Petronas on track to rake up RM100b profit in 2022?

KUALA LUMPUR: There was a time when crude oil prices crashed to as low as US$10 per barrel.

It was a gruelling time for one of the country's most beloved institution, Petroliam Nasional Berhad or fondly known as Petronas.

At the time, in 2001 to be exact, the state-owned national oil corporation and other small oil and gas companies bobbed in the water barely clinging to life when crude oil prices crashed.

Some oil and gas companies which were mainly Petronas's vendors were forced to close shop while others scraped at the bottom of the barrel.

The situation was dire and again in 2020, Petronas was running on empty when cars were ground to a halt due to the pandemic.

Petronas fortunes are changing for the better

Fast forward to 2022, as fate would have it, the tables are turned and Petronas is raking in the petrodollars.

The Forbes Fortune 500 company made a net profit of RM23.4 billion in the first quarter ended March 2022.

This is on the back of a RM80 billion revenue primarily due to the Ukraine-Russia war which saw crude oil prices spike as high as US$150 per barrel.

Petronas said on Tuesday the quarter's RM24 billion profit was 154 percent higher than a year ago, though that was partially offset by higher product costs and taxation.

The rakyat is beginning to feel the pinch of high oil prices that so much so, FMT reported that even the Vellfires and the Alphards (passenger vehicles) have given up on the pricey RON97 and opt for the more affordable RON95.

On track to chalk in RM100 billion in 2022?

At the rate the Ukraine-Russian war is going, and if crude oil prices continue to hold around the US$130-US$150 per barrel level, Petronas may well be on it's way to register a profit of between RM80 billion and RM100 billion in 2022.

It is believed that if this happens, this could be Petronas's highest profit ever.

As a comparison, Petronas made RM55 billion profit in 2013 when oil prices hovered at the US$80-US$100 per barrel level.

Economists optimistic on Petronas 2022 prospects

Bank Islam chief economist Dr Mohd Afzanizam Abd Rashid said Petronas should be able to record respectable profit in 2022 as prices for crude oil and LNG (liquefied natural gas) have been rising at a fast clip.

"Perhaps, this could allow Petronas to allocate more capital expenditure to be incurred in order to ensure the production capacity will continue to remain healthy.

This would certainly be beneficial for the oil and gas ecosystem especially for players who are in the upstream as well as the downstream sector," Afzanizam told Dagangnews.com.

Squeezed by subsidy

However, no matter how high oil prices climb, state-owned Petronas will be squeezed by royalty payment (around RM28 billion a year) to the government.

The government meanwhile opts to give out fuel subsidies (around RM20 billion a year) to the rakyat.

Thus, it is hard for Petronas to soar higher with it's wings partially clipped saddled by ir's massive obligation to the rakyat.

Perhaps the government should gradually abolish the market distorting subsidies and allow Petronas to show it's true potential in the global oil and gas arena.

The rakyat must also be reminded that eventhough Petronas is flying high, the ringgit is weak and it all comes to naught until the country's political situation stabilises to allay investors concerns.