Thursday, 4 April 2013

After 38 years, why no sovereign oil fund for Malaysia?

After 38 years, why no sovereign oil fund for Malaysia?
By Chua Jui Meng

IT’S time for Malaysians to take stock of the Umno-led Barisan Nasional (BN) federal government’s lack of transparency and accountability in its financial management of the country’s wealth.
It is utter rubbish and a disgrace for our 24-year-old National Trust Fund (or Kwan, the acronym for Kumpulan Wang Amanah Negara) to have a paltry savings of RM5.43 billion as at June last year (2012).
This amount was disclosed by Prime Minister Najib Abdul Razak in his written reply to a question by Nurul Izzah Anwar (PKR-Lembah Pantai) in Parliament.
Unless Najib now wants to claim that the figure was erroneous and blame it on a scapegoat, it is a national and international shame.
What can RM5.43 billion (US$1.9 billion) do to help Malaysians and Malaysia during rainy days, like when our oil wells run dry
My biggest beef with the BN federal government is this: Why is there no oil-based Soverign Wealth Fund (SWF) for Malaysia?
Malaysia is the 27th largest oil producer in the world, rolling out 693,700 bbl/day. Only 114 countries are listed as at 2009 and 2010 (see list of oil producing countries below).
Petronas , founded in 1974, is today a global player in oil and gas exploration.
Why is the government just satisfied with an annual RM100 million CONTRIBUTION to Kwan since 1988? Are you treating Malaysians as monkeys and giving out peanuts?
Where has Petronas’ trillions of ringgit in revenue over the past 38 years gone to? Did Petronas’ oil and gas exploration presence in 32 countries outside Malaysia contribute or help facilitate the bulk of RM1.08 trillion in capital flight in the last decade?
Why avoid establishing an oil-based sovereign fund for the people and country? Is it because financial transparency and accountability would be a pain?
Petronas’ Q3 2012 profits are down 22%. That is a significant drop in financial performance.
But all these beg the question: With such wealth over 38 years, why is Malaysia’s national debt, as reflected by Budget 2013, at RM502.4 billion or 1.3% short of the 55% legislated debt ceiling?
However, there are RM118 billion in off Budget liabilities or sovereign guarantees for private corporations like the Port Klang Free Zone (PKFZ) and government-linked company loans ending 2011. This must be included and the federal debt is rightly at RM620.4 billion.

Energy Statistics > Oil > production (most recent) by country


# 1  
10,120,000 bbl/day  

# 2  
9,764,000 bbl/day  

# 3  
9,056,000 bbl/day  

# 4  
4,172,000 bbl/day  

# 5  
3,991,000 bbl/day  

# 6  
3,289,000 bbl/day  

# 7  
3,001,000 bbl/day  

# 8  
2,798,000 bbl/day  

# 9  
2,572,000 bbl/day  

# 10  
2,494,000 bbl/day  

# 11  
2,472,000 bbl/day  

# 12  
2,399,000 bbl/day  

# 13  
2,350,000 bbl/day  

# 14  
2,211,000 bbl/day  

# 15  
2,125,000 bbl/day  

# 16  
1,948,000 bbl/day  

# 17  
1,790,000 bbl/day  

# 18  
1,540,000 bbl/day  

# 19  
1,502,000 bbl/day  

# 20  
1,213,000 bbl/day  

# 21  
1,023,000 bbl/day  

# 22  
1,011,000 bbl/day  

# 23  
878,700 bbl/day  

# 24  
816,000 bbl/day  

# 25  
796,300 bbl/day  

# 26  
785,000 bbl/day  

# 27  
693,700 bbl/day  

# 28  
680,500 bbl/day  

# 29  
589,200 bbl/day  

# 30  
486,700 bbl/day  

# 31  
485,700 bbl/day  

# 32  
400,400 bbl/day  

# 33  
380,000 bbl/day  

# 34  
346,000 bbl/day  

# 35  
300,600 bbl/day  

# 36  
288,400 bbl/day  

# 37  
276,800 bbl/day  

# 38  
274,400 bbl/day  

# 39  
262,100 bbl/day  

# 40  
241,700 bbl/day  

# 41  
197,700 bbl/day  

# 42  
191,000 bbl/day  

# 43  
156,800 bbl/day  

# 44  
151,600 bbl/day  

# 45  
148,000 bbl/day  

# 46  
146,500 bbl/day  

# 47  
146,000 bbl/day  

# 48  
132,700 bbl/day  

# 49  
117,000 bbl/day  

# 50  
115,000 bbl/day  

# 51  
99,930 bbl/day  

# 52  
96,270 bbl/day  

# 53  
91,380 bbl/day  

# 54  
77,310 bbl/day  

# 55  
70,910 bbl/day  

# 56  
70,820 bbl/day  

# 57  
61,150 bbl/day  

# 58  
59,140 bbl/day  

# 59  
58,950 bbl/day  

# 60  
57,190 bbl/day  

# 61  
52,980 bbl/day  

# 62  
48,560 bbl/day  

# 63  
48,340 bbl/day  

# 64  
48,180 bbl/day  

# 65  
47,050 bbl/day  

# 66  
35,090 bbl/day  

# 67  
34,140 bbl/day  

# 68  
31,400 bbl/day  

# 69  
27,230 bbl/day  

# 70  
23,960 bbl/day  

# 71  
21,880 bbl/day  

# 72  
21,430 bbl/day  

# 73  
18,880 bbl/day  

# 74  
16,870 bbl/day  

# 75  
16,510 bbl/day  

# 76  
16,360 bbl/day  

# 77  
15,190 bbl/day  

# 78  
13,530 bbl/day  

# 79  
11,400 bbl/day  

# 80  
11,220 bbl/day  

# 81  
10,970 bbl/day  

# 82  
10,910 bbl/day  

# 83  
10,850 bbl/day  

# 84  
9,671 bbl/day  

# 85  
8,718 bbl/day  

# 86  
7,600 bbl/day  

# 87  
7,081 bbl/day  

# 88  
6,779 bbl/day  

# 89  
6,333 bbl/day  

# 90  
5,733 bbl/day  

# 91  
5,400 bbl/day  

# 92  
5,100 bbl/day  

# 93  
4,833 bbl/day  

# 94  
4,721 bbl/day  

# 95  
4,114 bbl/day  

# 96  
4,053 bbl/day  

# 97  
3,990 bbl/day  

# 98  
3,806 bbl/day  

# 99  
3,488 bbl/day  

# 100  
3,227 bbl/day  

# 101  
2,235 bbl/day  

# 102  
1,783 bbl/day  

# 103  
997 bbl/day  

# 104  
995 bbl/day  

# 105  
979 bbl/day  

# 106  
765 bbl/day  

# 107  
221 bbl/day  

# 108  
160 bbl/day  

# 109  
118 bbl/day  

# 110  
108 bbl/day  

# 111  
31 bbl/day  

# 112  
29 bbl/day  

# 113  
5 bbl/day  

# 114  
2 bbl/day  

84,764,555 bbl/day   

Weighted average:
417,559.4 bbl/day  

Historical countries, unions or other regions:

European Union
2,365,000 bbl/day

Why are the following countries doing better in terms of oil-based or non-commodity based sovereign wealth fund management: Kuwait (10th at 2,494,000 bbl/day), Libya (17th at 1,790,000 bbl/day), Kazakhstan (18th at 1,540,000 bbl/day), Algeria (15th at 2,125,000 bbl/day), South Korea (64th at 48,180 bbl/day) and Singapore (82nd at 10,910 bbl/day).
The BN federal government is answerable to the people who have the right to demand accountability and transparency. They have every right to question and seek honest explanations and answers.
Unfortunately, Najib, as prime minister and finance minister, and his administration have been taking a non responsive and silent position whenever confronted by economic and financial issues related to accountability and transparency.
The people today are aware of BN-Umno making fools of Malays and Malaysians in the management of the country’s rich natural resources.
Their restlessness, intolerance for corruption and mismanagement of the country’s finances are reflected by the growing mammoth crowds at Pakatan Rakyat’s ceramahs.
Here, I also wish to draw Malaysians’ attention to a renewed attempt, parallel to the Petronas issue albeit on a smaller scale, to fool the people and win their confidence and votes with ridiculous claims of Kulim Hi-Tech Park (KHTP)’s success.
The details of the KHTP issue is clearly explained in a Malaysia Chronicle report produced below titled “MAKING A FOOL OF THE MALAYS: Kulim & NUR not success stories but UMNO FAILURES”.
Also reproduced below are The Star report on Petronas’ contribution to Kwan and an extract of a Centre for Public Policy Studies (CPPS) factsheet on oil and gas:

Thursday June 30, 2011
PM: Petronas contributed RM3bil to national trust fund
A total of RM3bil was contributed by Petronas to the National Trust Fund (Kwan) as at June this year, said Prime Minister Datuk Seri Najib Tun Razak.
The money has been invested in various financial instruments and the fund currently stands at RM5.43bil, he told Nurul Izzah Anwar (PKR-Lembah Pantai) in a written reply yesterday.
The fund was set up to ensure that revenue from dwindling natural resources would benefit future generations, said Najib.
He added that the administration and management of the fund would be handled by Bank Negara while a panel under Kwan would monitor the collection of funds.
Najib, who is also Finance Minister, said Petronas had also paid the federal government and state governments RM594.6bil in dividends, taxes, export duties and petroleum revenue up to March this year. – The Star

CPPS Policy Factsheet:
Oil and Gas
CPPS is pleased to bring to you its “CPPS Policy Fact Sheet” on the oil and gas industry. In this factsheet, we will look at perhaps the most important sector of the Malaysian economy and its relationship with both public and private sectors.
Crude oil and natural gas are two of Malaysia’s most abundant resources. In a country rapidly industrialising and moving into the service sector, oil and gas, among a handful of primary resources, remain significant contributors to the national economy. The national oil corporation, Petronas, is one of the largest companies in the world, and a towering figure at home; a significant portion of its revenues flow into the treasury.
The sustainability of the petroleum industry in Malaysia is increasingly becoming an issue, with projections predicting the country will become a net oil importer in a few years. With petroleum contributing a large chunk of federal revenue, there are fears that the government is too dependent on oil and gas royalties. Rising global fuel prices have buoyed Petronas and government revenues, but also put pressure on the government to cut fuel subsidies, which are among the largest in the region.
Complicating matters is the government’s opacity in the oil and gas industry; despite being completely state-owned, Petronas does not report to Parliament, and makes very limited information available about its operations and revenue. Several states with oil and gas reserves have also publicly raised the issue of royalties, saying they should be paid a larger share directly, rather than relying primarily on the federal government to funnel revenue back into the state.
Oil and gas is a significant contributor to government revenue, comprising more than 40% of federal revenue annually.
The main vehicle for developing the oil and gas industry is the state-owned Petronas corporation, which partners with international oil companies to explore and mine oil and gas fields.
Petronas is also expanding its operations overseas; foreign fields contribute an increasing amount of Petronas revenue.
Under the Petroleum Development Act 1974, Petronas reports only to the Prime Minister; much information about its business operations thus remains hidden from the public.
Transparency International has ranked Petronas as a low-performing international oil company and middle-performing national oil company when it comes to revenue transparency.
A substantial amount of revenue from oil and gas goes into subsidising various petroleum products, primarily petrol, diesel and natural gas.
Some revenue — about RM100 million a year — goes into the National Trust Fund, or Kumpulan Wang Amanah Negara, for future savings and investment; the fund currently has RM 3.8 billion in the bank.
The rest of the revenue is primarily spent on development, and allocated through the annual budget.
Due to Malaysia’s heavy dependence on oil and gas, some fear we may be subject to the “resource curse”. From 1960 to 1990, per capita incomes in resource-deficient countries grew two to three times faster than in resource-dependent countries.
Pure subsidies for fuel will not be sustainable for much longer, especially in light of depleting oil and gas reserves. Worryingly, the National Trust Fund’s RM3.8 billion is unlikely to be enough to sustain current rates of government expenditure once current reserves are exhausted.

Petronas, the national oil and gas company; responsible for development of the industry locally, and stewardship of the country’s oil and gas resources. Visit the official Petronas website.
The Prime Minister’s Office receives reports from Petronas and is responsible for allocating oil and gas revenue through the annual budget.
Kumpulan Wang Amanah Negara stores oil and gas funds allocated for future saving and investment by the Prime Minister.
International oil companies which partner with Petronas: ExxonMobile, Shell, BHP, Caltex, Murpy Oil, Nippon Oil, Lundin Malaysia, Mitsubishi and Japex.

The main oil and gas firm is Petroleum Nasional Berhad (Petronas), a 100% state-owned corporation. Several other international oil companies such as ExxonMobil, Shell, BHP, etc. also have operations in Malaysia, in partnership with Petronas.
Petronas also operates internationally in 32 other countries.
Malaysia’s total reserves of oil and gas as of 1 January 2008 stand at 20.13 billion barrels of oil equivalent (boe). In the last year production averaged out at 1,673,500 boe per day.
Petronas also has an additional 6.24 billion boe of international reserves, with production of 615,100 boe per day.
At current rates, Petronas has estimated Malaysia will become a net importer of oil by 2012.
At the end of the 2007 fiscal year, Petronas had earned RM223.1 billion in revenue. Of this money, Petronas paid RM62.8 billion to the federal government, and RM4.8 billion in royalties to the states of Terengganu, Sabah and Sarawak. These payments constituted 63.1% of Petronas revenue.
Petronas money comprised 44% of federal government revenue in the previous year. Since inception Petronas has paid RM403 billion to the government, comprising more than half of all government revenue since the 3rd Malaysia Plan.
In the 2007 fiscal year Petronas subsidised the gas sector to the tune of RM19.7 billion; the government’s expenditure on petrol, diesel and gas subsidies that year stood at RM16.2 billion.
The Kumpulan Wang Amanah Negara (National Trust Fund, or KWAN), primarily comprises Petronas funds earmarked for future investment; as of 2008, the fund has about RM3.8 billion, a paltry amount compared to other resource-rich countries such as Kazakhstan, whose trust fund has USD14.1 billion in the bank.

Oil and gas mining operations are based in the territories of three states: Terengganu, Sabah and Sarawak.
Petronas partners with foreign companies in 32 countries, whose contribution to Petronas revenue is steadily growing.

Credit: US Energy Information Administration
Petronas Foreign Operations:
Equatorial Guinea

South Africa

Timor Leste
United Kingdom

Barisan Nasional
Supports weaning Malaysians from resource dependence by cutting subsidies
Supports slow phasing out of current subsidies for Independent Power Producers (IPPs)
Supports letting Petronas reinvest more of its profits, through subsidy reductions
Prefers maintenance of status quo with respect to state royalties

Pakatan Rakyat
Supports reduction in fuel prices by as much as 50 sen
Demands immediate end to government protection of IPPs, which receive substantial subsidies at the expense of Petronas and Tenaga Nasional
Supports greater transparency in Petronas accounting
Supports giving more oil and gas royalties to the states

As Petronas is accountable only to the Prime Minister, its accounts are not public nor available to Parliament, rendering the state oil company’s operations extremely opaque.
As an international oil company, Petronas has been rated as a low performer on revenue transparency by Transparency International. According to the criteria, this means Petronas discloses its revenue only by geographical segmentation, with almost no additional relevant information, and that increased reporting in all areas of revenue transparency is necessary.
As a national oil company, Petronas was rated as a middle performer, meaning it discloses relatively little about payments and anti-corruption programmes, and needs increased reporting on policy and management systems, as well as improved reporting on all areas of revenue transparency. For more, see the full report.
Malaysia does not subscribe to the Extractive Industries Transparency Initiative (EITI), an initiative to get governments to release information on revenues received, and also to get oil and gas companies to publish information revenues paid to governments. Timor Leste is the only country in Asia Pacific subscribing to this initiative.
For further information, see and

Make disclosures within the extractive industry fully transparent: All oil and gas companies operating in Malaysia especially Petronas (being the national oil company) should disclose all payments to the government. this should be disaggregated to show all types of payments (royalties, taxes, etc.) following international disclosure standards for transparency in company reporting.
Make fully transparent the revenue flows coming from foreign countries in which Petronas operates, and the revenues being paid to foreign governments, as these may raise serious human rights concerns.
Amend the Petroleum Development Act 1974 to make Petronas reportable to Parliament instead of to the Prime Minister. This would increase accountability of oil and gas revenues that form a tremendous amount of national budget. Large activities and investments should be tabled to Parliament.
Increase Parliamentary oversight of the Kumpulan Wang Amanah Negara that absorbs RM100 million from Petronas accounts annually. Reports that are tabled to Parliament should be followed up on (the 2005 report is the latest available in the Parliament library).
Ensure that all information provided by the Government is watertight. Profit, revenue, subsidy, and expenditure figures must be consistent across all Ministries and Government Departments.
The National Depletion Policy must be updated in light of recent changes in the global oil market, highlighting steps taken to seek alternative sources of revenues for the sake of future generations.
Have a consistent subsidy scheme, with detailed measures on addressing targeted low-income groups. This should be accompanied by thorough methodology, figures and calculations on how the scheme is configured.

Monday, 10 December 2012 13:24
MAKING A FOOL OF THE MALAYS: Kulim & NUR not success stories but UMNO FAILURES
Written by  Nawawi Mohamad, Malaysia Chronicle

The Kulim Hi-Tech Park (KHTP), was officially opened in 1996, the first commercial estate to house specialist high technology industries in Malaysia. The nature of this park is to catch a niche market that needs a 'fool-proof' uninterrupted power supply. There are many sophisticated operations that cannot tolerate even for a second a power brown-out as that may be enough to create havoc in the costly manufacturing processes. So when there is a hiccup in power supply, the firms who have committed to set up stall there stand to lose millions as it is very time consuming to restore the complex systems and re-start production.
Kulim, which was another of former premier Mahathir Mohamad's 'brainchild', was beset by problems right from the start. There were few and insufficient takers for the 31 industrial lots needed to provide economics of scale for the developer's construction of 5 mini-power plants. The 5 power plants were needed to provide sufficient standby power that TNB could not provide through the main power grid lines. And these 5 plants, although not supplying power simultaneously, had to be on standby 24/7. Thus, it is very costly to have all 5 systems working when there is no or insufficient income because the power has to be burnt or wasted in any case.
So for years, the situation at Kulim was like the proverbial chicken-and-egg, i.e. which came first? Without the power plants, there would be no hi-tech manufacturing plants. Yet without the hi-tech manufacturing plants, the 5 power plants cannot be constructed as the costs would be too prohibitive.
Then, as usual in Malaysia, whenever there is huge money to be made, UMNO is bound to be involved. And more often than not, the money somehow vanishes into thin air, leaving behind a big huge white elephant which will have to be paid for over and over again by the people..
Greed that knows no bounds
Indeed, Kulim is symptomatic of UMNO's greed during the Mahathir era. Some greedy 'warlords' were not content to monopolize the power industry through Tenaga Nasioal Bhd. They wanted a set-up like Kulim, where the 5 plants would be totally independent and untouchable by even TNB. Kulim would not only be a separate power producing entity but also the gateway to the Forbes' List of the World's Wealthiest for many quarters with close ties to Mahathir and UMNO.
To cut the story short, in the end instead of 5, only one power plant was constructed producing some 228 mega-Watt of electrical power (compared to normal plant supply 1,500 MW). The deal was given to Northern Utility Resources Sdn Bhd ( NUR). This obscure firm was given a 30 year concession period beginning 1997. But as a result of building only one power plant instead of 5, not many hi-tech companies were keen to invest there. The investors were not at all keen to take the risk that there would not be any brown or black outs.
After a while, amid much haggling and the notorious UMNO arm-twisting, the Mahathir administration managed to lure 25 companies - of course,  mostly local 'crony firms' and GLCs - to open shop there. Like sitting ducks, these firms agreed to go there to save the entire Kulim 'Hi-Tech' project from becoming an embarrassing white elephant. But they were forced to sacrifice their need for uninterrupted power supply and the best joke of all, NUR still made huge losses and was indebted to the tune of RM1.5 billion.
What happened next is actually incredible but sad to say, it has become part of the UMNO-BN SOP or standard operating procedure for failed mega projects. After 'saving' Kulim, the BN administration stepped in to save NUR!
The UMNO-led BN government did this by changing NUR's license allowing it to sell power to the national grid. However, the firm failed to sign a power purchase agreement with TNB despite being in discussion for more than 2 years.
Some people say that this is due to one 'adamant' UMNO leader who wanted to take control of NUR and was trying to use the government to bail out the NUR just like the Ministry of Finance was persuaded to bail out the perennially loss-making national carrier MAS. To this particular UMNO leader, who is surely very influential, it was a case of 'if you can do it, why can’t I do the same?'
The latest postings in the back-biting UMNO blogs have already hinted that NUR is now under the control of a powerful ex-minister. Of course, he's from UMNO! Just like the DRB-Hicom's daring purchase of Proton without using 'real' money or having any know-how in car manufacturing, this ex-minister is said to be confident of being bailed out by the UMNO-BN government.
But of course - why else would he have got involved in the first place if not for the fact that he knows he would be bailed out and generously too!
Malay success story or RAPE & PLUNDER OF OWN RACE?
However, the UMNO media and bloggers are spinning the story as being one of the major successes of Prime Minister Najib Razak's ETP and NKEA economic programs. They are selling the Kulim failure and NUR bailout as a Malay economic success story. And thanks should be given to Najib's 'foresight' and 'great love' for his race, they insist.
But in actual fact, this is nothing but another RM1.5 billion down the drain - at the very least. It may be nothing compared to the RM12.5 billion PKFZ scandal but it is stunning enough to knock another hole in the country's coffers and ratchet up a national debt that has already surpassed its 55% legal ceiling.
If this is a Malay success story, then Malays would do well to worry about their future with UMNO leading their own rape and plunder.
Malaysia Chronicle