Petronas to cut govt dividend to RM28b

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) plans to lower its annual dividend paid to the government to RM28 billion this year as it holds onto cash to help reverse a production slump.

"We need to grow," Shamsul Azhar Abbas, the group's chief executive officer, said in an interview here on March 30. "Energy reserve is not finite, it will deplete."

Petronas, which manages all the Southeast Asian nation's energy reserves, is the biggest single contributor to government revenue, having paid RM30 billion in dividends for each of the past three financial years.

Shamsul, who took over as CEO in 2010, wants to retain more of the company's profits to invest in exploration after seeing Malaysia's oil and gas production fall for three straight years.

"Malaysia's revenue base should be broadened, so that it's not overly reliant on resource revenue," said Edward Lee, a Singapore-based economist at Standard Chartered Plc.

Petronas plans to spend a record RM300 billion over five years to replenish the country's maturing reserves and counter mounting exploration costs.

It has stepped up offshore drilling with local and overseas partners, including Petrofac Ltd, to boost the nation's underground holdings of oil and gas.

Malaysia, Southeast Asia's biggest oil and gas producer after Indonesia, saw production fall to 1.61 million barrels of oil equivalent a day in the year ended March 31 2011, from 1.63 million a day a year earlier, according to the Kuala Lumpur-based company's annual report.

Petronas may be able to reverse slumping production by 2014 as output is expected to be boosted by deepwater developments offshore in the eastern Sabah state, Shamsul said.

The company will gradually switch to a dividend payout ratio of 30 per cent of profit to reflect broader oil industry practices, he said.

Crude oil reserves rose one per cent to 5.86 billion barrels as of January 1 2011, with an expected lifespan of 24 years, the government said in October.

Gas reserves grew 0.3 per cent to 88.9 trillion cubic feet, enough to last 39 years, one year more than previously projected. Bloomberg