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Financial Times: Petronas

Published: March 11 2007 19:05 | Last updated: March 11 2007 19:05

Petronas, Malaysia’s national oil company, has been described as the role model that other NOCs would like to follow. Solidly placed in the second division of oil companies worldwide, it is one of the top three exporters of liquefied natural gas, which has been one of the fastest-growing energy markets of the decade.

However, it has yet to realise its full potential. For a while, it looked as though Petronas would exploit that strength to build a global position to match the grandeur of its headquarters in Kuala Lumpur, once – by some standards – the world’s tallest building. In 2003 it spent $1.74bn on assets in Egypt, and appeared to be on the verge of a determined move to break out of Asia and into the American and European markets.

Petronas has taken stakes in Rosneft of Russia and Cairn India, the oil company spun off from Cairn Energy of the UK at the end of last year, and about 4 per cent of Centrica, Britain’s biggest domestic energy supplier. But it has not yet derived any clear benefit from those investments.

The proposed Pars LNG project with Total in Iran, if it goes ahead, would be an important move in the country with the world’s second-biggest gas reserves. But the timing of the investment decision, which Iran has said must be made by the end of March, is hardly propitious. With Malaysian LNG export growth slowing, Petronas risks falling behind its international rivals.

Analysts at PricewaterhouseCoopers predict that by 2015 it will have been overtaken by two international gas companies, Royal Dutch Shell and ExxonMobil, by the national oil companies of the two leading growth areas, Qatar and Nigeria, and even by Pertamina of Indonesia.

Petronas still has many strengths. In terms of the competence of its staff and its operational capabilities, it is ahead of many other national oil companies. It is the leading refiner in Asia, where demand is rising the fastest and other companies would like to increase their presence. But if it wants to stay in the front rank, it will need to raise its game.

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