Petroliam Nasional Berhad, commonly known as PETRONAS (stylised in all caps), is a Malaysian multinational oil and gas company headquartered in Kuala Lumpur. Established in 1974, it is a legal entity incorporated under the Malaysian Companies Act 1965 and reports to the company's Board of Directors. Petronas is vested with all oil and gas resources in Malaysia and is entrusted with the responsibility of developing and adding value to these resources.
Petronas is a vertically integrated company and actively in all areas of the oil and gas industry, including exploration and extraction, refining, distribution and marketing, power generation, and trading. Petronas has operations in over 100 countries and has sales office in 22 countries, produced around 9 billion barrels of oil equivalent and 50 trillion cubic feet of gas and has around 1,000 service stations nationwide. Petronas formally owned the South African petrol company Engan before the sale of their majority stake Vivo Energy in may of 2024. As of 31 December 2024, Petronas had total proved reserves of of oil equivalent per day.
The company also has a strong presence in the lubricants market through its wholly owned subsidiary Petronas Lubricants International, which operated in over 100 markets internationally. Petronas Carigali, its principal subsidiary and one of its largest businesses, responsible for hydrocarbon exploration and production. Other subsidiaries include Petronas Dagangan, for gas trading and marketing, and Petronas Chemicals for petrochemical as well as Gentari for clean energy use and commercialization. It also offers higher education through its university, the Universiti Teknologi Petronas (UTP). The Malaysia Petroleum Management (MPM), its key division and a governing body for the petroleum resources development since Petronas' establishment, oversaws the entire lifecycle of the country's upstream oil and gas assets.
In the annual Fortune Global 500 list for 2022, Petronas was ranked at 216th. It also ranked 48th globally in the 2020 Bentley Infrastructure 500. The Financial Times has identified Petronas as one of the "new seven sisters", considered to be influential and mainly state-owned national oil and gas companies from countries outside the Organisation for Economic Co-operation and Development (OECD). Petronas provides a substantial source of income for the Malaysian government, accounting for more than 15% of the government's revenue from 2015 to 2020.
A total of 0.69 percent of the greenhouse gases released through global industrial processes from 1988 to 2015 came from the company's activities. Therefore, Petronas is a major contributor to climate change, a phenomenon that poses many risks to health, jobs, food and water supply stability, security, and economic development. The company celebrated its 50th anniversary in 2024.
History
Origins
Before the formation of Malaysia, Royal Dutch Shell (now Shell plc) first began the oil exploration in Miri, Sarawak after Charles Brooke signed the first Oil Mining Lease in 1909. In 1910, the first oil well was drilled in Miri. This oil well is later known as the Grand Old Lady. In 1929, oil was discovered in Brunei. There were no other drilling activities in Borneo or British Malaya until the 1950s. Shell was still the only oil company in the area in 1963, when the Federation of Malaya, having achieved independence from Britain six years earlier, united with Sarawak and Sabah, both on the island of Borneo, to become Malaysia. Authorities in both new states maintained a close relationship with Shell, which brought Malaysia's first offshore oilfield to fruition in 1968.
In 1966, the enactment of Petroleum Mining Act gave Exxon and Shell rights to explore oil territories and produce oil royalties and tax payments to the government. In the late 1960s, Esso and Continental Oil were given concessions to explore oil off the shores of the east coast of Peninsular Malaysia. By 1974, Malaysia's output of crude oil stood at about to .
20th century
Several factors converged in the early 1970s to prompt the Malaysian government into setting up a state-owned oil and gas company. In 1972, the oil price per barrel was US$1.50, which later rose to US$2.28 per barrel. War in the Middle East and an oil embargo by the Organization of Petroleum Exporting Countries (OPEC) caused the price per barrel to rise to US$12.00, which further incentivised Malaysia to set up its own oil company. Several countries such as United Arab Emirates, Egypt and Indonesia have adopted the production sharing agreement instead of a concession system for oil revenue distribution. The Malaysian government also believed that foreign oil companies did not properly inform the government regarding the oil exploration activities in their own concessions (such as the new discovery of oil fields), thus resulted in a loss of revenue to the government. The formulation of Malaysian New Economic Policy in the early 1970s encourages Malaysians to take control of various modern industries and to open more economic opportunities for the bumiputeras.
The former Sarawak Chief Minister, Abdul Rahman Ya'kub was the first one who proposed the idea of Malaysia setting up an oil company in 1965, when he was the Deputy Federal Lands and Mines Minister. It was due to the pressure of the Sarawak people who sought to clarify the exact boundaries of Sarawak territorial waters. In fact, since the formation of Malaysia in 1963, the issue of territorial waters of Sabah and Sarawak has not been fully addressed, thus leaving its interpretation wide open. The Sarawak government has declared that the territorial waters extend well beyond the three-mile limit defined by the Malaysian federal government. However, Abdul Rahman was reminded of Abdul Razak Hussein's act of installing him as the Sarawak Chief Minister. Therefore, Rahman decided to keep the conflict as low profile as possible. Rahman's nephew, Abdul Taib Mahmud assumed the role of Federal Deputy Land and Mines Minister after Rahman became Education Minister and later, the Sarawak Chief Minister. Taib believed in the sharing of oil royalties between the state and the federal government. During the time, the oil mining activities in Sarawak were still under the exclusive control of Shell. Taib initially suggested allowing independent contractors to market government oil. Taib found a Lebanese trader to purchase the Malaysian oil, however, the contractor defaulted on payments, resulting in US$4 million loss. A government hydrocarbon committee was later set up. Taib visited Indonesia and had a discussion with the Indonesian state-owned oil and gas company, Pertamina. Taib suggested that Malaysia scrap the concession system and replace it with a production sharing agreement. However, there were no laws that allowed Malaysia to take back the concessions without compensating foreign oil companies. Despite this, Taib decided to set up a statutory body named Hidrokarbon Malaysia (HIKMA; Malaysia Hydrocarbons), which would have total rights of oil found in the territorial waters of Sabah and Sarawak. However, Rahman protested his nephew's decision and threatened to take the federal government to court if Sarawak were to be left out of this oil deal. Tengku Razaleigh Hamzah, the then-chairman of Perbadanan Nasional Berhad (Pernas), visited Rahman at the latter's private residence in Kuching. Tengku Razaleigh suggested the formation of a company instead of a statutory body where the former would distribute profits equally between the federal and the state governments. Rahman agreed with the suggestion. Tengku Razaleigh drafted the Petroleum Development Act together with his associates in secret, as instructed by Tun Razak, and to be completed before the 1974 Malaysian general election. Rahman then called Tengku Razaleigh to ask about the terms offered by the Malaysian federal government. Tengku Razaleigh then told Rahman regarding abolishment of the concession system. Meanwhile, 5% oil royalty will be given to the respective oil-producing states. Rahman agreed with the deal.: "When Taib became Minister of Land and Mines, he showed considerable interest in the development of this resource, and in his view, there should be a sharing of royalties between the State (i.e. Sarawak) and the federal government".: "Tengku Razaleigh visited Datuk Rahman, ... I suggested the formation of a company, not a statutory corporation, which would distribute profits equally between the Federal government and Sarawak in the form of cash payments. He accepted the proposal and I rushed back to Tun Razak with the news".: "The proceeds would accrue to Petronas, but 5 percent of the oil revenue thereafter would go to the state, and a similar amount to the Federal government. Rahman agreed".
In 1974, the Petroleum Development Act was tabled and approved in Parliament. Petronas was established and incorporated on 17 August 1974 pursuant to the Malaysian Companies Act 1965 with a paid-up capital of RM10 million. Tengku Razaleigh became its inaugural chairman. Business tycoon and Tengku Razaleigh's close friend, Ananda Krishnan also played a crucial role in Petronas' establishment, following his experience as an international oil trader. At the time of its establishment, Petronas' headquarters was originally situated at the wooden building within the Prime Minister's Office complex in Jalan Dato Onn, Kuala Lumpur with only 18 staff and two telephone lines before moving to a smaller office at the ENE Plaza, Jalan Pudu in mid-1975. Tengku Razaleigh pointed that all areas where the oil was discovered to be wholly owned by Petronas. He said that the oil company that will explore the resource will only be a contractor and negotiations with state governments will be carried out to obtain an exclusive oil exploration license by Petronas. In October 1974, the company planned a framework to set up a petrochemical company which cost RM300 million, to make fertilizers, plastic materials and artificial yarns.
Initially, Exxon and Shell refused to surrender their concessions and refused to negotiate with Petronas. Petronas then issued a notice to all foreign oil companies that after 1 April 1975, all foreign oil companies would be operating illegally in Malaysian waters if they do not start negotiations with Petronas. After a few rounds of negotiations, foreign oil companies finally surrendered their concessions to Petronas. While all other oil-producing states in Malaysia signed the petroleum agreement, Mustapha Harun, the Sabah Chief Minister, stubbornly refused to sign, complaining of the meagre 5% oil royalty. Mustapha requested 10 to 20% oil royalty, threatening to pull Sabah out of Malaysia. Tengku Razaleigh refused to budge. The Malaysian federal government then made another deal with Harris Salleh (who was out of favour with Tun Mustapha) to establish Berjaya party and oust Tun Mustapha. However, Harris was reluctant to become the Sabah Chief Minister, and Fuad Stephens was asked to assume to the Chief Minister post if Berjaya were to come to power. Berjaya successfully ousted Tun Mustapha in the 1976 Sabah state election. One week after the 1976 air crash which killed Fuad and other five state ministers, Harris signed the oil agreement. With Sabah entering the oil agreement, Petronas finally has total control of all oil and gas reserves in Malaysia.