Sunday 8 July 2012

Petronas chafes at its role as Malaysia's piggy bank (Good governance)

As state oil companies go, Petronas has a good reputation for governance. A 2011 World Bank working paper on governance and performance of national oil companies ranked Petronas slightly above the global average.

Mahathir drew criticism for tapping Petronas to bail out a debt-burdened shipping concern controlled by his eldest son, Mirzan, and again to support Malaysian auto company Proton, which makes the Lotus Formula One car.

But it has been called upon to bankroll some questionable projects, both under Najib and his predecessors. Twice - in 1984 and 1989 - Mahathir asked Petronas to bail out scandal-ridden Bank Bumiputra Bhd from collapse. In those two rescues, Petronas injected a total of 3.3 billion ringgit into the bank.

Mahathir denied he had bailed out his son. Petronas "drove a very hard bargain" and ended up turning a profit on the deal, he insisted. Petronas has repeatedly declined to discuss the bailouts.

The strains between Petronas and the government spilled out into the public after Najib took office in 2009.

Hassan Marican, Petronas's CEO at the time, disagreed with Najib over issues ranging from who should be named to the Petronas board to which Formula One car to sponsor.

Reuters has learned that Najib gave Hassan just six days' notice that his contract would not be renewed in 2010, ending a 21-year career. Three people with direct knowledge of the situation said Hassan was let go because he did not get along with Najib.

"Six days to pack up a career spanning more than two decades," said a person close to Hassan.

Hassan, now a board member at U.S. oil major ConocoPhillips and chairman of utilities company Singapore Power, did not respond to repeated interview requests.

Appointed by Mahathir, the 59-year-old accountant by training had considerable freedom before the clashes with Najib. Mahathir said Hassan often said "no" to his suggestions, though he did agree to bail out the national car company that was the prime minister's pride and joy and the company owned by Mahathir's son.

Hassan refused to use inexperienced Malaysian companies to develop Malaysia's oil and gas industry, or to pursue costly ventures to develop the country's marginal oil fields, the source close to Hassan said.

Those two projects are now part of Najib's ambitious $444 billion economic transformation program launched in September 2010 - just seven months after Hassan's removal. ($1 = 3.1985 Malaysian ringgit)

(Additional reporting by Mica Rosenberg in Mexico City and Yantoultra Ngui in Kuala Lumpur.; Editing by Bill Tarrant and Michael Williams)