Anwar's competence in question amid mass layoffs at Petronas

A former Umno leader who was once a member of the Economic Planning Unit (EPU) has asked if Petronas' recent move towards reducing the size of its organisation was due to weaknesses in Prime Minister Anwar Ibrahim's negotiations with Sarawak.  

The national oil and gas company, which has contributed billions to the government's coffers, this week announced what it described as "a rightsizing workforce exercise" in light of the "challenging global operating environment".

Speaking to MalaysiaNow, though, Isham Jalil said he was not convinced.

The former Umno Supreme Council member said the issue involving Petronas and Sarawak-owned firm Petros could also affect Petronas' position.

He said Putrajaya did not understand how to negotiate, and that Anwar was forced to depend on Sarawak's support to remain as prime minister.

"The Petroleum Development Act 1974 is nothing new. It has been around since the time of the last prime minister, but Petronas did not go to the extent of firing people," he added.

"If it's true that the economy is doing well, why would you need to retrench your workers?"

Globally, Petronas has nearly 70,000 employees, about 15,000 of whom are "enablers" or personnel involved in support and management.

The last time it embarked on a large-scale retrenchment was in 2016, when some 1,000 workers – less than 2% – were let go.

Anwar, who also holds the finance portfolio, previously told the Dewan Rakyat that Petronas would maintain its domestic and international responsibilities even after Petros takes over control of gas in Sarawak on March 1.

Sarawak had amended the Distribution of Gas Ordinance 2016, allowing Petros to become the sole gas aggregator in the state. Any party involved in gas distribution activities in Sarawak must now apply for a licence.

Last July, RHB Investment Bank said Petronas would lose some of its profits following the appointment of Petros as the sole gas aggregator in Sarawak, saying this would affect the oil giant's ability to spend long-term capital.

The RHB report also said that the gas segment contributed RM101 billion or 30% of Petronas' profits in 2023.

Petronas paid the government RM40 billion in dividends in 2023, down from RM50 billion the previous year.

Isham urged Petronas to clarify the criteria for "rightsizing" as well as the industry standards used in the exercise.

"Petronas is a government company. It is not a private company that only cares about profit," he said.

"It belongs to the people. But under Anwar, it is getting rid of people. Before Petronas gets rid of people, maybe we need to get rid of Anwar."

Analyst Samirul Arif Othman said Petronas' move was not due to money problems, but rather the structural changes also seen on the global level.

"Many international oil and gas companies like Shell and ExxonMobil are also making similar adjustments to their workforce," he said.

Samirul, a senior consultant at Global Asia Consulting, said the oil and gas industry was also facing pressure from the transition to renewable energy and green investments.  

He cited concerns about declining profit margins and high risks in upstream projects, among others.

"Petronas also needs to trim its administrative costs and speed up its decision-making process," he said.

Pressure from foreign investors

Abd Halim Husin, secretary-general of the Malay Chamber of Commerce Malaysia, said Petronas was facing a "double whammy" challenge, not only because of Petros, but also because of the government's ambition to liberalise the gas market through the Natural Gas Roadmap, in an effort to break the monopoly.

Halim said the government's desire to truly open the market to more players would reduce Petronas' market share and profits.

"If the government does not balance liberalisation with a clear strategy to ensure that Petronas remains competitive, it could undermine Petronas' role as the country's cash cow in the long run," he said.

He did not rule out the possibility of pressure from trade agreements or foreign investors who wished to see a more open Malaysian gas market which could benefit large industries, start-ups, and consumers through lower gas costs for the generation of electricity.

"If it is not handled well, liberalisation could lead to volatility in prices, exploitation by private companies, or a reliance on foreign firms," he said.

"This issue needs clear policy details so that the benefits really reach the people, not just the big companies."  

Samirul said market liberalisation had its opportunities and risks.

While it could improve competitiveness, attract investments, and maintain energy security, it could also reduce Petronas' profits and create market uncertainty, he said.

"The key lies in crafting policies that allow for healthy competition while ensuring that Petronas – still a vital pillar of Malaysia's economy – evolves with the changing landscape," he said.

"The question is not whether Petronas will lose its dominance, but how it will reinvent itself to stay indispensable in a liberalised yet increasingly green energy future."

Isham meanwhile hit out at the government, saying it frequently pinned the blame on monopolies to cover up its own weaknesses.

"We want to break the monopoly to bring down prices," he said. "But if prices do not go down, there is no reason to destroy the monopoly.

"For example, the price of oil, gas, and inspection fees at Puspakom is regulated. If competition does not affect prices, there is no need to break up the monopoly," he said, referring to the recent controversy over the appointment of companies to provide vehicle inspection services for the Road Transport Department.