Edited by Changa at 5-9-2015 12:26 PM
http://www.thestar.com.my/Busine ... vernance/?style=biz
Former Petronas CEO gives his views on why the national oil company must stick to the spirit of the Petroleum Development Act A few months after his appointment to the helm of Petroliam Nasional Bhd (Petronas) in February 2010, Tan Sri Shamsul Azhar Abbas noticed something strange just outside the Petronas Twin Towers. Two lorry loads full of hampers were being unloaded. When he asked a security guard about this, he was promptly told that this was not an unusual sight as it happened every year, just around the time of festive celebrations.
The hampers he was told, were gifts for Petronas staff. The senders were a varied bunch of vendors, contractors and suppliers to Petronas. Shamsul recalls that soon after that incident he had a serious think about the level of professionalism that Petronas, Malaysia’s only Fortune 500 company, ought to display. A no-gift policy was soon implemented, which still stands today, its wording emblazoned on various facades of the oil giant’s headquarters in Kuala Lumpur.
That move was just the tip of the iceberg of the changes Shamsul had sought to bring to Petronas during his time at its helm until April this year. Industry observers are quick to point out that Shamsul had made great strides in shaping Petronas from a national oil company (NOC) into one that looks more like an international oil company (IOC), among the likes of the Shells and ExxonMobil of the world. Many of these oil giants no longer look upon Petronas as an NOC but an IOC that competes with them head on for overseas projects. The same can hardly be said about some other NOCs which have fallen by the wayside, such as Indonesia’s Pertamina and Brazil’s Petrobras which have been hit by large-scale corruption scandals.
The Shamsul-led transformation of Petronas meanwhile, had helped it attract talent from the far reaches of the world, mainly Malaysians placed in leading places among oil giants, to the opportunities a dynamic Petronas was offering. Speaking to StarBizWeek in what he admits is a long-overdue exit interview, considering it’s been five months since his departure from Petronas, Shamsul recalls that the greatest asset he had for being able to push through the changes was that he didn’t really want the president and CEO job at Petronas.
“I was asked by the Prime Minister to help out back then and seeing that he needed help, I took it on. But I wasn’t afraid of bringing about changes not only within Petronas but also our dealings with external parties and service providers,” he said. Shamsul focused on three basic principles for Petronas: governance, competency and meritocracy, drawing inspiration from the Petroleum Development Act (PDA) of 1974, which wrested control of all the country’s oil and gas resources into Petronas for the benefit of all Malaysians. Having learnt well about the importance of the PDA from the likes of the late Tan Sri Azizan Zainul Abidin, the former chairman of Petronas, Shamsul has countless times made a very poignant point about the act – that the oil and gas resources belong to all Malaysians and they have to be handled with care. On this ground, Shamsul insisted that Petronas did not operate like other government-linked companies and could not afford to give out handouts. In return, Shamsul bore the brunt of criticism from certain vested groups, such as the Malay Economic Action Council. These groups were of the view that Petronas and Shamsul tended to favour foreign companies and could do more to look into the interest of the bumiputra contractors. But Shamsul resisted such pressures on the grounds that foreign expertise was needed for capital-intensive and highly-technical jobs such as developing marginal oil fields.
“Why I can do it is because I don’t fear losing my job. It is in my DNA to see that everything is based on performance but the external crowd doesn’t share the same view,” he says.
Shamsul says business must be de-linked from politics to enhance governance. “There must not be a breakdown in governance and the board plays a key role. Board positions must not be seen as a reward for retired civil servants. It may dilute the strength of the board,” he says.
Licking his wounds It is a fact in the industry that one of Shamsul’s most significant changes at Petronas was to change an earlier “allocation system” into a merit-based one. At one point there were protestors outside the Petronas office with placards calling for Shamsul’s resignation. “I’m still licking my wounds,” says the straight-talking Shamsul, who turned 63 this year. Shamsul though has clearly moved on nicely after his departure from Petronas, looking more relaxed for this interview than he did at Petronas events. He says leaving Petronas is affording him quality time with his wife and only child. “I have not spent enough time with them for the last 40 years of working. At Petronas, where we are present in 24 countries, I travelled a lot, often during weekends so as to avoid being away from the office on weekdays. So any new roles I take one must afford me that flexibility,” he says. Upon leaving Petronas, Shamsul was appointed chairman of MMC Corp Bhd, a role he says which requires him to embark on a similar transformation journey as what he had done at Petronas. Shamsul was also appointed chairman of Petronas Gas Bhd in August. More surprising was his appointment as an independent non-executive director of little known Enra Group Bhd, a property investment holding company once known as Perduren Holdings Bhd. Critics were concerned if Shamsul was going to hog his name to any company that wanted to be associated with a notable former head honcho of Petronas. This isn’t exactly the case, according to Shamsul. He says he was called upon by a major shareholder of Enra, Datuk Kamaluddin Abdullah Badawi, to help him out after he had bought into Enra. “Kamal is an old friend and so I said ok, especially after hearing who the other directors were going to be,” explains Shamsul. Enra’s other board appointments include Datuk Ali Abdul Kadir, the former chairman of the Securities Commission, and Datuk Anuar Ahmad, the former executive vice-president of Petronas’ gas and power business. “I am very aware of reputational risks and offers from parties who just want to use my name and I will avoid that,” he says. Canada venture The previous attacks on Shamsul are even more absurd: he oversaw an ambitious programme that sought to turn local oil and gas service providers into oil explorers, the highest level in the hierarchy of the oil and gas sector, without putting Petronas at any significant risk. This was the move to develop marginal oil fields where certain international niche players were specialists and who were required to work with local partners with the intention of the latter learning exploration skills. “In the early days, Petronas had a tendency to do most of its work by itself, but it soon realised the onus it had, as an NOC, to develop the local industry. So we came up with the risk service contract (RSC) for marginal oil fields with the noble intent of doing just that,” he says. At last count, Petronas had more than 4,000 registered service providers, which is much more than Norway, with only around 700, despite having similar sized oil and gas deposits as Malaysia, another testament that Petronas has possibly the most active vendor schemes in the world of NOCs. However, it isn’t clear how many of these firms are dormant or the level of significant expertise built up. During his tenure, Shamsul oversaw one of Petronas’ biggest ever acquisitions, forking out US$5.7bil to buy Canada’s Progress Energy Resources in 2012. That acquisition was made when oil prices were around US$100 a barrel. Hence it raises the question if it was ill-timed and was the investment worth all that money. Shamsul explains that the opportunity came about as Canadian companies had shale assets but did not have the financial ability or know how to build LNG plants. One of Shamsul’s moves to mitigate the financial risk in the deal was to subsequently create a “buyers consortium”, by selling parts of equity in the project to partners such as the government oil companies of countries like Japan, Brunei, India and China. That move not only lowered Petronas’ cost of acquisition and future capital expenditure costs but also ensured that the bulk of its future production from the project had already secured buyers. “Even before building the facility, we were already sold out! More than 80% of the hydrocarbon molecules are already sold out now,” he says.
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Post time 5-9-2015 12:20 PM
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