Petronas Group Results For The Financial Year Ended 31 March 2009

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Business - Finance Press Release
25th June 2009, 09:22pm - Views: 801

MEDIA RELEASE PR65199

PETRONAS GROUP Results For The Financial Year Ended 31 March 2009

KUALA LUMPUR, June 25 /BERNAMA-AsiaNet/ --

FINANCIAL YEAR ENDED 31 MARCH

(in RM billion)

Profit Before Taxation

Shareholder's Funds

(in USD billion)

Profit Before Taxation 26.0

Shareholder's Funds

Average RM/US$ exchange rate

KEY FINANCIAL AND OPERATIONAL RATIOS

FINANCIAL YEAR ENDED 31 MARCH

Return on Revenue (PBT/Revenue)

Return on Assets (PBT/Total Assets)

Return on Average Capital Employed

Debt / Assets Ratio

Reserves Replacement Ratio

- International

The financial year ended 31 March 2009 was a difficult and highly

challenging year for the PETRONAS Group, as the global oil and gas industry was

thrust into an environment of heightened volatility and uncertainty amidst the

worst global economic crisis in more than 70 years.

The sharp and rapid contraction in global economic activity has led to an

unprecedented erosion in global demand for oil, which eased from 86.2 million

barrels per day in the previous year to 85.6 million barrels per day in the

first half of the year before sliding further to 84.4 million barrels per day

in the second half along with deteriorating economic conditions. Year-on-year,

the world saw oil demand fell by over 1.2 million barrels per day to average

85.0 million barrels per day, the largest annual decline in nearly three

decades. The destruction in demand led to a significant supply overhang, a

reversal from the tight supply conditions in the previous year, despite

successive production cuts by OPEC members.

These developments, aggravated by volatile market sentiments amidst intense

speculative activity, swung crude oil prices to extremes, which reached record

highs in the first half of the year before tumbling as the global economic

crisis unfolded. The average price of West Texas Intermediate (WTI) and Brent

crude oils increased by 47.1% and 43.5% during the first half of the year to

USD120.94 per barrel and USD118.14 per barrel respectively, before falling

57.9% and 57.8% to USD50.89 per barrel and USD49.81 per barrel respectively in

the latter half of the year. The weighted average price of Malaysian Crude Oil

(MCO) also moved in tandem, initially up 44.5% to USD125.45 per barrel before

declining 59.6% to USD50.69 per barrel.

The fall in global oil demand and prices, however, has not been mirrored by

a similar reduction in costs, which tend to lag prices. For example, despite an

almost 60% decline in WTI crude price, the daily charter rates of drilling rigs

(a significant component of upstream costs) moved up by 6.2% during the same

period, while the average price of tubular steel strengthened by 11.0%. The

combination of low prices and high costs that persisted during the second half

of the year forced industry players to scale back investments, reduce manpower

and cut costs to defend eroding margins.

In summary, the year in review was an exceedingly challenging one with weak

market fundamentals, unprecedented price volatility and persistently-high costs

testing the resilience of industry players across the board.

Despite the adverse business and economic environment, PETRONAS was able to

mitigate the impact to its financial performance and operations largely due to

its strategy to integrate, add value and globalise its operations which has

successfully enhanced the Group's competitiveness, resilience and operational

REVIEW OF FINANCIAL RESULTS

* Strong revenue of RM264.2 billion, an 18.4% increase from RM223.1 billion

recorded in the previous year, driven by higher sales volume and prices.

* Revenue from international operations surpassed the RM100 billion mark to

RM111.3 billion and continues to be the biggest contributor to the Group's

* Profit before taxation recorded a decline of 6.7% to RM89.1 billion due to

the low-price and high-cost environment that persisted during the second half

of the financial year, but well within the decline recorded by the oil and gas

majors which ranged between 6.4% and 25.7%, during the same period.

* Stronger balance sheet with total assets increasing by 14.4% to RM388.1

billion while shareholder's funds grew by 15.1% to RM232.1 billion.

* Return on Total Assets and Return on Average Capital Employed stood at 23.0%

and 37.1% respectively, at par with the more established players in the

* Export revenue represents about 16% of Malaysia's total exports.

The review period saw PETRONAS recording another year of robust performance

with strong revenue of RM264.2 billion, an increase of 18.4%, primarily due to

higher sales volume and prices in the first half of the year. However, similar

to other oil and gas companies, PETRONAS' profitability was adversely affected

by the low-price and high-cost environment which persisted during second half

of the financial year. The Group's profit before taxation declined by 6.7% from

RM95.5 billion to RM89.1 billion, but well within the decline recorded by the

oil and gas majors which ranged between 6.4% and 25.7%. Nonetheless, PETRONAS'

return on revenue remained amongst the highest in the industry at 33.7%

compared to the average return on revenue of 17.7% recorded by other oil and

gas companies globally.

Despite the lower profit, PETRONAS continued to make higher payments to

governments. During the financial year, PETRONAS Group paid RM74.0 billion to

governments, bringing the Group's total payments to governments to RM471.3

billion since its incorporation in 1974. Of the RM74.0 billion payment for the

year, RM67.8 billion was paid to the Federal Government comprising RM30.0

billion of dividend, RM20.3 billion of petroleum income tax, RM9.1 billion of

corporate income tax, RM2.2 billion of export duties and RM6.2 billion of

royalty payment. Another RM6.2 billion was paid in royalty payments to the

state governments of Terengganu (RM3.0 billion), Sarawak (RM2.3 billion) and

Sabah (RM0.9 billion).

The RM74.0 billion total payment to governments for the year represents 71.4%

of the PETRONAS Group profit before taxation, royalty and export duty, with the

Group retaining only 21.1% of its profits during the year for reinvestment and

the balance 7.5% accounting for foreign taxes and minority interests. The

reinvestment is necessary to ensure the Group's sustainable operations and

growth in order to be able to continue to generate value for its stakeholders.

PETRONAS' reinvestment during the year was significantly lower compared to

other oil and gas companies: oil and gas majors reinvested an average of 57.1%

of profits while national oil companies reinvested an average of 72.9% of

The Group continued to supply gas to the domestic power and non-power sectors

at regulated rates. Despite revisions to the rates during the year, PETRONAS

bore a subsidy of RM19.5 billion for the supply of gas to these sectors,

marginally lower from the previous year's subsidy and bringing the cumulative

gas subsidy to RM97.4 billion since regulated gas prices came into effect in

May 1997. The subsidy to the power sector was reduced by 8% from RM13.8 billion

to RM12.7 billion mainly due to lower gas offtake by the Independent Power

Producers. However, gas subsidy to the non-power sector which includes small

industrial, commercial, residential users and NGV, increased by 15.3% to RM6.8

Despite the volatility of the oil and gas industry, PETRONAS continued to

invest to ensure sustainability and future growth of the operation. During the

financial year, the Group increased its capital expenditure from RM37.6 billion

to RM44.0 billion, an increase of 17%. Of this, RM26.2 billion was spent in

Malaysia, representing about 60% of the Group's total capital expenditure. The

Group incurred higher capital expenditure of RM33.8 billion in the Exploration

and Production (E&P) sector, an increase of 63.3%, largely due to the

acquisition of upstream assets of the Gladstone LNG project in Australia.

The Group's balance sheet continued to strengthen with total assets growing by

14.4% to RM388.1 billion while shareholder's funds grew by 15.1% to RM232.1

billion. Return on Total Assets remained strong at 23.0% while Return on

Average Capital Employed stood at 37.1%, at par with the more established

players in the industry, who averaged 19.1% and 39.0% respectively.

The higher revenue of RM264.2 billion recorded during the year was driven not

only by higher sales volume and prices but also improved operational efficiency

and reliability achieved across the Group's businesses.

Refined petroleum products remained the top revenue generator for the Group,

with sales revenue amounting to RM91.7 billion and constituting about one-third

of Group revenue. This represents a 19.2% increase from the previous year's

revenue of RM76.9 billion. Sales volume grew by about 7% from 231.1 million

barrels to 246.6 million barrels, mainly contributed by strong performance of

trading activities by the Group.

Revenue from sales of crude oil and condensates rose to RM64.4 billion as

compared to RM59.0 billion in the previous year due to an increase in sales

volume by 12% from 200.9 million barrels to 225.0 million barrels.

Liquefied natural gas (LNG) sales contributed RM48.5 billion to the Group's

revenue, higher by 38.2% as compared to the previous year. LNG sales volume was

steady at 25.0 million tonnes but the Group benefited from higher LNG prices

realised which rose from USD415.07 per tonne to USD564.37 per tonne, an

increase of about 36%.

Despite the volatility of petrochemical industry, the Group was able to

maintain the production and sales of petrochemical products at 5.8 million

tonnes, which translated to sales revenue of RM13.1 billion.

SALES VOLUME AT A GLANCE

Crude Oil (million barrels)

Processed Gas (trillion btu)

LNG (million tonnes)

Petroleum Products (million barrels) 246.6

LPG (million tonnes)

Petrochemicals (million tonnes) 5.8

The Group remained focused on value adding activities to enhance the value of

the nation's oil and gas resources. Revenue from the Group's manufacturing

activities rose from RM120.5 billion to RM142.0 billion, an increase of about

18%. Through manufacturing activities, PETRONAS was able to add RM86.0 billion

in value to the oil and gas resources, about 33% higher than the revenue that

would be generated should PETRONAS have sold the crude oil and gas in their raw

The Group continued to reap the benefits of its globalisation strategy. Revenue

from international operations surpassed the RM100 billion mark to RM111.3

billion, an increase of 23.7% from the previous year. International operations

revenue represents 42.1% of the Group's revenue and continues to be the biggest

revenue contributor, reinforcing its importance to the Group.

Export revenue increased from RM86.8 billion to RM98.2 billion and represents

about 16% of Malaysia's total exports over the same period, earning valuable

foreign exchange revenue for the nation.

Revenue from the domestic market increased from RM46.3 billion to RM54.7

billion and represents only 20.7% of Group revenue.

REVIEW OF BUSINESS

EXPLORATION & PRODUCTION BUSINESS

Strong total reserves at 27.02 billion barrels of oil equivalent (boe).

International reserves account for 25.3% of the Group's total reserves

Reserves Replacement Ratio (RRR) of 1.8 times for the Group, with an RRR of

1.1 times in Malaysia and 4.1 times internationally, amongst the highest in the

Total production of 1.80 million boe per day. International production rose

to 629.0 thousand boe per day, equivalent to 35.0% of the Group's total

Acquisition of stake in Gladstone LNG project marked the Group's maiden

venture in unconventional hydrocarbons

Discovery of gas reserves from Malaysia's first High Pressure High

Temperature (HPHT) well, paving the way for more exploration of the nation's

deeper reservoirs

Awarded six new Production Sharing Contracts (PSCs) in Malaysia

Secured six new PSCs abroad, bringing the number of international upstream

ventures to 66 in 22 countries

MALAYSIA'S RESERVES AND PRODUCTION AT A GLANCE

Reserves (billion boe)

As at 1 January

Crude oil and condensates

('000 boe per day)

1,659.0 1,673.5

Crude oil and condensates

Reserves Replacement Ratio

Domestic Exploration & Production

As at 1 January 2009, Malaysia's total hydrocarbon reserves rose to 20.18

billion barrels of oil equivalent (boe) from 20.13 billion boe last year as a

result of ongoing exploration efforts and field growth activities. Crude oil

and condensates reserves grew by 1.1% to 5.52 billion boe but natural gas

reserves declined marginally by 0.1% to 14.66 billion boe from 14.67 billion

boe. The reserves replacement ratio (RRR) for the year was 1.1 times, as more

reserves were added to the nation's resource base than were produced during the

Malaysia's total average production recorded a marginal decline of 0.9% to 1.66

million boe per day from 1.67 million boe per day previously, due to the

maturity of our domestic fields, after years of steady and continuous

production. Of this, production of crude oil and condensates amounted to an

average of 678.8 thousand barrels per day while gas production averaged at 5.9

billion cubic feet per day (equivalent to 980.2 thousand boe per day). PETRONAS

Group's entitlement inclusive of PETRONAS Carigali's production accounted for

1.17 million boe per day or 70.4% of total average national production, a

slight increase from the previous year's share of 69.2%.

Malaysia's E&P sector remained vibrant despite the challenging environment

characterised by a multitude of above and below-ground risks, including

maturing hydrocarbon acreages, increasing geological complexity of remaining

reserves, the sharp fall in crude oil prices and the continuing tightness in

the supply of materials, equipment and experienced human capital.

Six new production sharing contracts (PSCs) were awarded during the year,

namely for Block PM308A, Block PM308B, Block PM303 & 324, Block PM329, Block

SK310 and Block SB303, bringing the total number of PSCs in operation to 71.

A key breakthrough was also achieved in Malaysia's upstream sector by PETRONAS

Carigali with the discovery of gas reserves from the nation's first High

Pressure High Temperature (HPHT) well in the Kinabalu field offshore Sabah. The

discovery - at a total vertical depth of 4,800 metres, the deepest reservoir

with proven hydrocarbons in Malaysia - is expected to open up new exploration

prospectivity for deeper reservoirs in Malaysia, and serves to highlight the

significant technical challenges faced by the industry moving forward.

Seven new oil fields and nine gas fields were also brought onstream during the

year, increasing the total number of producing fields in Malaysia to 104 (68

oil and 36 gas fields).

A total of RM22.31 billion was spent in Malaysia's upstream sector during the

year, about 3.6% higher than the previous year's expenditure of RM21.54

billion. Of this, RM12.01 billion or 53.8% was spent on development and

production projects, RM2.54 billion or 11.4% was spent on exploration

activities, and the balance on operations.

INTERNATIONAL RESERVES AND PRODUCTION AT A GLANCE

Reserves (billion boe)

As at 1 January

Crude oil and condensates

FY 2009 FY 2008

('000 boe per day)

Crude oil and condensates

Reserves Replacement Ratio

International Exploration & Production

The Group's international E&P business delivered an excellent performance

during the year despite the challenges in the global operating environment. The

Group's international reserves stood at 6.84 billion boe, an increase of 9.6%

from 6.24 billion boe last year. Crude oil and condensates reserves were lower

by 9.1% from 2.42 billion boe to 2.20 billion boe previously, largely due to

downward revisions in condensate reserves. Natural gas reserves, however, rose

by 12.0% from 3.82 billion boe to 4.28 billion boe due to a number of

significant gas discoveries during the year, particularly in Turkmenistan and

The acquisition of a 40% equity stake in the Gladstone LNG project during the

year marked the Group's maiden venture into unconventional hydrocarbons, with

coal seam gas (CSG) equity reserves of 0.36 billion boe. With the inclusion of

the CSG reserves during the year, the Group's international E&P operations

achieved an exceptional RRR of 4.1 times, compared to 0.6 times in the previous

The Group's total average international production increased by 2.3% to 629.0

thousand boe per day due to higher gas production from the Group's operations

in the Malaysia-Thailand Joint Development Area and Egypt. Crude oil and

condensates production, however, declined from an average of 287.0 thousand boe

per day to 275.9, mainly due to a fall in production from Block 1, 2 and 4 in

Six (6) new international PSCs were secured by the Group during the year,

namely the Surumana, Mandar and SE Palung Aru blocks in Indonesia; Block 3 & 6

and Block 16/19 in Mozambique; and the Urga Fields Production Sharing Agreement

(PSA) in Uzbekistan. The new PSCs brought the Group's total international E&P

ventures to 66 in 22 countries. Of this, PETRONAS is the operator for 28

ventures, joint operator for 14 and active partner in the other 24 ventures.

Four (4) of the Group's international upstream projects commenced production

during the year, namely the Haraz, Canar and Suttaib development and the

Kaikang development in Block 1, 2 & 4 in Sudan; the Gumry development in Block

3 & 7, also in Sudan; and in Block 46/02 (Song Doc) in Vietnam.

A total of RM13.90 billion was invested in international E&P ventures during

the year, of which 57.3% was for new exploration, development and production,

while the remaining 42.7% was for the operation of existing producing assets.

Overall, the Group's total reserves stood at 27.02 billion boe, compared to

26.37 billion boe in the previous year. International reserves grew from 23.7%

to 25.3% of the Group's total reserves, reflecting the growing importance of

international ventures to the Group's upstream portfolio. The Group's total

average production also recorded an increase of 1.3% from 1.77 million boe per

day to 1.80 million boe per day, with production from international operations

remaining steady at 35.0% of combined production.

Expansion in the Group's crude oil marketing portfolio with the debut of

Foreign Equity Crude Oil (FEC) Song Doc from Vietnam

The capacity utilisation of the Group's domestic refineries improved to 97.3%

while reliability was at 98.2%, resulting in higher throughput

Strengthened retail market presence in Africa through acquisitions of

competitors' operations in Lesotho, Gabon, Rwanda, Guinea Bissau and Burundi

Higher crude and petroleum products trading of 47%, driven by expansion in

trading portfolio in both crude oil and petroleum products

Commissioned the first base oil plant in Malaysia, the Group III Base Oil

(MG3) plant which produces ETRO - one of the world's highest quality Group III

OIL BUSINESS AT A GLANCE

FY 2009 FY 2008

(in million barrels)(in million barrels)

Export of Malaysian Crude Oil (MCO)

Exports of Petroleum Products 61.0

Sale of Foreign Equity Crude Oil (FEC) 51.8

Crude Oil Refining

Processing of MCO

Processing of non-MCO

Petroleum Products Retail

Domestic (including commercial)

Petroleum Products

Crude Oil & Petroleum Products Marketing

PETRONAS exported 76.4 million barrels of its share of MCO (including

condensates) during the year, lower by 19.2% due to lower production. Of this,

77% was exported to the Asian region with the balance sold to markets in

Australia, New Zealand and the USA. The Group's exports of petroleum products

were also lower by 1.9% at 61.0 million barrels, primarily due to lower

liquefied petroleum gas (LPG) sales.

The Group's sales of Foreign Equity Crude Oil (FEC) increased by 3.8% to 51.8

million barrels mainly due to higher crude oil entitlement from the Group's

Mauritania operations. The year also saw the introduction of a new crude from

the Group's international E&P venture in Vietnam, the Song Doc crude oil.

Crude Oil Refining

The Group's domestic refineries continue to play a strategic role in adding

further value to the nation's petroleum resources. During the year, the Group's

domestic refineries collectively delivered a higher throughput of 126.8 million

barrels compared to 115.8 million barrels previously. Continuous Operational

Performance Improvement (OPI) initiatives increased the domestic refineries'

utilisation rates to 97.3%, while maintaining plant reliability at 98.2%.

The refineries' strong emphasis on HSE also continued to be recognised. During

the year, all three domestic refineries won the Gold (Class 1) Award from the

Malaysian Society of Occupational Safety and Health (MSOH).

The Group's refinery in Durban, South Africa, owned and operated by subsidiary

Engen Ltd (Engen), recorded a 17.3% decline in production due to planned

turnaround and inspection and unplanned shutdown as a result of fire.

Consequently, the Group's combined utilisation rate of all its refineries fell

from 91.6% to 86.2%.

The Group III Base Oil (MG3) plant in the Melaka Refinery was successfully

commissioned in October 2008 with base oil production of 6,500 bpd. MG3 plant

is the first base oil plant in Malaysia which produces one of the highest

quality Group III base oils for top-tier automotive and industrial lubricant

manufacturers in domestic and international markets.

Petroleum Products Retail

The Group's domestic retail arm, PETRONAS Dagangan Bhd (PDB), registered a

lower sales volume of 78.8 million barrels of petroleum products compared to

84.2 million barrels in the previous year. Amidst the difficult operating

environment, PDB maintained its leadership position to secure an estimated

42.5% share of the market compared to 44.1% previously. PDB added 20 new

stations during the year, bringing the number of total stations in its retail

network to 912.

Total sales volume from the Group's international retail operations decreased

from 70.8 million barrels to 61.3 million barrels as a result of the

significant price increases experienced at the beginning of the year coupled

with the economic downturn which impacted sales volume in general.

In South Africa, Engen maintained its market dominance despite aggressive

competition from other players. Engen acquired 100% of Shell Oil Lesotho during

the year to strengthen its position in sub-Saharan Africa. The year also saw

the completion of Engen's acquisitions in Gabon, Rwanda, Guinea Bissau and

Burundi, bringing the total number of Engen's stations to 1,473 across the

African continent.

In Sudan, the Group expanded its retail network from 67 to 74 stations, with a

market share of about 14%.

The Group's retail operation in Indonesia expanded its network to 19 stations,

while in the Philippines, the autogas station network has been expanded from 52

to 54 stations.

Crude Oil & Petroleum Products Trading

The Group continued to be active in crude oil and petroleum products trading to

optimise its position in the market and to enhance its value-adding capability.

During the year, the total volume of crude oil traded by the Group increased by

71.6% from 56.4 million barrels to 96.8 million barrels, while petroleum

products trading increased by 24.3% from 60.5 million barrels to 75.2 million

The Group's crude oil trading portfolio was significantly strengthened with

higher trade volumes of Asia Pacific, Persian Gulf/Red Sea, West Africa and

Mediterranean/Caspian crude grades.

In petroleum products trading, the Group registered higher volume from

increased trading activities for naphtha, gasoline and LPG. The Group also

entered new markets for naphtha, jet fuel and gasoil trading in Europe and the

The volume of natural gas sold domestically increased marginally to 2,563

million standard cubic feet per day (mmscfd)

Gas pipeline network achieved a reliability rate of 99.99%, exceeding the

world class standard of 99.90%

LNG sales volume of 25.0 million tonnes, with 22.3 million tonnes from

PETRONAS LNG complex, 1.8 million tonnes from Egyptian LNG (ELNG) and 0.9

million tonnes from trading activities

Acquired 40% of Santos Ltd's interest in the integrated LNG project in

Gladstone, Australia, marking PETRONAS' first investment in coal seam gas (CSG)

GAS BUSINESS AT A GLANCE

FY 2009 FY 2008

Total Average Sales Gas Volume (mmscfd) 2,563

Average Sales Gas through PGU (mmscfd) 2,146

LNG Sales Volume (million tonnes)

Malaysia LNG (MLNG) 22.3

Egyptian LNG (ELNG) 1.8

ASEAN LNG Trading Company Ltd (ALTCO) 0.9

Gas Processing & Transmission

During the review period, the average volume of gas sold by the Group in

Malaysia increased slightly from 2,560 mmscfd to 2,563 mmscfd. Of that, an

average of 2,146 mmscfd was sold through the Peninsular Gas Utilisation (PGU)

system, a decrease of 1.1% from last year's average volume of 2,170 mmscfd.

The Group had to increase gas imports from 21.9% to 23.8% into the PGU system

during the year to meet demand and to make up for the lower supply from the

fields offshore Terengganu. The gas imports were sourced from Indonesia, MTJDA

and PM3 Commercial Arrangement Area (CAA) between Malaysia and Vietnam.

The power sector remained the largest consumer of gas, taking up about 60% of

the total volume, with the Independent Power Producers (IPPs) consuming 57.6%

of the gas supplied to the sector. The non-power sector, comprising industrial,

petrochemical and other users, consumed an average of 732 mmscfd or 34.1% of

the total volume, an increase of 4.1% compared to the previous year, while the

balance was exported to Singapore.

The Group's gas processing and transmission arm, PETRONAS Gas Berhad (PGB)

sustained world class operations standards for its Gas Processing Plants and

pipeline network with reliability rates of 99.5% and 99.99% respectively.

Liquefied Natural Gas

The Group's total LNG production for the year declined marginally to 25.0

million tonnes as a result of slightly lower production from the PETRONAS LNG

Complex in Bintulu, which decreased from 22.5 million tonnes to 22.3 million

tonnes due to an increase in unplanned downtime.

About 60% of production from Bintulu amounting to 13.4 million tonnes was

exported to Japan, 27.4% or 6.1 million tonnes was sold to South Korea, 11.7%

or 2.6 million tonnes to Taiwan, and the balance to China and India, mostly

under long-term contracts. The Group's market shares in Japan, South Korea and

Taiwan declined to 19%, 22% and 30% respectively.

The Group's LNG trading arm, ASEAN LNG Trading Company Ltd (ALTCO), sold a

total of 14 LNG cargoes (equivalent to 0.9 million tonnes) from Egypt, Oman,

Belgium and Trinidad & Tobago during the year.

The Group successfully maintained its LNG plant reliability at a high level of

96.1%, and ensured a strong track record of deliveries to customers.

The de-bottlenecking of the MLNG Dua plant to increase the capacity by 1.2

million tonnes per annum (mtpa) is progressing well. Upon completion in Quarter

2 of the next year, the combined capacity of PETRONAS LNG Complex will increase

Other Downstream Gas Ventures

In May 2008, PETRONAS acquired 40% of Santos Ltd.'s interest in the integrated

CSG project in Gladstone, Australia. The acquisition marks PETRONAS' maiden

investment in CSG assets, paving its entry into the Australian CSG gas industry

and strengthening its position as a global LNG player.

PETROCHEMICAL BUSINESS

* The Group's production of petrochemical products declined marginally to 9.2

million tonnes from 9.3 million tonnes

* Petrochemical plants continued to operate at a high reliability rate of 94.9%

Successful commissioning of Mega Methanol Plant in Labuan with the production

of its first commercial methanol in January 2009

PETROCHEMICAL BUSINESS AT A GLANCE

Production Volume (million tonnes)

Sales Volume (million tonnes)

Trading of third-party volumes 0.7

Overall plant reliability rate

Production of petrochemical products decreased slightly from 9.3 million tonnes

to 9.2 million tonnes while the overall plant reliability rate remained high at

94.9% despite downtime associated with the unfavourable economic conditions

faced by the petrochemical industry.

Sales volume recorded a marginal decline from 5.8 million tonnes to 5.7 million

tonnes due to lower trading volume.

The Mega Methanol Project in Labuan was commissioned during the year with

production of its first US Federal Spec Grade AA commercial methanol commencing

in January 2009. The plant, with a production capacity of 1.7 million tonnes

per year, is set to strengthen the Group's position as a major methanol

supplier in Asia, increasing total production capacity from 2,000 tonnes per

day to 7,000 tonnes per day.

LOGISTICS AND MARITIME BUSINESS

Strengthened position as the largest owner/operator of LNG carriers through

delivery of three new LNG tankers - Seri Bijaksana, Seri Balhaf and Seri Balqis

Maintained strong vessel utilisation of 97.2% during the year, despite a

weakening in slot utilisation in the Liner Business

Took delivery of three offshore facilities - one Floating Production, Storage

and Offloading (FPSO) unit, FPSO Espirito Santo, and two Floating Storage and

Offloading (FSO) units, FSO Puteri Dulang and FSO Orkid

LOGISTICS AND MARITIME BUSINESS AT A GLANCE

Fleet Numbers by Business

The Group's Logistics and Maritime Business, led by subsidiary MISC Berhad,

delivered a solid performance amidst the difficult global environment

characterised by declining trade volumes, softening freight rates and higher

operating cost.

During the year under review, MISC took delivery of three new LNG carriers -

Seri Bijaksana, Seri Balhaf and Seri Balqis - bringing its LNG fleet size to 29

and shipping capacity to more than two (2) million deadweight tonnes, further

strengthening its position as the world's single largest owner-operator of LNG

Despite the challenging environment, the Group recorded a commendable vessel

utilisation rate of 97.2%, compared to 98.9% in the previous year. In tandem

with industry developments, the liner business was most affected by the

reduction in global trading volumes and increased cost with slot utilisation

falling to 67.5% during the year under review from 71.3% in the previous year.

The offshore business continued to chart progress with the delivery of two (2)

Floating Storage and Offloading (FSO) units and one (1) Floating Production,

Storage and Offloading (FPSO) unit during the year. FSO Puteri Dulang was

deployed in the Dulang field in Block PM-305 offshore Peninsular Malaysia,

while FSO Orkid was installed in the PM3 Commercial Arrangement Area (CAA), a

joint development area between Malaysia and Vietnam. FPSO Espirito Santo was

delivered to Shell Brazil and marks MISC's second FPSO in Brazil's deepwater

offshore sector.

MISC is set to further expand its offshore business with the award of a

contract for the lease of two (2) mobile offshore production units (MOPU) for

the D30 and Dana field development projects located in Block SK305, offshore

Sarawak in Malaysia. Construction of the MOPUs is progressing on schedule with

delivery expected in June and September 2009 respectively.

MISC's subsidiary, Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) also

sustained its performance in the marine and heavy engineering business. During

the year, MMHE completed two fabrication projects, two marine conversion

projects, as well as dry docking and repair works for 68 vessels.

The strong financial results and operational performance delivered amidst a

volatile and uncertain global industry environment characterised by weak market

fundamentals, unprecedented price volatility and persistently high costs

demonstrated the resilience and capability of the PETRONAS Group to compete

efficiently and effectively to generate value in a variety of market conditions.

Driving this performance excellence is the Group's proven strategy of

integration, adding value and globalisation that has served the PETRONAS Group

well in addressing the industry challenges, and enabled the organisation to

evolve and grow into what it is today. The strategy is complemented by the

Group's philosophy of mutually beneficial partnerships and alliances anchored

on long term relationships based on mutual trust, respect and understanding.

One of the key enablers to the successful implementation of the Group's

strategy and philosophy is its people, firmly guided by the organisation's

Shared Values of Loyalty, Integrity, Professionalism and Cohesiveness in

discharging their responsibility as trustees to the people and the nation.

These values have become the soul of this organisation and are key differences

between PETRONAS and many of its competitors, instilling in its people the

resolve to deliver a superior performance and to leave a legacy for future

Going forward, the Group faces significant and growing challenges in an

increasingly difficult and volatile industry environment compounded by the

global economic crisis. Existing domestic acreages are maturing, with both

reserves and production set to decline. New reserves are in harsher geological

frontiers, technologically more demanding and costlier to exploit. Access to

international reserves has also become more difficult with heightened

geopolitical uncertainties in many parts of the world. The ongoing global

economic crisis and the prevailing high-cost and low-price environment have

prompted many industry players to scale back investments and cut costs,

resulting in wide-scale retrenchments. The credit crunch has adversely impacted

many companies' balance sheets and triggered another wave of industry

consolidation. All of these factors combine to create a potent recipe for

another supply crunch.

Despite these challenges and uncertainties, PETRONAS remains focused on the

long-term. It will continue investing in building capacity and capability in

this highly competitive and capital-intensive industry to develop the energy

needed for economic development. The requirement for continuous re-investment

is expected to increase as PETRONAS grows its international portfolio to

supplement declining domestic resources.

PETRONAS has come a long way from its beginnings as a fledgling regulator of

Malaysia's upstream sector to become a fully integrated oil and gas company

with a global presence, ranked on the Fortune Global 500 list. Indeed, the

national oil company (NOC) of Malaysia has been internationally acknowledged as

one of the most successful and well managed NOCs. With an initial share capital

of RM10 million, it has to date returned to its sole shareholder, the

Government of Malaysia, a total of RM426.7 billion in the form of dividends,

taxes, royalties and export duties. More significantly, it has become the

single largest contributor to the Federal Government's revenue, standing at 45%

PETRONAS was able to achieve all these as it has been allowed to operate

commercially and independently, a distinguished foundation for the company

established by its founding leaders. The foundation continues to be

strengthened by its present leaders and dedicated workforce to sustain its

success, and has become an enduring strength of the organisation. PETRONAS

remains committed to this tested and proven formula, and will continue with its

long-term strategy of integration, value adding and globalisation while

investing in capacity and capability to ensure its sustainability. It will

continue to forge mutually beneficial partnerships and alliances based on

mutual trust, respect and understanding. With full support from its

stakeholders, PETRONAS is ready to face the challenges and remains devoted to

raising the level of its performance to not only meet but exceed the

expectations of all its stakeholders.

SOURCE: PETRONAS

FOR MORE INFORMATION CONTACT:

NAME: AZMAN IBRAHIM

HEAD, MEDIA RELATIONS

TEL: +603 - 2231 2140

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