UNTIL about 5pm last Monday evening, Malaysians at large did not know who was going to head their most valuable company – Petroliam Nasional Bhd.
During a town hall meeting that started at about 3pm, many within the organisation had the impression that president and chief executive officer Tan Sri Shamsul Abbas would stay on as the 62-year did not give away any indication he was stepping down.
But everybody knew that his contract had ended on that Monday evening and he was going to be replaced. The details of who would replace him – something that is within the purview of the Prime Minister’s Office (PMO) – was not out until Shamsul was at the tail end of his town hall speech that started at 3pm.
The staff in Petronas knew that Datuk Wan Zulkiflee Ariffin was to take over only when Shamsul welcomed his younger colleague to the stage. By then the official announcement was out from the PMO.
The timing of Shamsul’s town hall address and PMO’s announcement may be a perfect script for a drama.
But it certainly is not the way to announce a successor for a company that has RM140bil in cash reserves, manages the oil and gas reserves of the country that is Malaysia’s biggest assets and dishes out contracts to the tune of RM60bil per annum.
The successor should have been announced much earlier – some six months ago. One would assume that the forces that decide on the appointment of the top position in Petronas would have made up their mind on Shamsul’s position several months earlier.
Why wait until the last minute to announce his successor? Is it because of heavy lobbying from certain groups or individuals hoping to get `their person’ at the top?
Shamsul is not the first Petronas president and CEO who had to deal with an unceremonious exit.
His predecessor Tan Sri Hassan Marican also found out that his contract would not be renewed in the final week before its expiry.
This practice may be acceptable to some quarters within Putrajaya, who contend that the present standards of disclosure – if they can be called that –are much better than the previous practise where there were no announcements on contracts of key officials in government-linked companies – whether it is renewed or not.
But we live in a modern world that warrants disclosures, especially for companies such as Petronas that goes to the capital markets to raise bonds. Any last minute appointments may be misconstrued.
The capital expenditure of Petronas is more than any other ministry, which makes it an ideal target for critics sniping away at the way it handles the awards of contracts. Petronas and Shamsul particularly came under attack from groups such as the Malay Economic Action Council (MTEM) who was of the view that Petronas tended to favour the foreign companies and could do more to look into the interest of the bumiputra contractors.
But Shamsul resisted such pressures on the grounds that the foreign expertise was needed for capital-intensive jobs such as developing marginal oil fields.
Shamsul read the ground well. One cannot imagine the colossal financial damage that small companies would be facing in the wake of the collapse of oil prices had they gone into jobs such as the development of marginal oil fields.
And at the end, Petronas would likely be forced to step in.
The task of managing the pressure groups and the oil reserves falls on Wan Zulkiflee, who incidentally was the favourite to take over the helm when Hassan was replaced in 2010.
National oil companies, such as Petronas, generally have strong credit ratings but if mismanaged, they will go down the slippery slope very fast.
One needs to only look at Brazil’s Petrobras to see how fast a national oil company can fall from grace.
In 2007 it won accolades from international investors for its technological prowess in the oil and gas industry and making a large discovery off the shores of Brazil.
Even some five years ago, Petrobras was touted as over-taking Exxon to become the biggest oil and gas company by the end of the decade.
But today Petrobras is in a sorry state of affairs after being caught in what is described as the largest bribery scandal in Brazil. It has attracted investigators and scared away its auditors from signing off the accounts in November last year.
The investigations are on allegations that Petrobras executives have conspired with contractors to inflate contracts, sucking away billions due to the company. It is called the “car wash” scandal because the money was apparently laundered through petrol stations.
The scandal has already claimed the scalps of several top executives and adversely impacted Brazil’s president Dilma Rousseff.
Today, Petrobras market capitalisation is about US$40bil, which is 10% of what it was some seven years ago. It faces investigations from even the authorities in the United States and has been cut off from the capital markets. It cannot raise money and risk a default of its loans of more than US$110bil.
The sorry state of affairs in Petrobras is an example of how a national oil company should not be run. Or how it can be run to the ground and drag the country down with it.
Petronas is not Petrobras. It is well-run and the chief executives always champion meritocracy and that it should strive to adhere to standards of an international oil companies.
Under Wan Zulkiflee the tradition is likely to continue, considering he has learned much from the likes of Hassan and then Shamsul.
But its sole shareholder, which is the government, must be seen to not having too much of an influence on its management. There is no mistaking that the government, as Petronas’ only shareholder, is the only authority that can appoint the president and CEO.
But it must be done in a manner that fits a Fortune 500 company. Or it may send wrong signals, especially to pressure groups.