terengganu

 
 

Fiscal health first, higher oil royalties later, economists tell govt

The government should only be alarmed when crude oil prices consistently plummet to below US$50 per barrel, an economist says. REUTERSPIX

PETALING JAYA: The government should restore its fiscal health and weigh the implications on Petroliam Nasional Bhd’s (Petronas) balance sheet first before fulfilling the request of oil-producing states for an increase in royalty payments, according to economists.

Sunway University Business School Professor of Economics Dr Yeah Kim Leng said the government should at least put on hold the request by oil-producing states for higher royalties at least for the next two to three years, until the country’s fiscal health is restored.

He highlighted that a higher petroleum royalty will not only jeopardise Petronas’ balance sheet but also reduce its capacity to churn the planned RM30 billion extra dividend.

“Petronas’ dividend has given the government the flexibility to pay the goods and services tax and income tax refunds owed to corporations and individuals but also to avoid too drastic austerity measures under Budget 2019,” he said.

Socio-Economic Research Centre executive director Lee Heng Guie concurred, saying that the federal government should buy time to iron out its fiscal position as there is a lot to rectify at this juncture.

He said oil-producing states such as Sabah and Sarawak could hold back on their requests for the time being unless they are in need of funding for state initiatives and projects. Assuming that the royalties are paid directly to the oil-producing states by Petronas, the federal government is likely to receive less in dividends, he added.

Sarawak called for royalty payments to be increased to 20% for its oil spoils in line with Pakatan Harapan promise in its manifesto, after which Sabah joined the bandwagon. Petronas currently pays a royalty of 5% to the oil-producing states.

Recently, Kelantan said it is withdrawing a lawsuit against Petronas in relation to royalty claims. Mentri Besar Datuk Ahmad Yakob said the decision to retract the claim, which was filed since 2011, was made due to its confidence in Prime Minister Tun Dr Mahathir Mohamad’s stand to distribute royalty payment to the state governments as announced in a recent Finance Committee meeting.

It was announced in the meeting that the federal government will stop giving out “wang ehsan” and instead channel the royalty payments directly to the Kelantan and Terengganu governments.

Mahathir also said the government is studying the claims of Kelantan and is trying to come up with a mechanism to fulfil the claim without hurting Petronas’ balance sheet.

When asked if the government is being too dependent on Petronas’ dividends for revenue, Lee said the government should look at asset monetisation and non-tax revenue and continue to plug leakages.

For 2019, apart from the RM30 billion one-off payment, the government will still be receiving petroleum income tax, royalty and normal dividend by Petronas, bringing the federal government revenue to RM261.8 billion or 17.1% of gross domestic product.

Commenting if there is a need to recalibrate Budget 2019 in view of the current volatile oil prices, Lee said the government should only be alarmed when crude oil prices consistently plummet to below US$50 per barrel. Budget 2019 was devised based on oil prices of US$70 a barrel. On Friday, global benchmark Brent crude closed at US$60.28 a barrel.

Lee said the RM4-5 billion recognised in savings from the additional tax initiatives and revenue-raising measures introduced in Budget 2019, and Petronas’ dividend would serve as buffers.

Meanwhile, Yeah said the government has to consider diversifying its revenue stream to avoid the need to recalibrate the Budget, especially from the spending side.

“It is now a key risk in 2019 as world oil prices are now expected to hover between US$60 and US$70 depending on the oil-producing countries’ ability to cut production. A US$10 a barrel difference will mean about RM3 billion lower revenue for the government,” he added.


Petronas conducting feasibility study on energy supply in Silica Valley

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is undertaking a feasibility study for the development of an energy supply and related infrastructure in the Terengganu Silica Valley in Marang.

President and CEO Tan Sri Wan Zulkiflee Wan Ariffin said the study, conducted together with state-owned company Terengganu Inc, would involve technical and commercial assessment to develop natural gas supply, power generation, supply of industrial gases and other related gas supply in the Silica Valley.

“We expect to complete the study within 18 months,“ he told reporters after witnessing the signing of a memorandum of understanding (MoU) between Petronas and Terengganu Inc today.

The MoU was signed by Petronas vice-president (Malaysia Petroleum Management) Muhammad Zamri Jusoh and Terengganu Inc Director Datuk A Rahman Yahya.

Terengganu Mentri Besar Dr Ahmad Shamsuri Mokhtar, who witnessed the ceremony, said the MoU also included a proposal to develop 32km of gas transmission and distribution pipeline to the project to allow supply of gas through the peninsular gas utilisation network from existing gas supply systems.

He said the Silica Valley development would be partly funded by the state government, but declined to disclose the amount, saying that the proposal was still at the preliminary stage.

With a gross development value of RM13 billion, the Silica Valley will be developed in two phases – 470ha in the first phase and 3,520ha in the second phase.

The project is scheduled for completion within 10 to 15 years and create 7,200 jobs.

On the outcome of the Organisation of the Petroleum Exporting Countries’ (Opec) meeting today, Wan Zulkiflee said Petronas’ plans were based on the continuance of the production cut.

“In the past, we have been complying with this 20,000 barrels production cut per day and we just have to see on the outcome of this meeting,“ he said.

The Opec meeting, scheduled to be held in Vienna today with the aim of reaching an accord over production levels for the next six months.

The cartel will then meet with allied non-Opec partners tomorrow, with markets widely-expecting the energy alliance to announce steep output reductions of around 1.2 million to 1.4 million barrels per day starting January.

Petronas had previously reduced its oil production by 20,000 barrels per day in line with efforts by Opec and its allies to solve the global supply glut.


Growing interest among Polish investors for Malaysia

KUALA LUMPUR: There is growing interest among Poland’s investors to invest and expand their businesses in Malaysia due to the strategic location, ease at doing business and cost competitiveness, says Polish Ambassador to Malaysia, Krzysztof Debnicki. He said Malaysia would be a good platform for Polish companies, especially the medium-sized, to begin business forays and […]


YTL Power’s net profit eases to RM126.28m for Q1

KUALA LUMPUR, Nov 23 — YTL Power International Bhd’s net profit eased to RM126.28 million for the first quarter ended Sept 30, 2018 from RM132.62 million chalked up in the same period last year. Revenue rose to RM2.8 billion from RM2.58 billion…


Yeo: IPP review covers only direct-award contracts

PETALING JAYA: The Energy, Green Technology, Science and Climate Change Ministry has no plans to review existing independent power producer (IPP) contracts, but will be looking at them phase by phase, according to its minister Yeo Bee Yin (pix).

“At this moment, the existing ones we do not touch on them. But we are only looking and reviewing the one that is a direct award,” she told reporters at the Sustainability Summit Asia 2018 here today.

“In 2017, just a year before the election, there were many direct awards for IPPs. The direct award does not offer the best deal to the people,” she added.

Asked why the primarily property company Tadmax Resources Bhd was allowed to proceed with its project in Pulau Indah when it fulfils the criteria for review announced by the minister, Yeo declined to comment.

Tadmax, which is a new player in the power sector, was directly awarded a 1,000MW combined-cycle gas turbine plant on its Pulau Indah land in August 2016.

In October 2018, Yeo announced the government decided to cancel four power projects.

They were the 700MW power plant projects by Malakoff Corp Bhd and Tenaga Nasional Bhd (TNB) in Kapar; 1,400MW power plant by Aman Majestic Sdn Bhd and TNB in Paka, Terengganu; the 300MW combined gas engine power plant project by Sabah Development Energy (Sandakan) Sdn Bhd and SM Hydro Energy Sdn Bhd at the Palm Oil Industrial Cluster in Sandakan; and the 400MW solar energy quota to Edra Power Holdings Sdn Bhd.

In July, Yeo said her ministry would cancel up to eight projects.
In Parliament yesterday, she said the government would open a tender process for some RM2 billion worth of projects in January next year to produce 500MW of electricity through solar power. The details of the project tenders, known as Large Scale Solar (LSS) Programme 3 projects, will be announced later.

The projects are in addition to the ongoing LSS projects to produce 958MW of electricity from the end of this year until 2020.

The Sustainability Summit Asia 2018, hosted by Sunway University's Jeffrey Sachs Center on Sustainable Development in partnership with The Economist, featured more than 20 speakers from different countries.


Energy Minister says not reviewing existing IPP contracts

PETALING JAYA: The Energy, Green Technology, Science and Climate Change Ministry has no plans to review existing independent power producer (IPP) contracts, but will be looking at them phase by phase, according to its minister Yeo Bee Yin.

“At this moment, the existing ones we do not touch on them. But we are only looking and reviewing the one that is a direct award,” she told reporters at the Sustainability Summit Asia 2018 here today.

“In 2017, just a year before election, there is a lot of direct award of IPPs. This direct award case is not offering competitive (rates and give) the best deal for the people,” she added.

Asked on why Tadmax Resources Bhd was allowed to proceed with its project in Pulau Indah when they fit the criterias announced by the Minister, Yeo declined to comment.

Tadmax, which is a new player in the power sector, was directly awarded a 1,000MW combined-cycle gas turbine plant on its Pulau Indah land in August 2016.

In October 2018, Yeo announced four projects the government had decided to cancel. These projects were The 700-megawatt (MW) power plant projects by Malakoff Corporation Berhad and Tenaga Nasional Berhad (TNB) in Kapar; 1,400 MW power plant by Aman Majestic Sdn Bhd and TNB in Paka, Terengganu; the 300-MW combined gas engine power plant project by Sabah Development Energy (Sandakan) Sdn Bhd and SM Hydro Energy Sdn Bhd at the Palm Oil Industrial Cluster (POIC) in Sandakan; and the 400-MW solar energy quota to Edra Power Holdings Sdn Bhd.

In July this year, she had announced that her Ministry would cancel up to eight projects.


Ranhill’s share price down 6.37% on IPP project cancellation

PETALING JAYA:Ranhill Holdings Bhd’s share price fell as much as 6.37% this morning to 95.5sen after receiving a letter from the Energy Commission informing of the government’s decision to rescind its power plant project.

At 11.46am, the stock was trading at 96sen, with 2.37million shares done.

The proposed 300MW combined cycle gas turbine power plant in Sandakan which was to be developed by a consortium consisting of its unit SM Hydro Energy Sdn Bhd (SMHE) and Sabah Development Energy (Sandakan) Sdn Bhd (SDESB) was one of the four independent power producer projects axed by the government.

The Energy Commission had on October 26, issued a letter informing the consortium of the cancellation of the project.

“In its letter, the Energy Commission stated that it was informed by the Ministry of Energy, Science, Technology, Environment and Climate Change through a letter dated 25 October 2018 that the Government has decided to rescind its decision on the implementation of the project,” it said.

To recap, Minister of Energy, Science, Technology, Environment and Climate Change (Mestecc), Yeo Bee Yin said in a response in parliament on Thursday that the four IPPs were awarded through direct negotiations and failed to adhere to stipulated conditions in the offer letter issued by the developer.

Apart from the aforesaid project, the three IPPs are 700MW gas power plant in Kapar by Malakoff Corp Bhd and Tenaga Nasional Bhd(TNB); 1,400MW plant in Paka, Terengganu by Aman Majestic Sdn Bhd and TNB; and the 400MW solar power quota to Edra Power Holdings Sdn Bhd for the development of solar power plant.


Smoke and mirrors for Big Tobacco

Times continue to be tough for tobacco players in the midst of changing cigarette prices, burgeoning taxes, and Ministry’s tough love on the nation to reduce smoking. The Pakatan Harapan government is seen keeping its promises post election. To recap, in its Alternative Budget 2018, Pakatan Harapan outlined the curbing of illicit cigarettes to drive […]


IPP cancellation has no effect on TNB, Malakoff

KUALA LUMPUR, Oct 26 — The cancellation of four independent power producers’ (IPP) licences will not affect the existing power purchase agreement (PPA) and and current operating plants of Tenaga Nasional Bhd (TNB) and Malakoff Corp Bhd, said…


MITI’s trade, investment mission to seoul generates rm1 bln potential sales

KUALA LUMPUR, Oct 20 —The Ministry of International Trade and Industry’s (MITI) trade and investment mission to Seoul, South Korea from Oct 18-20, 2018 has garnered RM1 billion in potential sales. The ministry said the mission, led by its…