Appended below is Kim Quek's reply emailed to ASWJ..
04.08.2000
The editor,
The Asian Wall Street Journal.
Reply to Petronas on "Mystery Over Petronas"
I refer to Petronas' reply (published in AWSJ on 21.07.2000) to my original letter titled "Mystery Over Petronas" (published in AWSJ on 14.7.2000).
In the above reply, Petronas attempted to portray its performance in glorious terms, but has failed completely to rebut my assertion that Petronas' current net worth of RM 45.6 billion is only a small fraction of what it should have been. It has produced neither facts nor figures to explain why Petronas' net worth (RM 45.6 billion) is only equivalent to its total net profits of the past 5 years while it has been in the business of collecting petroleum revenue on behalf of the Government of Malaysia for the past 25 years!
Petronas' letter writer appeared to justify Petronas' meager net worth of RM 45.6 billion by explaining that it has reinvested its past profits into business expansion in Malaysia and overseas, and he seemed to take pride in announcing that Petronas' total assets now stand at RM 121.6 billion (as contrast to RM 45.6 billion).
If the above statement is intended to explain the huge gap between its current net worth and its perceived cumulative historical incomes, then this explanation is a fallacy. Firstly, all Petronas' reinvestments have already been reflected in its net worth, hence it is illogical to offer reinvestment as Petronas' justification for having a lesser net worth. Secondly, quoting the total assets is meaningless, unless it is accompanied by its total liabilities, which the letter writer conveniently omits. In this instant, we deduce that Petronas' total liabilities are at the tune of RM 76 billion, which is 1.7 times its shareholders' funds (or net worth). (Net worth equals total assets less total liabilities). And Petronas' net worth still stands at RM 45.6 billions, notwithstanding its vast assets. Incidentally, Petronas' heavy liabilities betray Prime Minister Mahathir's oft-repeated boasts that Malaysia need not borrow to complete his many mega projects (all financed by Petronas) - his standard defence against criticism of his mega projects.
Petronas' letter writer also boasts that Petronas' net profits rank among the tops of the world's oil producers. This again is a fallacy, as the bulk of Petronas' so called net profits is actually oil and gas revenue collected on behalf of the Government of Malaysia, for which Petronas does not have to bear any exploration, development or production costs. In fact, Petronas should separate such expense-free oil revenues from its other business profits in its Annual Reports, so that its efficiency as a profit making entity can be properly ascertained.
Since Petronas has maintained such high standards of reporting and transparency
as claimed by the letter writer, it should now have no hesitation in disclosing
to the nation the basic information requested in my previous letter.
We look forward to receiving the following data from Petronas: For
each of the past 25 years, in respect of the production of oil and gas,
a) production figures, b) weighted average prices, c) production fees paid
to production sharing contractors and d) dividends paid to the Federal
Government.
Kim Quek