|Founded||17 August 1974|
|Headquarters||Petronas Twin Towers, Kuala Lumpur, Malaysia|
|Key people||Dato' Shamsul Azhar Abbas, Group CEO and President
|Industry||Oil and Gas|
|Revenue||▲ 77.0 billion USD (2009)|
|Net income||▼ 15.0 billion USD (2009)|
|Total assets||▲ 110.9 billion USD (2009)|
|Total equity||▲ 69.8 billion USD (2008)|
Petronas, short for Petroliam Nasional Berhad, is a Malaysian-owned oil and gas company that was founded on August 17, 1974. Wholly owned by the Government, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and adding value to these resources. Petronas is ranked among Fortune Global 500's largest corporations in the world. Fortune ranks Petronas as the 95th largest company in the world in 2008 and 80th largest in 2009. It also ranks Petronas as the 8th most profitable company in the world and the most profitable in Asia.
Since its incorporation, Petronas has grown to be an integrated international oil and gas company with business interests in 31 countries. As of the end of March 2005, the Petronas Group comprised 103 wholly-owned subsidiaries, 19 partly-owned outfits and 57 associated companies. Together, these companies make the Petronas Group, which is involved in various oil and gas based activities. The Financial Times has identified Petronas as one of the "new seven sisters": the most influential and mainly state-owned national oil and gas companies from countries outside the OECD.
The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.
The Petronas Twin Towers were officially opened on Malaysia's 42nd National Day, August 31 1998 - in the Corporation's 24th Anniversary year.
Petronas was not the first company to extract oil or gas in Malaysia. It was Royal Dutch Shell that began the oil exploration in Sarawak, then a British colony, at the end of the 19th century. In 1910, the first oil well was drilled in Miri, Sarawak. This became the first oil producing well known as the Grand Old Lady. Shell was still the only oil company in the area in 1963, when the Federation of Malaya, having achieved independence from Britain six years before, absorbed Sarawak and Sabah, both on the island of Borneo, and became Malaysia. The authorities in the two new states retained their links with Royal Dutch Shell, which brought Malaysia's first offshore oil field onstream in 1968.
Meanwhile, the federal government turned to Esso, Continental Oil, and Mobil, licensing exploration off the state of Terengganu, in the Malay Peninsula, the most populous region and the focus of federal power. By 1974, however, only Esso was still in the area. It made its first discoveries of natural gas in that year and then rapidly made Terengganu a bigger producer of oil than either Sarawak or Sabah. By 1974, Malaysia's output of crude oil stood at about 81,000 barrels per day (12,900 m3/d).
Several factors converged in the early 1970s to prompt the Malaysian government into setting up a state oil and gas company, as first proposed in its Five Year Plan published in 1971. These were years in which power in the world oil industry began to shift away from the majors, which then controlled more than 90% of the oil trade, toward the Organization of Petroleum Exporting Countries (OPEC), as well as a proliferation of new private and state companies joining in the search for reserves. By 1985, the majors, reduced in number from seven to five, were producing less than 20% of the world total. It seemed that Malaysia would either have to join the trend or continue to leave its oil and gas entirely to Royal Dutch/Shell and Esso, multinational corporations necessarily attuned to the requirements of their directors and shareholders, rather than to the priorities the government of a developing country might seek to realize.
Further, an agreement between Malaysia and Indonesia, signed in 1969, had settled doubts and disputes about each country's claims over territorial waters and offshore resources at a time when both were heavily indebted to Organization for Economic Co-operation and Development (OECD) governments and banks as well as to the International Monetary Fund (IMF) and the World Bank. Setting up a state oil and gas company, through which the government could get international capital but avoid tangling with foreign oil companies or governments, had worked for Indonesia: why not for Malaysia as well? The oil crisis of 1973–74 made the government even more aware of Malaysia's dependence on foreign oil and foreign capital in general.
Another factor in the decision was that the technology had recently been developed for extensive exploration and drilling offshore. The local geography included a combination of broad basins of sedimentary rock with calm and shallow waters around the Sunda Shelf, making exploration for gas and oil relatively easier and more successful than in most areas of the world. Malaysian crude turned out to be mostly high quality with low sulfur content.
A final and crucial factor in the creation of Petronas, and its continuation in much the same form since, has been the political stability of Malaysia. Since the restoration of parliament in 1971, the country has been ruled by the National Front (Barisan Nasional), the heirs to the Alliance Party which had been dominant from 1957 to 1969 and the originators in 1971 of the New Economic Policy, which was designed to improve the economic position of Bumiputras—native Malays and other natives in Sabah and Sarawak—relative to Chinese and Indian Malaysians and to foreign corporations. The difficulties this policy has caused for foreign companies and investors are outweighed by the benefits they believe they gain from Malaysia's political stability.
The Malaysian government chose to create a state company, rather than using taxes, production limits, leasing, or other familiar instruments of supervision. The government wanted, and needed, the cooperation of the majors but also sought to assert national rights over the use of the country's resources. A state company, having both supervisory powers over the majors and production activities of its own, was a workable compromise between allowing the majors full rein and excluding them, along with their capital and expertise, altogether.
Petronas was established in August 1974 and operates under the terms of the Petroleum Development Act passed in October 1974. It was modeled on Pertamina, the Indonesian state oil and gas company founded in 1971 in succession to Permina, which had been set up in 1958. According to the 1971 plan, Petronas's goals would be to safeguard national sovereignty over oil and gas reserves, to plan for both present and future national need for oil and gas, to take part in distributing and marketing petroleum and petrochemical products at reasonable prices, to encourage provision of plant, equipment, and services by Malaysian companies, to produce nitrogenous fertilizers, and to spread the benefits of the petroleum industry throughout the nation.
Having created Petronas, the government had to choose what forms its dealings with private oil companies would take. Starting with its legal monopoly on oil and gas activities and resources, it had several options: it could simply award concessions without taking part in production, management, or profits; it could try offering services at the supply end; or it could make contracts to cover profit-sharing, production-sharing, joint ventures—sharing both profits and costs—or all stages of the process, under "carried-interest" contracts. Petronas's first move was to negotiate the replacement of the leases granted to Royal Dutch/Shell on Borneo and to Esso in the Peninsula with production-sharing contracts, which have been the favored instrument, alongside joint ventures, ever since. These first contracts came into effect in 1976. Allowing for royalties to both federal and state governments, and for cost recovery arrangements, they laid down that the remainder would go 70% to Petronas and 30% to the foreign company. Esso began oil production in two offshore fields in 1978, exporting its share of the supply, unlike Petronas, whose share was consumed within the country.
Petronas went downstream for the first time in 1976, when it was chosen by the Association of South East Asian Nations (ASEAN) to begin construction on the second ASEAN joint industrial project, a urea plant. The subsidiary, Asean Bintulu Fertilizer (ABF), is based in Sarawak and now exports ammonia and urea all over the world.
Also in 1976, Malaysia became a net exporter of oil, but exports were at such a low level as to make the country ineligible to join OPEC. This situation benefited Malaysia, and Petronas, by allowing the company a degree of commercial and political flexibility and reinforcing Petronas's chief purpose, Malaysian self-reliance.
Petronas supervised its foreign partners' oil activities, taking no direct role in production until 1978, when the government saw to the creation of a subsidiary for oil exploration and production, Petronas Carigali. It began its work in an oil field off the Peninsula. Petronas retained its supervisory powers over all oil and gas ventures, particularly on issues of health and safety and environmental control.
The government was determined to develop Malaysia's natural gas as well as its oil. In 1974, it saw to the ordering of five tankers for liquefied natural gas (LNG) by the Malaysian International Shipping Company (MISC), of which it owned 61%. These were to take LNG exports out of Malaysia, save the cost of hiring foreign tankers, and expand the country's fleet under its own control—in contrast to cargo shipping, which was controlled by international conferences. Shell BV, the Royal Dutch/Shell subsidiary that was building the LNG plant off Sarawak with Japanese and Asian Development Bank aid, accepted production sharing with Petronas but baulked at sharing equity, transport management, or refining. Negotiations went on, pushing commencement further and further back, until 1977, when Petronas and the government, faced with the costs of maintaining the tankers between delivery and first use, surrendered management rights—leading to a repeal of part of the Petroleum Development Act—and settled for Petronas's taking 60% of equity in the new company Malaysia LNG. The Sarawak state government took 5%, and the other 35% was divided equally between Shell BV and the Mitsubishi Corporation. Production of LNG in Sarawak at last began in 1983.
After negotiations lasting from 1977 to 1982, Petronas had concluded contracts with Tokyo Electric Power and Tokyo Gas for the sale and delivery of LNG through to the year 2003. Malaysia LNG was to send almost the entire output of its Bintulu gas fields to Japan, under these contracts and another one, signed in 1990, to supply Saibu Gas of Fukuoka, in southwestern Japan, for 20 years from 1993.
When in 1982 Petronas Carigali formed an exploration and production company with Société National Elf Aquitaine of France, it allowed Elf better terms for recovering costs than it had offered in earlier ventures. This development came against the background of the government's imposition of a depletion policy on Petronas, Royal Dutch Shell, and Esso in an attempt to postpone the exhaustion of oil reserves. These were then estimated to be about 2.84 billion barrels (4.52E+8 m3), and it was officially predicted that by the late 1980s Malaysia would be a net oil importer once again. By 1980, oil and gas already represented 24% of Malaysian exports, and the government decided to impose a tax on these exports at a 25% rate. The new policy and the new tax combined to cause Malaysia's output and exports of crude oil to fall in 1981 for the first time since Petronas was established. Output rose again, beyond its 1980 level, in the following year, but exports took until 1984 to surpass their 1980 level.
However, the depletion policy was being undermined by external circumstances. Through the early 1980s, a worldwide oil glut, which OPEC proved unable to control, forced the Malaysian government to increase production to offset deterioration in its balance of increased payments to a deficit of $1 billion. It became clear that this could only be sustained by relaxing the conditions for joint ventures between Petronas and the major oil companies. In 1982, the Petronas–government share, which had risen to 80%, was cut to 70%, and taxes on company income were also cut.
Petronas went into refining and distribution in 1983. It initiated the construction of refineries at Malacca and at Kerteh in order to reduce its dependence on Royal Dutch/Shell's two refineries at Port Dickson and Esso's refinery in Sarawak. These two majors, and other foreign companies, already covered much of the domestic retail market, but the new subsidiary Petronas Dagangan was given the initial advantage of preference in the location of its stations. By 1990, 252 service stations carried the Petronas brand, all but 20 on a franchise basis, and another 50 were planned. Some were set up on grounds of social benefit rather than of strict commercial calculation.
As production from Royal Dutch/Shell and Esso's existing fields moved nearer depletion, the companies sought new fields and new contracts. In 1985, the government and Petronas revised the standard production-sharing contract, increasing the rate of recovery of capital costs from 30% to 50% of gross production in the case of oil and from 35% to 60% in the case of natural gas, abolishing signature, discovery, and production bonus payments and increasing the foreign partners' share of the profits. At first the drastic fall in oil prices during 1986, which cut Malaysia's income from exported oil by more than a third even though the volume of exports rose by 16%, discouraged interest in the new arrangements, but by 1989 Petronas had signed 22 new contracts with 31 companies from 11 countries. However, the contract period was still restricted to five years—compared, for example, with the 35-year contracts available in neighboring Singapore—and there was still a 25% levy on exported crude oil, a measure that was intended to promote the domestic refining industry. These conditions, cited as disincentives to foreign investment, were eventually relaxed over the next several years.
The government and Petronas aimed to encourage the replacement of fast-depleting oil within Malaysia itself and simultaneously to foster heavy industries which could help reduce the country's overwhelming dependence on exporting its natural resources. In 1980, petroleum products accounted for 88% of the country's commercial consumption of energy, the rest being provided from hydroelectric plants in Sarawak, too far away from the main population centers to become a major alternative. Five years later, gas accounted for 17%, hydroelectricity for 19%, coal for 2%, and petroleum products for 62% of such consumption, and about half of each year's gas output was being consumed in Malaysia.
The Petronas venture responsible for this shift in fuel use, and—along with Malaysia LNG—for Malaysia's becoming the third largest producer of LNG in the world, was the Peninsular Gas Utilization Project (Projek Penggunaan Gas Semenanjung), the aim of which was to supply gas to every part of the Peninsula. Its first stage was completed in 1985, following the success of smaller gasification projects in the states of Sarawak and Sabah, and involved the extraction of gas from three fields in the Natuna Sea, between the Peninsula and the island of Borneo; its processing in a plant at Kertih on the Peninsula's east coast; and its distribution to the state of Terengganu by pipeline and abroad via an export terminal.
Petronas's least happy venture was its ownership of the Bank Bumiputra, the second-largest, but least-profitable, of the commercial banks incorporated in Malaysia. Petronas spent more than MYR3.5 billion over five years trying to rescue the bank from the impact of the bad loans it had made, starting with its support of the Carrian property group of Hong Kong, which collapsed in 1985, taking the bank's share capital down with it. In 1991, Petronas sold the bank back to another state company, Minister of Finance Inc., and announced its intention to concentrate on oil, gas, and associated activities in future.
Just as Petronas was disposing of this liability, the crisis caused by the Iraqi regime's invasion of Kuwait culminated in military action against Iraq on behalf of the United Nations. Petronas had already raised Malaysia's oil production rate from 605,000 to 650,000 barrels per day (103,000 m3/d) in late 1990 as the crisis unfolded. This move only reinforced the company's awareness of the need to vary its policies, since, with known reserves of 2.94 billion barrels (467,000,000 m3), and assuming no new major finds of oil, Malaysia risked seeing output decline to 350,000 barrels per day (56,000 m3/d) in 2000 and running down to depletion within another five years. This was exacerbated by the possibility that Southeast Asia in general would enjoy rapid economic growth in the 1990s, so that demand for oil there would rise twice as fast as demand in the relatively more sluggish, more mature economies of North America and Europe. The Malaysian government, and its state oil and gas company, was forced to decide what mixture of policies to adopt in response.
Fortunately for Malaysia, exploration was by no means at an end and could yet produce more reserves. The Seligi field, which came onstream at the end of 1988 and was developed by Esso Production Malaysia, was one of the richest oilfields so far found in Malaysian waters, and further concessions to the majors would encourage exploration of the deeper waters around Malaysia, where unknown reserves could be discovered. Meanwhile, computerized seismography made it both feasible and commercially justifiable to re-explore fields which had been abandoned, or were assumed to be unproductive, over the past century. In 1990, Petronas invited foreign companies to re-explore parts of the sea off Sabah and Sarawak on the basis of new surveys using up-to-date techniques.
Another way to postpone depletion was to develop sources of oil, and of its substitute, natural gas, outside Malaysia. Late in 1989, the governments of Vietnam and Myanmar (Burma) invited Petronas Carigali to take part in joint ventures to explore for oil in their coastal waters. In 1990, a new unit, Petronas Carigali Overseas Sdn Bhd, was created to take up a 15% interest in a field in Myanmar's waters being explored by Idemitsu Myanmar Oil Exploration Co. Ltd., a subsidiary of the Japanese firm Idemitsu Oil Development Co. Ltd., in a production sharing arrangement with Myanma Oil and Gas Enterprise. Thus began Petronas's first oil exploration outside Malaysia. In May 1990, the governments of Malaysia and Thailand settled a long-running dispute over their respective rights to an area of 7,300 square kilometers in the Gulf of Thailand by setting up a joint administrative authority for the area and encouraging a joint oil exploration project by Petronas, the Petroleum Authority of Thailand, and the U.S. company Triton Oil. In a separate deal, in October 1990, the Petroleum Authority of Thailand arranged with Petronas to study the feasibility of transferring natural gas from this jointly administered area, through Malaysia to Thailand, by way of an extension of the pipelines laid for the third stage of the Peninsular Gas Utilization Project.
That project was on course to becoming a major element in the postponement of oil depletion. Contracts for line pipes for the second stage of the project were signed in 1989 with two consortia of Malaysian, Japanese, and Brazilian companies. This stage, completed in 1991, included the laying of 730 kilometers of pipeline through to the tip of the Peninsula, from where gas could be sold to Singapore and Thailand; the conversion of two power stations—Port Dickson and Pasir Gudang—from oil to gas; and the expansion of Petronas's output of methyl tertiary butyl ether (MTBE), propylene, and polypropylene, which were already being produced in joint ventures with Idemitsu Petrochemical Co. of Japan and Neste Oy of Finland. The third and final stage of the project was to lay pipelines along the northwest and northeast coastlines of the Peninsula and was completed in 1997.
Another new venture in 1990 was in ship-owning, since Petronas's existing arrangements with MISC and with Nigeria's state oil company would be inadequate to transport the additional exports of LNG due to start in 1994, under the contract with Saibu Gas. Petronas did not lose sight of the government's commitment to Malaysian self-reliance, and the company's second refinery at Malacca, completed in 1994, with a capacity of 100,000 barrels per day (16,000 m3/d), promoted the same policy. The fact that it was built in a joint venture with Samsung of Korea, the Chinese Petroleum Corporation of Taiwan, and Caltex of the United States did not negate the policy, for the subsidiary company Petronas Penapisan (Melaka) had a decisive 45% of equity while sharing the enormous costs of and gaining advanced technology for the project. More to the point, a side effect of the refinery's completion was that Petronas was able to refine all of the crude oil it produced, instead of being partially dependent on refining facilities in Singapore.
Petronas, with its policies of promoting self-reliance, helping to develop associated industries, and varying the sources and uses of oil and gas, played an important role in the Malaysian economy as a whole. Under governments which—by current, if not historical, Western standards—were strongly interventionist, the contribution of oil taxes to the federal government's revenue hovered at around 12% to 16% until 1980, when it showed a marked increase to 23%, followed by another leap to 32% in 1981. From then until 1988 the proportion fluctuated between 29% and 36%. Petronas was not just another big oil company: it controlled a crucial sector of the economy and remained, for better or worse, an indispensable instrument of the state.
During the mid- to late 1990s, international exploration, development, and production remained key components in Petronas's strategy along with diversification. A key discovery was made in the Ruby field in Vietnam in 1994. That year, the firm also saw its first overseas production from the Dai Hung field in Vietnam and established its first retail station outside of Malaysia in Cambodia. In 1995, a subsidiary was created to import, store, and distribute liquefied petroleum gas (LPG). In addition, the company's polyethylene plant in Kerteh began operations. Petronas marked a significant milestone during this time period—two of its subsidiaries, Petronas Dagangan Bhd and Petronas Gas Bhd, went public on the Kuala Lumpur Stock Exchange.
In 1996, Petronas entered the aromatics market by way of a joint venture that created Aromatics Malaysia Sdn Bhd. It also formed a contract with China National Offshore Oil Corporation and Chevron Overseas Petroleum Ltd. to begin exploration of block 02/31 of the Liaodong Bay area in China. While the Asian economy as a whole suffered from an economic crisis during 1997 and 1998, Malaysia was quick to bounce back due to successful government reforms. From its new headquarters in the Petronas Twin Towers, the state-owned concern continued its development in the oil and gas industry.
During 1997, Petronas heightened its diversification efforts. The firm set plans in motion to build three petrochemical plants in Kuantan as well as an acetic facility in Kerteh. Its first LPG joint venture in China was launched that year and the company acquired a 29.3% interest in Malaysia International Shipping Corporation Berhad (MISC). In 1998, Petronas's tanker-related subsidiary merged with MISC, increasing Petronas's stake in MISC to 62%. That year, Petronas introduced the Petronas E01, the country's first commercial prototype engine. The company also signed a total of five new production sharing contracts (PSCs) in 1998 and 1999, and began oil production in the Sirri field in Iran.
Petronas entered the new century determined to expand its international efforts. The company forged deals for two new exploration plots in Pakistan and began construction on the Chad-Cameroon Integrated Oil Development and Pipeline Project. By 2002, Petronas had signed seven new PSCs and secured stakes in eight exploration blocks in eight countries, including Gabon, Cameroon, Niger, Egypt, Yemen, Indonesia, and Vietnam. The firm also made considerable progress in its petrochemicals strategy, opening new gas-based petrochemical facilities in Kerteh and Gebeng.
By 2003, Malaysia was set to usurp Algeria as the world's second-largest producer of LNG with the completion of the Malaysia LNG Tiga Plant. Prime Minister Mahathir Mohamad commented on the achievement in a May 2003 Bernama News Agency article, claiming that "the Petronas LNG complex now serves as another shining example of a vision realized of a national aspiration, transformed into reality by the same belief among Malaysians that 'we can do it.'" Indeed, Petronas had transformed itself into a global oil company over the previous decade, becoming a national symbol for success. The company realized, however, that it would have to continue its aggressive growth strategy in order to insure its survival in the years to come.
The Petronas overseas expansion drive continues with the acquisition of Woodsite Energy Ltd Mauritania assets for $418 million in 2007. The venture proved successful as they discovered oil in May 2008
In 2004, Minister in the Prime Minister's Department, Datuk Mustapa Mohamed, stated that Petronas contributed RM 25 Billion to the country's treasury accounting for 25% of revenue collected via dividends and other revenues. Petronas continuously provides the Malaysian government dividends from its profits. Since inception in 1974, Petronas have paid the government RM 403.3 billion, with RM 67.6 billion in 2008. The payment represents 44% of the 2008 federal government revenue. Petronas continues to focus on international exploration projects as 40% of revenue in 2008 was derived from international projects such as Iran, Sudan, Chad and Mauritania. The company’s international reserves stood at 6.24 billion barrels oil equivalent in 2008.
On July 4, 2009 Petronas adviser Tun Dr Mahathir Mohamad asked what did the government spend with the RM253.6 billion payment from the national oil company over the past six years when his successor Tun Abdullah Ahmad Badawi was prime minister. He said that Petronas has been paying dividends, taxes, royalties and export duties to the government since 1976, after it was set up as the national custodian for fossil fuels. Petronas began by paying the government RM300 million in 1976, rising to RM2 billion in 1981, when Mahathir assumed office. The total from 1981 to 2003 was RM168.8 billion for the 22 years that marked Dr Mahathir's tenure as the country's fourth prime minister. Opposition leader Lim Kit Siang urged the Barisan Nasional government to open its books on Petronas and give a full accounting of how payments from the national oil company had been spent since its inception. Lim said that previously Mahathir did not raise any issues about the misuse of funds from Petronas, set up in 1976 as the national oil company, to bail out "dubious projects”. He pointed to the infamous incident where RM2 billion was used to bailout Mahathir's son Mirzan Mahathir’s shipping concern Konsortium Perkapalan Bhd (KPB) in 1998 when KPB was floundering in billion-ringgit debts with its share price falling to RM3.78 by February 1998, a fraction of its pre-financial crisis level of over RM17. He claimed that there were other occasions under Dr Mahathir when “Petronas was used as a national piggy bank” such as the RM2.5 billion and RM1 billion bail-outs of Bank Bumiputra in 1986 and 1989, aiding MAS and Proton in their financial struggles as well as to fund mega-projects such as the Petronas Twin Towers and the shifting of the federal administration to Putrajaya. Lim also demanded a full accounting of the RM15.2 billion royalty owed to the Terengganu government from 2000 to 2009, which he claims were “hijacked by the federal government when the Terengganu state government fell to PAS.
The Statistics Department revealed that the states of Kelantan, Sabah and Terengganu, had contributed 62.5 per cent of the oil extracted in Malaysia and are entitled to oil royalty payment as per Petroleum Development Act 1974. The opposition PAS state government of Kelantan had demanded their entitlement of oil royalty payment from Petronas and the federal government.  The Barisan Nasional-ruled federal government has insisted oil from the joint development area with Thailand was not from part of Kelantan’s waters and has only offered RM20 million as compassionate payment. UMNO veteran Tengku Razaleigh Hamzah, one of the founding chairmen of Petronas, has disagreed with the government’s move, saying the formula for oil royalty was first agreed with Sarawak and later extended to all states. Tengku Razaleigh mentioned that the original purpose of the Petroleum Development Act was to ensure the poorest states in Malaysia, like Kelantan received benefits. He also advised that Petronas comply with its agreement with the state governments.
The Barisan Nasional federal government on February 21, 2010 argued why states in the Malay peninsula are not entitled to oil royalty, but was silent about its decision to resume paying the 5 per cent cash payment direct to oil-rich Terengganu. The Information, Communication and Culture Ministry took out full page advertisements in Malay weeklies listing eight questions and answers to rebut Tengku Razaleigh’s argument that Kelantan and all other states are entitled to the 5 per cent oil royalty under the Petroleum Development Act 1974. Its main argument is that oil and gas are extracted from waters that are beyond the three-nautical mile limit prescribed as territorial waters under Malaysia’s Emergency Ordinance (Essential Powers) No 7 1969. Tengku Razaleigh Hamzah on February 22, 2010 rubbished attempts by the federal government to explain the non-payment of oil royalties to the Kelantan government.  He pointed out that the advertisements fails to point out that almost all the oil found in Malaysia is located more than three nautical miles offshore, and Petronas has nevertheless been making oil payments to the states that not controlled by the opposition.
Petronas has more than 100 subsidiaries and around 40 Joint Venture companies in which Petronas has at least 50% stake in the company. Although Petronas is considering to listing more of its subsidiaries, so far the company has listed at least 3 of its subsidiaries in the Bursa Malaysia:
Involved in the distribution and sale of finished petroleum products and operations of service stations for the domestic market. The company has over 800 petrol stations around Malaysia as of July 2007  and further increase to 870 stations in January 2008
The company also team up with local food and beverage players, banks and transportation players to provide better services at their petrol stations. Players include McDonalds, Kentucky Fried Chicken, Dunkin Donuts, Konsortium Transnasional Berhad, Maybank and also CIMB Bank.
Involved in the provision of gas processing and transmission services to Petronas and its customers as a throughput company. Owns and operates the Peninsular Gas Pipeline which is 2,550 kilometers in length and runs from Kerteh in Terengganu to Johor Bahru in the South and Kangar in the North of Peninsular Malaysia.
Involved in ship-owning, ship-operating and other logistics and maritime transportation services and activities. Currently has the largest fleet of LNG transport vessels
Some of the key subsidiaries are:-
Others include Petronas Assets Sdn Bhd; Petronas Maritime Services Sdn Bhd; Petronas Trading Corp. Sdn Bhd; Petronas Argentina S.A.; Petronas Australia Pty Ltd.; Petronas Thailand Co. Ltd.; Petronas Philippines Inc.; Petronas Cambodia Co. Ltd.; Petronas Technical Services Sdn Bhd; Petronas South Africa Pty Ltd.; Petronas India Holdings Company Pte Ltd.; Petronas China Company Ltd.; Petronas International Corp. Ltd.; Petronas Marketing Thailand Co. Ltd.; Myanmar Petronas Trading Co. Ltd.; Petronas Marketing (Netherlands) B.V. and Indianoil Petronas
Petronas was one of the main sponsors of the BMW Sauber Formula One team, and it supplies lubricants and fuel to the team. It also owned 40% of Sauber Petronas Engineering, the company that builds chassis which formerly utilized Ferrari designed engines used by the Sauber team, until being bought out by German motor company BMW. Petronas is also the main sponsor for Malaysian Grand Prix, and co-sponsors the Chinese Grand Prix. Petronas is the exclusive premium partner of the BMW Sauber F1 Team. BMW has acquired the controlling stake of the former Sauber Petronas Engineering. Petronas also sponsors the Malaysian Cub Prix races.
It also sponsors many other sporting events and teams, mostly motorsports. Some of these sponsorships includes the PERT (Petronas EON Rally Team), the now defunct Foggy Petronas Superbike team (in which Petronas debutes their own superbike, the FP1), and also the Petronas Adventure Team, a 4X4 adventure team. More recently Petronas is also a major sponsor for PETRONAS TOYOTA TEAM TOM'S car no. #36 which is currently participating in Super GT series, which they won the team title in 2008 and driver title in 2009. The series also race in Malaysia every season at Sepang International Circuit. Petronas signed a three-year sponsorship agreement with Fiat Yamaha motoGP team. The PETRONAS branding can be seen starting Qatar race on the 10 to 12 April 2009.
In terms of further Formula One involvement, every year Petronas takes the BMW-Sauber teams to various parts of Malaysia for F1 demos so the public who are unable to go to the track itself get to experience a little bit of what F1 offers. Other promotional events are held in the run up to the race and the drivers play an integral part in this so much so that Nick Heidfeld concedes that there are more fans for BMW-Sauber in Malaysia in than most other countries.
As part of its corporate social responsibility programme, Petronas also brings underprivileged children to watch the race.
Petronas awards education sponsorships in the form of convertible loans to Malaysian and international students to further their studies at local or foreign universities. The Petronas unit that is responsible for handling education matters is called the Education Sponsorship Unit (ESU). These sponsorships are awarded based on academic results, co-curricular activities, family background as well as an assessment of student personality (which is conducted throughout a program called EduCamp, which all prospective Petronas students are required to undergo). Students who are absorbed by Petronas at the end of their tertiary studies have their convertible loans converted into full scholarships. These students are under contract agreement to work for the company for two years for every one year they are sponsored.
Petronas is a Malaysian-owned oil and gas company that was founded on August 17, 1974. Petronas is owned by the Malaysia government. It is in charge of all of the oil and gas resources in Malaysia.