin construction on the second ASEAN joint industrial project. of which it owned 61%. which was controlled by international conferences. Royal Dutch Shell. it allowed Elf better terms for recovering costs than it had offered in earlier ventures. under these contracts and another one. but exports were at such a low level as to make the country ineligible to join OPEC. save the cost of hiring foreign tankers. for 20 years from 1993. Production of LNG in Sarawak at last began in 1983. Shell BV. transport management. particularly on issues of health and safety and environmental control. After negotiations lasting from 1977 to 1982. until 1977. the Royal Dutch/Shell subsidiary that was building the LNG plant off Sarawak with Japanese and Asian Development Bank aid. Malaysia LNG was to send almost the entire output of its Bintulu gas fields to Japan. The subsidiary. faced with the costs of maintaining the tankers between delivery and first use. ever since. or refining. and expand the country's fleet under its own control—in contrast to cargo shipping. It began its work in an oil field off the Peninsula. and for cost recovery arrangements. The Sarawak state government took 5%. in southwestern Japan. to supply Saibu Gas of Fukuoka. and the other 35% was divided equally between Shell BV and the Mitsubishi Corporation. unlike PETRONAS. Asean Bintulu Fertilizer (ABF). This situation benefited Malaysia. Malaysia became a net exporter of oil. Also in 1976. accepted production sharing with PETRONAS but baulked at sharing equity. These were to take LNG exports out of Malaysia. and PETRONAS. exporting its share of the supply. when the government saw to the creation of a subsidiary for oil exploration and production.

000 m ). It became clear that this could only be sustained by relaxing the conditions for joint ventures between PETRONAS and the major oil companies. but the new subsidiary PETRONAS Dagangan was given the initial advantage of preference in the location of its stations. These were then estimated to be about 2. but exports took until 1984 to surpass their 1980 level. It initiated the construction of refineries at Malacca and at Kerteh in order to reduce its dependence on Royal Dutch/Shell's two refineries atPort Dickson and Esso's refinery in Sarawak. but by 1989 PETRONAS had signed 22 new contracts with 31 companies from 11 countries. the companies sought new fields and new contracts. 3 . hydroelectricity for 19%. By 1990. coal for 2%. all but 20 on a franchise basis. and other foreign companies. In 1985. the government and PETRONAS revised the standard production-sharing contract. The PETRONAS venture responsible for this shift in fuel use. which cut Malaysia's income from exported oil by more than a third even though the volume of exports rose by 16%. As production from Royal Dutch/Shell and Esso's existing fields moved nearer depletion. abolishing signature. following the success of smaller gasification projects in the states of Sarawak and Sabah. and taxes on company income were also cut. beyond its 1980 level. petroleum products accounted for 88% of the country's commercial consumption of energy. too far away from the main population centers to become a major alternative. a measure that was intended to promote the domestic refining industry. discovery. was cut to 70%. and about half of each year's gas output was being consumed in Malaysia.000. increasing the rate of recovery of capital costs from 30% to 50% of gross production in the case of oil and from 35% to 60% in the case of natural gas. The new policy and the new tax combined to cause Malaysia's output and exports of crude oil to fall in 1981 for the first time since PETRONAS was established. cited as disincentives to foreign investment. and the government decided to impose a tax on these exports at a 25% rate. The government and PETRONAS aimed to encourage the replacement of fast-depleting oil within Malaysia itself and simultaneously to foster heavy industries which could help reduce the country's overwhelming dependence on exporting its natural resources. and another 50 were planned. which OPEC proved unable to control. and—along with Malaysia LNG—for Malaysia's becoming the third largest producer of LNG in the world. gas accounted for 17%. were eventually relaxed over the next several years. was the Peninsular Gas Utilization Project (Projek Penggunaan Gas Semenanjung). with the 35-year contracts available in neighboring Singapore—and there was still a 25% levy on exported crude oil. However. oil and gas already represented 24% of Malaysian exports. the contract period was still restricted to five years —compared. the depletion policy was being undermined by external circumstances. the aim of which was to supply gas to every part of the Peninsula.84 billion barrels (452. already covered much of the domestic retail market. Through the early 1980s. forced the Malaysian government to increase production to offset deterioration in its balance of increased payments to a deficit of $1 billion. By 1980. discouraged interest in the new arrangements. Output rose again. These two majors. In 1982. At first the drastic fall in oil prices during 1986. the PETRONAS–government share. 252 service stations carried the PETRONAS brand. These conditions. which had risen to 80%. Some were set up on grounds of social benefit rather than of strict commercial calculation. Its first stage was completed in 1985. in the following year. In 1980. and production bonus payments and increasing the foreign partners' share of the profits. for example. and it was officially predicted that by the late 1980s Malaysia would be a net oil importer once again.oil reserves. Five years later. and involved the extraction of gas from three fields in the Natuna Sea. However. and petroleum products for 62% of such consumption. the rest being provided from hydroelectric plants in Sarawak. a worldwide oil glut. PETRONAS went into refining and distribution in 1983.

Malaysia risked seeing output decline to 350. exploration was by no means at an end and could yet produce more reserves. and the U. Ltd.5 billion over five years trying to rescue the bank from the impact of the bad loans it had made.000. where unknown reserves could be discovered. which came onstream at the end of 1988 and was developed by Esso Production Malaysia. gas. over the past century. In 1990.. so that demand for oil there would rise twice as fast as demand in the relatively more sluggish. and announced its intention to concentrate on oil.000 to 650. The Malaysian government. and its distribution to the state of Terengganu by pipeline and abroad via an export terminal. Ltd. taking the bank's share capital down with it.000 m /d) in late 1990 as the crisis unfolded. which collapsed in 1985. PETRONAS had 3 already raised Malaysia's oil production rate from 605. the second-largest. the governments of Vietnam and Myanmar (Burma) invited PETRONAS Carigali to take part in joint ventures to explore for oil in their coastal waters. was one of the richest oilfields so far found in Malaysia waters. the Petroleum Authority of Thailand.between the Peninsula and the island of Borneo. the crisis caused by the Iraqi regime's invasion of Kuwait culminated in military action against Iraq on behalf of the United Nations. the Petroleum Authority of Thailand arranged with PETRONAS to study the feasibility of transferring natural gas from this jointly administered . was created to take up a 15% interest in a field in Myanmar's waters being explored by Idemitsu Myanmar Oil Exploration Co.000 barrels per day (103. since. Battling oil depletion: the late 1980s Fortunately for Malaysia. natural gas. its processing in a plant at Kertih on the Peninsula's east coast. Late in 1989. with known reserves of 2. PETRONAS Carigali Overseas Sdn Bhd. PETRONAS sold the bank back to another state company.000 m ). The Seligi field.94 billion barrels (467. PETRONAS' least happy venture was its ownership of the Bank Bumiputra. In 1990. In a separate deal. PETRONAS spent more than MYR3. This was exacerbated by the possibility that Southeast Asia in general would enjoy rapid economic growth in the 1990s. In 1991.000 m /d) in 2000 and running down to depletion within another five years. a new unit. and associated activities in future. and further concessions to the majors would encourage exploration of the deeper waters around Malaysia. and of its substitute.000 barrels per day (56. Thus began PETRONAS' first oil exploration outside Malaysia. company Triton Oil. Minister of Finance Inc. and its state oil and gas company. the governments of Malaysia and Thailand settled a long-running dispute over their respective rights to an area of 7. was forced to decide what mixture of policies to adopt in response. computerized seismography made it both feasible and commercially justifiable to re-explore fields which had been abandoned. In May 1990. Meanwhile. starting with its support of the Carrian property group of Hong Kong.. a subsidiary of the Japanese firm Idemitsu Oil Development Co. in October 1990. and assuming no new 3 major finds of oil. PETRONAS invited foreign companies to re-explore parts of the sea off Sabah and Sarawak on the basis of new surveys using up-to-date techniques. but leastprofitable. more mature economies of North America and Europe. or were assumed to be unproductive. outside Malaysia. of the commercial banks incorporated in Malaysia. in a production sharing arrangement with Myanma Oil and Gas Enterprise. Just as PETRONAS was disposing of this liability. This move only reinforced the company's awareness of the need to vary 3 its policies.300 square kilometers in the Gulf of Thailand by setting up a joint administrative authority for the area and encouraging a joint oil exploration project by PETRONAS..S. Another way to postpone depletion was to develop sources of oil.

More to the point. and the expansion of PETRONAS' output of methyl tert-butyl ether (MTBE). Japanese. Western standards —were strongly interventionist. played an important role in the Malaysian economy as a whole. of Japan and Neste Oy of Finland. Contracts for line pipes for the second stage of the project were signed in 1989 with two consortia of Malaysian. from where gas could be sold to Singapore and Thailand. and varying the sources and uses of oil and gas. the Chinese Petroleum Corporation of Taiwan.000 m /d). followed by another leap to 32% in 1981. and Brazilian companies. and Caltex of the United States did not negate the policy. Under governments which—by current. an indispensable instrument of the state. The third and final stage of the project was to lay pipelines along the northwest and northeast coastlines of the Peninsula and was completed in 1997. 3 completed in 1994. This stage. a side effect of the refinery's completion was that PETRONAS was able to refine all of the crude oil it produced. PETRONAS. since PETRONAS' existing arrangements with MISC and with Nigeria's state oil company would be inadequate to transport the additional exports of LNG due to start in 1994.area. and polypropylene. included the laying of 730 kilometers of pipeline through to the tip of the Peninsula. under the contract with Saibu Gas. for the subsidiary company PETRONAS Penapisan (Melaka) had a decisive 45% of equity while sharing the enormous costs of and gaining advanced technology for the project.propylene. That project was on course to becoming a major element in the postponement of oil depletion. helping to develop associated industries. through Malaysia to Thailand. PETRONAS was not just another big oil company: it controlled a crucial sector of the economy and remained. promoted the same policy. and the company's second refinery atMalacca. which were already being produced in joint ventures with Idemitsu Petrochemical Co. From then until 1988 the proportion fluctuated between 29% and 36%. Another new venture in 1990 was in ship-owning. PETRONAS did not lose sight of the government's commitment to Malaysian self-reliance.000 barrels per day (16. when it showed a marked increase to 23%. . if not historical. with a capacity of 100. The fact that it was built in a joint venture with Samsung of Korea. the contribution of oil taxes to the federal government's revenue hovered at around 12% to 16% until 1980. the conversion of two power stations—Port Dickson and Pasir Gudang—from oil to gas. by way of an extension of the pipelines laid for the third stage of the Peninsular Gas Utilization Project. completed in 1991. for better or worse. instead of being partially dependent on refining facilities in Singapore. with its policies of promoting self-reliance.

In addition. PETRONAS Dagangan Bhd and PETRONAS Gas Bhd.Expanding globally: the 1990s and beyond The Petronas Twin Towers. In 1998. The firm set plans in motion to build three petrochemical plants in Kuantan as well as anacetic facility in Kerteh. PETRONAS' tanker-related subsidiary merged with MISC. the firm also saw its first overseas production from the Dai Hung field in Vietnam and established its first retail station outside of Malaysia in Cambodia. In 1995. . a subsidiary was created to import. went public on the Kuala Lumpur Stock Exchange. Soon India's Liberty Group purchased a 1% stake in Petronas During 1997. PETRONAS marked a significant milestone during this time period—two of its subsidiaries. A key discovery was made in the Ruby field in Vietnam in 1994. During the mid. the company's polyethylene plant in Kerteh began operations. PETRONAS entered the aromatics market by way of a joint venture that created Aromatics Malaysia Sdn Bhd. and distribute liquefied petroleum gas (LPG). development. PETRONAS heightened its diversification efforts. international exploration. to begin exploration of block 02/31 of the Liaodong Bay area in China. It also formed a contract with China National Offshore Oil Corporation and Chevron Overseas Petroleum Ltd. store. While the Asian economy as a whole suffered from an economic crisis during 1997 and 1998. Its first LPG joint venture in China was launched that year and the company acquired a late 1990s.3% interest in Malaysia International Shipping Corporation Berhad (MISC). That year. the state-owned concern continued its development in the oil and gas industry. In 1996. From its new headquarters in the Petronas Twin Towers. Malaysia was quick to bounce back due to successful government reforms. and production remained key components in PETRONAS' strategy along with diversification.

Sudan. Cameroon. transformed into reality by the same belief among Malaysians that 'we can do it. Since inception in 1974. The $6-billion bid was approved by Ottawa on December 7. Petronas sources said it will renew a bid for gas producer Progress Energy Resources after Canada blocked its bid earlier this month. claiming that "the PETRONAS LNG complex now serves as another shining example of a vision realized of a national aspiration. That year. Datuk Mustapa Mohamed. The company realized.3 billion. The company forged deals for two new exploration plots in Pakistan and began construction on the Chad-Cameroon Integrated Oil Development and Pipeline Project. Chad and Mauritania. The firm also made considerable progress in its petrochemicals strategy. becoming a national symbol for success. The payment represents 44% of the 2008 federal government revenue. however. PETRONAS have paid the government RM 403. . that it would have to continue its aggressive growth strategy in order to insure its survival in the years to come. The venture proved successful as they discovered oil in . including Gabon. Yemen. By 2003. By 2002. The company's international reserves stood at 6. Indonesia. Egypt. 2013. It had flow rates of 440 barrels of crude oil per day and 11. the country's first commercial prototype engine. May 2008 In 2004. and Vietnam. Petronas issued a statement that an onshore oil and gas discovery has been made in the state after drilling a test well about 20 kilometers away from the city of Miri in northern Sarawak. PETRONAS continues to focus on international exploration projects as 40% of revenue in 2008 was derived from international projects such as Iran.increasing PETRONAS' stake in MISC to 62%. On October 29. PETRONAS continuously provides the Malaysian government dividends from its profits. PETRONAS entered the new century determined to expand its international efforts. PETRONAS had signed seven new PSCs and secured stakes in eight exploration blocks in eight countries. PETRONAS had transformed itself into a global oil company over the previous decade. Malaysia was set to usurp Algeria as the world's second-largest producer of LNG with the completion of the Malaysia LNG Tiga Plant. On January 17.6 [9] billion in 2008.24 billion barrels oil equivalent in 2008. 2012. with RM 67. The well was found to have a net hydrocarbon thickness of 349 meters. Niger. Prime Minister Mahathir Mohamad commented on the achievement in a May 2003 Bernama News Agency article. opening new gas-based petrochemical facilities in Kerteh and Gebeng. The PETRONAS overseas expansion drive continues with the acquisition of Woodside Energy Ltd Mauritania assets for $418 million in 2007. The find is the first onshore oil discovery in Malaysia in 24 years. The company also signed a total of five new production sharing contracts (PSCs) in 1998 and 1999.5 million standard cubic feet of gas per day. Minister in the Prime Minister's Department. stated that PETRONAS contributed RM 25 Billion to the country's treasury accounting for 25% of revenue collected via dividends and other revenues. and began oil production in the Sirri field in Iran. PETRONAS introduced the Petronas E01. 2012.'" Indeed.

guiding our corporate activities and policies. Vision Statement To be a Leading Oil and Gas Multinational of Choice Mission Statement     We are a business entity Petroleum is our core business Our primary responsibility is to develop and add value to this national resource Our objective is to contribute to the well-being of the people and the nation .Vision and Mission These statements define PETRONAS as an organisation. setting our course for the future.

reflecting our sense of duty and responsibility in upholding our commitment towards contributing to the wellbeing of peoples and nations wherever we operate. Loyalty Loyal to nation and corporation Integrity Honest and upright Professionalism Committed.Shared Values Our values are embedded in our culture as the backbone of our business conduct. innovative and proactive and always striving for excellence Cohesiveness United in purpose and fellowship .

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