oil price INCREASE...!!! crucify Petronas?!

okay... this post (Italic) is actually written by a friend of mine and he able to write all this things down (took more than half an hour according to him) because he is working with Petronas (scholarship from UTP) right now and this is his comment and defences ^.^ I think it worth for me to post this.... i know it is another long post BUT really worth reading.



ok...i guess the angst u have against petronas is because of lack of knowledge
it is important that you can separate your hatred of government's move to increase the price and petronas.

getting the facts right.
Petronas is not the main price-up company.
as in any free market, its by supply and demand
if demand is high and supply is low, price of commodity goes up.
same here with oil and gas

in malaysia it is wrong to assume petronas is the only player
exxon is the bigger player in terengganu, shell in sarawak and murphyoil in sabah waters
and these players, are world players and they sell the oil at market price
so if the world price for oil is USD 1.50, then they sell USD 1.50. the balanced is taken up by governmentGeneral examples given by public and thru blogs


1. Fisherman goes fishing. Assume negligible operating cost. Fisherman caught fish, and at that time fish sells at RM15. fisherman goes to market and sell at RM10. Fisherman loses RM5, BUT instead...fisherman actually earns RM10 and not losing anything.

The flaw: this example does not take in the CAPEX, the capital expenditure, which is very high. Now the easily accessible oil is gone from the world, although there are still alot of oil in the world, they are in smaller pockets, hard to extract and hard to process oil or in deep water. To drill a well now cost RM100million or more. The success rate of drilling 1 well is less than 15%. second, this fisherman is actually owner of the market as well. For every fish other fisherman sells for RM10 in his market, he has to give RM5 to the other fisherman.


2. Take half of PETRONAS profit and give to the rakyat.

The flaw: Like i explained just now, although PETRONAS profit is RM70b last yr. Most of it will go into exploration of new oil source and in operation cost. Although the price of oil doubled from last yr, the operating course tripled! From barges, vessels, drilling equipments...at least triple. If we do not have the money, we cant invest in the future resources. We will die a natural death. Oil industry always have to take a long term view and not a knee jerk view. From a country giving a block (piece of land or sea) for a oil company to producing the 1st oil, the simplest easier fields will take 5 yrs. others, 10-15yrs. if we stop now, we could not catch up 10 yrs from now.


3. Stop spending so much money in failed exploration, wasting our money.

The flaw: Like i said before, the success to find oil now is less than 15%. Why so low? because
1st. the oil is deep in the sea, and under lots of rock. Now we have to go to 1000m water depth, and then 3000m of rock to reach oil source. How can we confirm got oil? we did all the surveys we want, we did all the scans we can. but these are under huge amount of water and rock! We got criteria that a survey study can determine potential oil source, but nothing is for sure until we reached it. and another misconception of oil and gas is they are like a pool of water. u go in and u suck them out. Hydrocarbon are trapped in small capilaries in sand, and they come out by pressure difference between the reservoir and the sea surface. We have to inject chemicals, water, gas into the well...just to get 30-40% of the total oil up to surface.
2nd. We cant stop overseas exploration. Malaysian oil can only last for 20 more yrs. even now our own oil contribute to only 50% of our output. the rest are from overseas. we need to expand to survive. and why we went to myanmar and sudan? petronas is the most community-serviced minded oil and gas company. so many schools, hospitals, libraries exists in the country we operate in.

Lemme give another example. The jail officer who whip prisoners. Its a bad job cos u hurt ppl, but i rather have a kind-hearted person wif conscience to do it, so he does not apply unnecessary strong pressure, he does not cross the whipping lines etc etc. so instead of other companies, i rather have petronas in these contries to do what we can for the citizen. we do not involve ourselves in their politics. if we pull out, who will suffer? the citizen rite? look at myanmar, when the government resist outside help, who suffers? civilians.


4. Boikot PETRONAS, but other companies?

The flaw: Petronas pays the most tax to the government. Shell, Exxonmobil, and others pay much less. So if u boikot petronas, government get less revenue, so less ability to support subsidy, and REAL market price will come into play. (apply ur economics theory) since petronas dun get as much business, it has less capability to develop, and will die a natural death once its fields life ended.


5. Petronas are overstaffed and overpaid

The flaw: petronas is seriously lacking staffs. we do not have enough ppl and we are stretched. Most of our staffs are young (less than 5 yrs experience) and the seniors are having a hard time to train us. We are hugely underpaid, peers in other companies are earning at least double us. even government engineers earn more than us now, including COLA, allowances. We do not get allowances, we do not get car/house allowance and COLA. we do not get OT. Petronas made the right move in taking best SPM students under scholarship. but if we are paid little, we leave for better paying companies. Who is left? u pay peanuts, u get monkeys. so when its best brains leave, petronas cant compete with other companies. either it die off, or it takes in experts who are paid at least 5 times our salary. This is the most globalised industry. ppl move with projects everywhere. in my office now, in another oil company. we have approx 30% semenanjung peeps, 30% sabahan and sarawakian. the rest are american, chinese, indian, norwegian, brits, pakistani, swedes, french. The last wave of middle eastern companies coming to take petronas staffs, we lost nearly ALL senior engineers and managers. now the second wave is coming, cos of their expansion and the completion of their huge plants. wanna bet how many engineers and managers will go?


6. Stop selling subsidized gas to other companies and process them ourselves for local use.

Malaysia is 1 of the world leading liquified natural gas producers. we are the world leaders. We do not subsized any countries. but gas is hard to sell because they are in vapour form. we have to know who will buy them. then only we can plan the processiing, the pipeline, and the LNG plants. unlike oil, we can store them in barrels and ship them anytime to customers. CAPEX and OPEX of gas is so high, we need to sell them longterm to buyers before developing gas fields. thats why they are priced low now, cos the contract is signed at least 5 yrs ago. Petronas subsidized for IPP, so that electricity bills are low. Petronas sells at least at half price, and petronas swallow up the subsidy.