Malaysia Eyes Big Moves to Fund Its Hefty Debt
Prime Minister Mahathir Mohamad says the government might hand over shares of the oil titan Petronas to two of its own states—Sarawak and Sabah. The plan, if it lands, could give those regions a real seat at the table for one of the globe’s top LPG exporters.
Why the Stakes? Debt and Royalties
- Debt crisis: The federal coffers are drowning in obligations, so every yen and dollar that can be raised is welcome.
- State complaints: The two states have been demanding 4‑fold royalties—shifting from the current 5 % to 20 % of Petronas’ profit.
- Financial hit: That move could cost Petronas up to US$7 billion a year.
What Mahathir Claimed
In a casual interview, he told Reuters:
“It’s fully owned by the government, but if you want to sell privately, it’s up to us. We’ll consider offering shares to Sarawak and Sabah, if they’re willing to pay.”
He also hinted at cutting aside smaller units of Petronas—
- Petronas Chemicals Group – the petrochemicals powerhouse.
- Petronas Dagangan – the retail arm.
- Petronas Gas – the gas infrastructure and utilities wing.
- Petronas Carigali – the exploration unit.
Petronas has recently completed block trades in its aviation and retail arms, which could be part of this master plan.
Why It’s a Hot Potato
Petronas is the state’s financial juggernaut—a major buttress for the federal budget. Yet there are hard limits. CEO Wan Zulkiflee Wan Ariffin pointed out that the company only nets a 3.7 % profit margin from local oil production, factoring in high production costs, taxes, and royalty payouts.
He stated that boosting royalties to 20 % would be “not feasible” given those tight margins. The Pakatan Harapan government promised a shift to 20 %, but reality’s bleeding the sweet spot.
Bottom Line
There’s a tightrope to walk: get enough capital while keeping Petronas profitable. Whether the government swallows up private stakes or squeezes out the lesser units, the debate is heating up. Stay tuned—Malaysia’s oil puzzle is still solvable, and the states are hungry for their fair share.
