Rising Costs Across The Energy Value Chain Limit Petronas’ Profits

By Nurunnasihah Ahmad Rashid

KUALA LUMPUR, April 3 (Bernama) -- The surge in global oil prices following the conflict in West Asia does not necessarily lead to extraordinary profits, as cost increases also occur across the entire energy value chain, said Petroliam Nasional Bhd (Petronas).

President and group chief executive officer, Tan Sri Tengku Muhammad Taufik Tengku Aziz, said the perception that Petronas is "swimming in profits" when oil prices reach around US$120 per barrel (US$1 = RM4.02) is inaccurate, as the company's operations encompass not only the upstream sector but also the midstream and downstream sectors.

"At first glance, there may be profits in the upstream sector, but in the midstream and downstream segments, input costs, including crude oil purchases, refining, and processing, also increase significantly when energy prices rise," he said while appearing as a guest on the special programme, Bicara Naratif Khas: Addressing Challenges due to the Global Energy Crisis, on RTM tonight.

He explained that the increase in costs needs to be considered comprehensively, thereby balancing the impact of rising oil prices on the group's financial performance.

At the same time, Tengku Muhammad Taufik said Petronas continues to shoulder its responsibility as a national oil company that is not only profit-oriented but also entrusted with ensuring the country's energy security.

"A stable energy supply is the foundation of economic activities and daily life. This is a trust that we must fulfil," he said.

In response to why Petronas does not bear a larger share of subsidies, he said the company has made significant contributions to the country since its establishment in 1974, totalling approximately RM1.6 trillion in the form of dividends, taxes, petroleum payments, and export revenues.

"In the past five years alone, Petronas has contributed more than 20 per cent to the government's revenue, in addition to channelling nearly half of its post-tax profits as dividends to the government.

"Petronas remains a commercial entity, while the subsidy mechanism involves broader considerations at the government level," he noted.

Meanwhile, Tengku Muhammad Taufik acknowledged that the current challenges also involve global supply disruptions, which have led to increased costs for imports, processing, and logistics.

"There are situations where the issue is not just about price, but also about the availability of supply. If the supply does not arrive, the cost becomes higher, and the burden on the government also increases.

"We have also implemented various internal measures to enhance operational efficiency, including reducing non-critical expenses, possibly cancelling non-essential travel, optimising energy usage, and leveraging data analytics in maintenance and logistics planning," he said.

He added that these measures are important to ensure the company remains resilient in a high-cost environment, while also setting an example for the industry in responsible energy management.

-- BERNAMA