Petronas set to chalk it's highest profits ever
Petroliam Nasional Berhad or Petronas is set to chalk it's highest net profit ever.
Economists and analysts said Petronas is on it's way to register a net profit of some RM100 billion for financial year 2022.
This target is achievable as it has already turned in a profít of RM77.6 billion for the first nine months of last year.
State-owned national oil corporation is smilling all the way to the bank riding on the Russia-Ukraine war.
The clashes erupted in March last year between the two countries saw crude oil prices shoot up as high as US$130 per barrel.
Petronas is expected to announce it's full year 2022 financial performance soon.
Long term outlook still positive
The profit outlook for Petronas is very positive because Brent crude oil prices rose to around $130 per barrel in March last year.
Although they have come down and are hovering at around US$80 per barrel right now, they are still elevated due to tobust global demand amid restrictions due to the Ukrainian conflict.
"So there will be a record profit by Petronas for 2022 which will help the government's oil royalties to double," said Professor Geoffrey Williams.
The Management, Science and Technology University economics lecturer said income from oil royalties in 2023 will also be very positive.
"Most of this has funded the petrol subsidies but some has found its way into wider spending.
As the oil price has fallen to US$80 per barrel level, the petrol subsidy will be less expensive and more of the oil royalties can be used for other priorities.
It is important to allow Petronas to keep as much surplus as necessary to ensure long-term investment and sustainability, especially in overseas operations, Williams told Sinar Daily.
Williams said now is the best time for the government to assess whether it can rely on oil royalties in the long-term or whether now is the time to get greater asset value from Petronas by privatising part of the business and reinvesting part of the proceeds into other assets and priorities.
Where will prices head next?
Crude oil prices are not expected to head any where in the medium term hovering at the US$80 per barrel level.
"We expect oil prices to trade in the range of between US$70-US$90 per barrel barring any major shocks with an average of around $80 per barrel.
Russia-Ukraine war expected to prolong
Petronas has done a good job in managing the country's wealth thanks to higher oil prices last year.
These higher oil prices have been largely due to the Ukrainian war and global economic recovery after most nations ended pandemic restrictions.
"The latter caused revenge spending and thereby kept oil prices afloat at around US$100.
Datuk Dr John Antony Xavier said Malaysia can expect the payout by Petronas to the government in taxes and dividends to be in the region of RM55-59 billion.
"This will largely cover the RM70 billion subsidies that the govenemtn has budgeted to pay out to the poor and vulnerable groups in 2023," Xavier told Sinar Daily.
The AIMST University vice chancelor said such a huge Petronas payout will have a positive impact on the fiscal deficit of the government.
H added Fitch Ratings forecast forecast oil prices to be about US$85 per barrel in 2023.
This would mean that the payout to the government will reduce by about RM10 billion in 2024.
"But we can consider further buoyancy in the price of oil with the opening up of China’s economy given its abandonment of the zero-Covid policy and the fading away of the threat of a global recession.
Petronas's performance in line with other oil majors
Petronas's outstanding profit is not a stand alone flash in a pan.
ExxonMobil reportedly made a net profit of US$59.1 billion while Shell announced it's highest ever net profit of US$39.9 billion.
Chevron meanwhile made US$36.5 billion while BP made US$27.7 billion.