Petronas likely to give less money to Govt

By IZWAN IDRIS

Lower oil prices will limit royalty to Government

PETALING JAYA: Lower crude oil prices that hit Petroliam Nasional Bhd’s (Petronas) bottomline hard this year are likely to limit the national oil firm’s ability to repeat the huge payout to the Government last year.

Recent official statements indicated that Petronas’ petroleum payments to the Government are expected to fall between 14% and 19% in the financial year ending March 31, 2010 (FY10) to between RM60bil and RM64bil.

“We suspect the shortfall will come solely from the petroleum income tax portion, down 35% to RM19bil, while dividend distribution will remain at RM30bil,’’ Maybank Investment Bank said in a report yesterday.

Income from Petronas made up a significant chunk of the Government’s annual revenue.

To recap, total income distribution from Petronas to the Government amounted to RM74bil in FY09.

Of the total amount, RM67.8bil went straight to the Government’s coffers, while RM6.2bil was for royalty payments to several oil producing states.

The Government’s total revenue was estimated at RM162bil in 2009, but is expected decline to RM148bil in 2010.

In the Economic Report 2009/2010 published in October, the Government said its current year revenue from petroleum income tax – assessed on the preceeding year basis – would amount to RM27bil as crude oil had averaged at US$103.69 per barrel in 2008.

This year, the Government is predicting that crude oil price would average at US$65 per barrel. For the first nine months of this year, the Tapis blend – the main type produced in the country – averaged at US$60.70 per barrel.

The oil and gas industry is the Government’s biggest source of tax revenue.

Since October, crude oil price in the international market has consistently remained above US$70 per barrel.

The benchmark price for New York light sweet crude oil futures rose to a high of US$81 per barrel in late October and was traded at US$73 per barrel yesterday.

The rising crude oil prices may help shore up Petronas’ revenue in the second half of its FY10.

The national oil firm announced on Tuesday that its pre-tax profit fell 51% to RM31.2bil during its first six months ended Sept 30, while revenue declined 37.5% to RM98.2bil.

In FY09, Petronas made a pre-tax profit of RM89.1bil on revenue of RM264bil.

Prime Minister Datuk Seri Najib Tun Razak announced in October that the Government intends to bring down its budget shortfall from a 22-year high of RM51.1bil, or 7.4% of gross domestic product in 2009 to 5.6% next year.

To achieve this, the Government plans to cut down on subsidy spending and lower its operating expenditure.