Monday, October 17, 2011

Effective Role Played by Petronas Oil Company in Malaysia's Economic Development

Malaysia's PETRONAS Company, Asia's most profitable oil company, has been able to confirm and promote its position among the world's giant oil companies and in addition to collaborating with a number of global oil companies in other countries' oil projects, it has also been involved in the development of Malaysia's marine oil reserves. PETRONAS has been able to absorb foreign capital and to increase Malaysia's economic growth rate.
In 2008, PETRONAS was introduced as the world's 95th largest, eighth most profitable and Asia's most profitable company by Global Fortune magazine. The construction of PETRONAS' Twin Towers, which were inaugurated in 1998 and were considered the world's tallest buildings in the world at the time, was carried out by PETRONAS and at the moment, the central offices of this company are located in this building.
Since PETRONAS was established, the company has become a uniformly international company in the field of gas and oil, which has economic resources in 31 countries. By the end of March 2005, the PETRONAS group took complete possession of 103 companies, part possession of 19 companies and half possession of 57 affiliated companies. These affiliated companies constitute the PETRONAS Group, which engages in a variety of oil and gas activities.
PETRONAS Group activities cover a wide spectrum of oil activities including exploration in upstream sectors, the production of gasoil in downstream refineries, marketing and distribution of oil products, trade, processing, and gas liquefaction, operations for the installation of pipelines for the transfer of gas, marketing for natural liquid gas, production of petrochemical products and their marketing, marine transport, car engineering and investment in property.
PETRONAS is the not the first company that has engaged in the exploration of oil and gas in Malaysia. Previously, at the end of the 19th century, the Royal Dutch Shell Company was engaged in oil exploration in the colony of Sarawak and in 1910, the first oil well was drilled in Sarawak. The Shell Company continued with its activities until 1963 as the only oil company in the region until Malaysia gained independence. Officials of the newly independent Malaysia continued their connection with the Royal Dutch Shell Company until Malaysia's first marine oil field became operational in 1968. The central government also gave permits for exploration in Terengganu, the most populous province and the power hub of the central government. In 1974, ESSO succeeded in discovering natural gas in the province of Terengganu and in the same year, the production of crude oil in Malaysia reached around 81,000 barrels (12,900 cubic meters) per day.
According to a plan approved in 1971, the objectives behind the establishment of PETRONAS include the following: protecting national rule over oil and gas resources, planning for supplying the country's present and future gas and oil needs, participation in the distribution of petrochemical products and marketing for these products at acceptable prices, encouraging Malaysian companies for supplying machineries and services, the production of azote fertilizers and generating profit from oil industries across the country.
Level of Export
In 1976, Malaysia turned into an exporter of oil but its level of export was not such that it could join the group of OPEC countries. This led to some interests for Malaysia and PETRONAS in particular because on the one hand it resulted in relative economic and political flexibility for PETRONAS and on the other hand, it strengthened the company's main objective which was for Malaysia to obtain self-reliance.
Until 1997, PETRONAS was managing the oil activities of its partners and until government tried to establish a company called PETRONAS CARIGALI, affiliated to PETRONAS in the field of oil exploration and production, it played no direct role in production. PETRONAS continued its supervision over all economic oil and gas activities, particularly in issues relat ed to health, safety and protection of the environment.
In 1990, oil and gas constituted 24% of Malaysia's overall exports; therefore, government became determined to impose a 25% tax on oil and gas exports. Government's new policy in addition to the implementation of 25% tax meant a decrease in the production and export of Malaysia's crude oil in 1981 for the first time since PETRONAS was established; although in later years, the level of exports and imports improved compared with 1980. In 1982, PETRONAS turned to refining and distributing oil. The objective behind this move was to reduce dependency on the Royal Dutch Shell refinery in Port Dickson and the Esso refinery in Sarawak and Malaysia itself established refineries in Malacca and Kerte.
International Reserves
In 1996, PETRONAS entered the aromatic market through joint investment. In 1997, this company increased the variety of its activities and established three petrochemical companies in Kuantan and an acetic factory in Kerte. In the same year, PETRONAS' first joint investment with China in the field of Liquefied Natural Gas called TIGA, took away Algeria's rank as the second biggest producer of this product.
The PETRONAS Group continues to emphasize the importance of carrying out international oil exploration projects because in 2008, 40% of this company's revenues were obtained through international projects in countries such as Iran, Sudan, Chad and Mauritania.
PETRONAS' international reserves reached the figure of 6.24 billion barrels of oil in 2008 and it has more than 100 affiliated companies and approximately 40 joint investment companies, a minimum of 50% of whose shares are under the control of PETRONAS.

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