Petronas earnings dip impacts government dividend - Expert

SHAH ALAM - The decline in Petroliam Nasional Bhd's (Petronas) dividend payment to the government is caused by the financial performance of the company which decreased by 7.7 per cent which is RM343.6 billion in 2023 compared to RM372.3 billion in 2022.

Universiti Sains Islam Malaysia (USIM) Islamic Banking and Finance Faculty of Economics and Business Lecturer Dr Mohd Faisol Ibrahim said the company's finances declined because in 2023 the global economic environment was still unstable.

"It is also due to economic uncertainty which causes Petronas' earnings to be slightly affected.

"Issues such as the series of wars in the Middle East and geopolitical tensions in Europe have caused the oil and gas market to experience uncertainty in demand," he said when contacted on Saturday.

On Friday, it was reported that Petronas would pay a dividend of RM40 billion to the government in 2023 in addition to contributing RM2 billion to the National Trust Fund.

Its president and chief executive officer Tan Sri Tengku Muhammad Taufik Tengku Aziz said the country's oil and gas company had made a dividend payment of RM50 billion in 2022.

It is understood that Petronas has recorded a lower net profit of RM80.7 billion for the financial year ending 31 December 2023 (financial year 2023) compared to RM101.6 billion in the previous year, largely due to lower average realised prices.

Commenting further, Faisol said if the situation continues for 2024, then revenue to the government is also expected to decrease.

"It will indirectly affect the management and development expenses of the country. This is because the contribution from income tax on oil will shrink due to the decrease in petroleum revenue in addition to the decrease in royalty contributions.

"Situations like this happened a few years ago (in 2020) when the country was hit by Covid-19 where the oil source was only three per cent of the country's total revenue," he said.

However, he explained that the government would continue to depend on Petronas because it is one of the main sources of national income.

He said the resources obtained from the country's oil and gas companies were among the highest in addition to profit tax and income tax as well as the country's investment income.

"This national oil and gas company actually has good and efficient investment power every year and has bright prospects with organised exploration, development, oil and gas production activities.

"This situation will certainly provide a high earning potential for Petronas and the country," he said.