Malaysia denies nepotism behind Petron Fuel approval

05 September 2018, Week 35, Issue 641

The Malaysian government has rebuffed criticism of its decision to add Petron Fuel International to a list of approved fuel suppliers to government vehicles.

Petron Fuel, a unit of Philippines-based Petron, joins state-owned Petronas and Royal Dutch Shell in being permitted to supply fuel to government vehicles. The company will do so via its indent card programme.

Petron Fuel’s appointment has been decried by former prime minister Najib Razak and Pan-Malaysian Islamic Party deputy president Tuan Ibrahim Tuan Man.

Razak has argued that Petronas’ income would be “disturbed” by the panel’s expansion, adding that Petronas and Shell’s wide retail fuel networks should be enough to serve the government fleet. The former prime minister also questioned why Caltex and BHP were not included, both of which possess almost the same number of stations as Petron Fuel.

Ibrahim went a step further, however, complaining that Petron Fuel’s appointment harkened back to the days of Razak’s administration, when nepotism was rampant.

Malaysian Prime Minister Mahathir Mohamad’s eldest son Mirzan Mahathir is a Petron director. Mahathir was elected a Petron director in 2010, when he owned 1,000 shares in the company. The Straits Times reported this week that by 2013 Petron claimed Mahathir no longer held those shares.

Nothing to see

The Malaysian Finance Ministry has been adamant that Petron Fuel’s approval was driven purely by operational reasons, adding that appointing a third government fuel supplier would stimulate competition. It pointed to the fact that Petron Fuel, Petronas and Shell operated the country’s largest retail fuel networks.

It also said there were no limitations on the number of government-sanctioned fuel supplies and that BHP and Caltex were free to apply to join the ranks of the other companies.

In a swipe at Razak, the ministry revealed that Petron Fuel had submitted its application under the previous government. “Discussions that were started during the leadership of former prime minister … Razak showed that the previous government had no resistance to considering Petron’s application, and that the new government only continued the internal process by following clear, existing guidelines,” it said.

Petron Fuel was also only appointed as a provider after it agreed to provide the government with a small discount via its indent card programme.

The ministry said the matter had not been referred to the prime minister and that there had been no political intervention during the decision-making process.

“The appointment was transparent and is not linked to any political individuals,” the ministry stated.

Razak’s claims that Petron Fuel’s inclusion on the list of approved suppliers to government vehicles will disrupt Petronas’ business ring slightly hollow in the face of the company’s robust results announcement last week.

Petronas performs

Petronas said last week that it had raised its 2018 dividend guidance from 19 billion ringgit (US$4.59 billion) to 24 billion ringgit (US$5.79 billion). Petronas CEO Wan Zulkiflee Wan Ariffin said the payment was 50% higher year on year owing to the global oil price rally.

The increase was revealed as the company announced its mid-term results, with its second-quarter profit climbing to 13.63 billion ringgit (US$3.29 billion) from 7.06 billion ringgit (US$1.7 billion) a year earlier. Quarterly revenue increased by 14.7% year on year to 59.3 billion ringgit (US$14.32 billion) from 51.6 billion ringgit (US$12.46 billion).

The company’s first half net profit expanded 54% to 26.65 billion ringgit (US$6.43 billion) from 17.35 billion ringgit (US$4.19 billion). Oil prices in the half averaged US$70.56 per barrel, according to the company, which added that this compared favourably with the US$51.8 per barrel recorded in the first half of 2017.

In May, an official from the Finance Ministry predicted that Malaysia could collect up to an additional 8-9 billion ringgit (US$1.93-2.17 billion) in corporate taxes and dividends from Petronas this year owing to higher oil prices.

Edited by

Andrew Kemp


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