Statistics: State-Owned Company Incorporated: 1974 Employees: 25,733 Sales: !

"7#1 $illion %&17#" $illion' %2((2' )*IC: 211111 Cr+de ,etrole+m and )at+ral -as E.traction/ 32411( ,etrole+m e0ineries

Company ,erspecti1es: ,etronas2s 3oal is to contri$+te to t4e well-$ein3 o0 t4e people and t4e nation w4ere it operates# 5o 0+l0ill t4is role, all o0 its $+siness acti1ities m+st $e 1ia$le and pro0ita$le# ,etronas2s contri$+tions--desi3ned to assist in en4ancin3 t4e 6+ality o0 li0e o0 t4e people and 4elp in t4e de1elopment o0 t4e nation--incl+de t4e pro1ision o0 6+ality petrole+m and related prod+cts and ser1ices at a 0air price/ promotin3 and creatin3 $+siness and 7o$ opport+nities in t4e petrole+m ind+stry/ enlar3in3 t4e co+ntry2s ind+strial $ase/ and ens+rin3 a sa0e and clean en1ironment#

8ey 9ates: 1974: 54e !alaysian 3o1ernment creates ,etronas# 19:3: ,etronas enters t4e re0inin3 and distri$+tion mar;et# 19:5: 54e 0irst sta3e o0 t4e ,enins+lar -as <tili=ation ,ro7ect is completed# 199(: ,etronas $e3ins oil e.ploration o+tside o0 !alaysia in !yanmar# 1994: S+$sidiary ,etronas 9a3an3an >4d lists on t4e 8+ala ?+mp+r Stoc; E.c4an3e# 1997: Company 4ead6+arters are mo1ed to t4e ::-story ,etronas 5win 5owers#

2((3: 54e !alaysia ?)- 5i3a ,lant opens#

Company @istory: ,etroliam )asional >4d, or ,etronas, operates as a state-owned entity controllin3 !alaysia2s oil and 3as reso+rces# 54e company and its s+$sidiaries are in1ol1ed in nearly e1ery aspect o0 t4e ind+stry incl+din3 +pstream e.ploration, oil and 3as prod+ction, downstream oil re0inin3, mar;etin3 and distri$+tin3 petrole+m prod+cts, 3as processin3, 3as transmission pipeline networ; operations, li6+e0ied nat+ral 3as %?)-' mar;etin3, and petroc4emical man+0act+rin3 and mar;etin3# ,etronas 4as also di1ersi0ied into s4ippin3, a+tomoti1e en3ineerin3, and property in1estment# 9+rin3 2((3, !alaysia2s cr+de oil reser1es were 3#2 $illion $arrels w4ile its nat+ral 3as reser1es reac4ed :7#5 trillion standard c+$ic 0eet# 54ro+34 its international acti1ities, t4e co+ntry 4as access to additional reser1es o0 3#71 $illion $arrels o0 oil e6+i1alent#

,etronas was not t4e 0irst company to e.tract oil or 3as in !alaysia# Oil was 0irst 0o+nd in w4at is now !alaysia at t4e end o0 t4e 19t4 cent+ry, and in 191( oyal 9+tc4A S4ell, t4en as now one o0 t4e ma7ors--t4e small 3ro+p o0 leadin3 pri1ate oil companies--0irst drilled 0or oil in Sarawa;, t4en a >ritis4 colony# It was still t4e only oil company in t4e area in 19"3, w4en t4e Bederation o0 !alaya, 4a1in3 ac4ie1ed independence 0rom >ritain si. years $e0ore, a$sor$ed Sarawa; and Sa$a4, $ot4 on t4e island o0 >orneo, and $ecame !alaysia# 54e a+t4orities in t4e two new states retained t4eir lin;s wit4 oyal 9+tc4AS4ell, w4ic4 $ro+34t !alaysia2s 0irst o00s4ore oil 0ield onstream in 19":#

!eanw4ile t4e 0ederal 3o1ernment t+rned to Esso, Continental Oil, and !o$il, licensin3 e.ploration o00 t4e state o0 5ren33an+, in t4e !alay ,enins+la, t4e most pop+lo+s re3ion and t4e 0oc+s o0 0ederal power# >y 1974, 4owe1er, only Esso was still in t4e area# It made its 0irst disco1eries o0 nat+ral 3as in t4at year and t4en rapidly made 5ren33an+ a $i33er prod+cer o0 oil t4an eit4er Sarawa; or Sa$a4# >y 1974, !alaysia2s o+tp+t o0 cr+de oil stood at a$o+t :1,((( $arrels per day#

Settin3 <p a State Company: 197(s

Se1eral 0actors con1er3ed in t4e early 197(s to prompt t4e !alaysian 3o1ernment into settin3 +p a state oil and 3as company, as 0irst proposed in its Bi1e Cear ,lan p+$lis4ed in 1971# 54ese were years in w4ic4 power in t4e world oil ind+stry $e3an to s4i0t away 0rom t4e ma7ors, w4ic4 t4en controlled more t4an 9( percent o0 t4e oil trade, toward t4e Or3ani=ation o0 ,etrole+m E.portin3 Co+ntries %O,EC', as well as a proli0eration o0 new pri1ate and state companies 7oinin3 in t4e searc4 0or reser1es# >y 19:5, t4e ma7ors, red+ced in n+m$er 0rom se1en to 0i1e, were prod+cin3 less t4an 2( percent o0 t4e world total# It seemed t4at !alaysia wo+ld eit4er 4a1e to 7oin t4e trend or contin+e to lea1e its oil and 3as entirely to oyal 9+tc4AS4ell and Esso, m+ltinational corporations necessarily att+ned to t4e re6+irements o0 t4eir directors and s4are4olders, rat4er t4an to t4e priorities t4e 3o1ernment o0 a de1elopin3 co+ntry mi34t see; to reali=e#

B+rt4er, an a3reement $etween !alaysia and Indonesia, si3ned in 19"9, 4ad settled do+$ts and disp+tes a$o+t eac4 co+ntry2s claims o1er territorial waters and o00s4ore reso+rces at a time w4en $ot4 were 4ea1ily inde$ted to Or3ani=ation 0or Economic Cooperation and 9e1elopment %OEC9' 3o1ernments and $an;s as well as to t4e International !onetary B+nd %I!B' and t4e Dorld >an;# Settin3 +p a state oil and 3as company, t4ro+34 w4ic4 t4e 3o1ernment co+ld 3et international capital $+t a1oid tan3lin3 wit4 0orei3n oil companies or 3o1ernments, 4ad wor;ed 0or Indonesia: w4y not 0or !alaysia as wellE 54e oil crisis o0 1973-74 made t4e 3o1ernment e1en more aware o0 !alaysia2s dependence on 0orei3n oil and 0orei3n capital in 3eneral#

*not4er 0actor in t4e decision was t4at t4e tec4nolo3y 4ad recently $een de1eloped 0or e.tensi1e e.ploration and drillin3 o00s4ore# 54e local 3eo3rap4y incl+ded a com$ination o0 $road $asins o0 sedimentary roc; wit4 calm and s4allow waters aro+nd t4e S+nda S4el0, ma;in3 e.ploration 0or 3as and oil relati1ely easier and more s+ccess0+l t4an in most areas o0 t4e world# !alaysian cr+de t+rned o+t to $e mostly 4i34 6+ality wit4 low s+l0+r content#

* 0inal and cr+cial 0actor in t4e creation o0 ,etronas, and its contin+ation in m+c4 t4e same 0orm since, 4as $een t4e political sta$ility o0 !alaysia# Since t4e restoration o0 parliament in 1971, t4e co+ntry 4as $een r+led $y t4e )ational Bront %>arisan )asional', t4e 4eirs to t4e *lliance ,arty w4ic4 4ad $een dominant 0rom 1957 to 19"9 and t4e ori3inators in 1971 o0 t4e )ew Economic ,olicy, w4ic4 was desi3ned to impro1e t4e economic position o0 >+mip+tras--nati1e !alays--relati1e to C4inese and Indian !alaysians and to 0orei3n corporations# 54e di00ic+lties t4is policy 4as ca+sed 0or 0orei3n companies and in1estors are o+twei34ed $y t4e $ene0its t4ey $elie1e t4ey 3ain 0rom

!alaysia2s political sta$ility#

54e !alaysian 3o1ernment c4ose to create a state company, rat4er t4an +sin3 ta.es, prod+ction limits, leasin3, or ot4er 0amiliar instr+ments o0 s+per1ision# 54e 3o1ernment wanted, and needed, t4e cooperation o0 t4e ma7ors $+t also so+34t to assert national ri34ts o1er t4e +se o0 t4e co+ntry2s reso+rces# * state company, 4a1in3 $ot4 s+per1isory powers o1er t4e ma7ors and prod+ction acti1ities o0 its own, was a wor;a$le compromise $etween allowin3 t4e ma7ors 0+ll rein and e.cl+din3 t4em, alon3 wit4 t4eir capital and e.pertise, alto3et4er#

,etronas was esta$lis4ed in *+3+st 1974 and operates +nder t4e terms o0 t4e ,etrole+m 9e1elopment *ct passed in Octo$er 1974# It was modeled on ,E 5*!I)*, t4e Indonesian state oil and 3as company 0o+nded in 1971 in s+ccession to ,E !I)*, w4ic4 4ad $een set +p in 195:# *ccordin3 to t4e 1971 plan, ,etronas2s 3oals wo+ld $e to sa0e3+ard national so1erei3nty o1er oil and 3as reser1es, to plan 0or $ot4 present and 0+t+re national need 0or oil and 3as, to ta;e part in distri$+tin3 and mar;etin3 petrole+m and petroc4emical prod+cts at reasona$le prices, to enco+ra3e pro1ision o0 plant, e6+ipment, and ser1ices $y !alaysian companies, to prod+ce nitro3eno+s 0ertili=ers, and to spread t4e $ene0its o0 t4e petrole+m ind+stry t4ro+34o+t t4e nation#

@a1in3 created ,etronas, t4e 3o1ernment 4ad to c4oose w4at 0orms its dealin3s wit4 pri1ate oil companies wo+ld ta;e# Startin3 wit4 its le3al monopoly on oil and 3as acti1ities and reso+rces, it 4ad se1eral options: it co+ld simply award concessions wit4o+t ta;in3 part in prod+ction, mana3ement, or pro0its/ it co+ld try o00erin3 ser1ices at t4e s+pply end/ or it co+ld ma;e contracts to co1er pro0it-s4arin3, prod+ction-s4arin3, 7oint 1ent+res--s4arin3 $ot4 pro0its and costs--or all sta3es o0 t4e process, +nder FcarriedinterestF contracts# ,etronas2s 0irst mo1e was to ne3otiate t4e replacement o0 t4e leases 3ranted to oyal 9+tc4AS4ell on >orneo and to Esso in t4e ,enins+la wit4 prod+ctions4arin3 contracts, w4ic4 4a1e $een t4e 0a1ored instr+ment, alon3side 7oint 1ent+res, e1er since# 54ese 0irst contracts came into e00ect in 197"# *llowin3 0or royalties to $ot4 0ederal and state 3o1ernments, and 0or cost reco1ery arran3ements, t4ey laid down t4at t4e remainder wo+ld 3o 7( percent to ,etronas and 3( percent to t4e 0orei3n company# Esso $e3an oil prod+ction in two o00s4ore 0ields in 197:, e.portin3 its s4are o0 t4e s+pply, +nli;e ,etronas, w4ose s4are was cons+med wit4in t4e co+ntry#

,etronas went downstream 0or t4e 0irst time in 197", w4en it was c4osen $y t4e *ssociation o0 So+t4 East *sian )ations %*SE*)' to $e3in constr+ction on t4e second *SE*) 7oint ind+strial pro7ect, a +rea plant# 54e s+$sidiary, *sean >int+l+ Bertili=er %*>B', is $ased in Sarawa; and now e.ports ammonia and +rea all o1er t4e world#

*lso in 197", !alaysia $ecame a net e.porter o0 oil, $+t e.ports were at s+c4 a low le1el as to ma;e t4e co+ntry ineli3i$le to 7oin O,EC# 54is sit+ation $ene0ited !alaysia, and ,etronas, $y allowin3 t4e company a de3ree o0 commercial and political 0le.i$ility and rein0orcin3 ,etronas2s c4ie0 p+rpose, !alaysian sel0-reliance#

,etronas s+per1ised its 0orei3n partners2 oil acti1ities, ta;in3 no direct role in prod+ction +ntil 197:, w4en t4e 3o1ernment saw to t4e creation o0 a s+$sidiary 0or oil e.ploration and prod+ction, ,etronas Cari3ali# It $e3an its wor; in an oil 0ield o00 t4e ,enins+la# ,etronas retained its s+per1isory powers o1er all oil and 3as 1ent+res, partic+larly on iss+es o0 4ealt4 and sa0ety and en1ironmental control#

9e1elopin3 )at+ral -as: ?ate 197(s to t4e !id-19:(s

54e 3o1ernment was determined to de1elop !alaysia2s nat+ral 3as as well as its oil# In 1974, it saw to t4e orderin3 o0 0i1e tan;ers 0or li6+e0ied nat+ral 3as %?)-' $y t4e !alaysian International S4ippin3 Company %!ISC', o0 w4ic4 it owned "1 percent# 54ese were to ta;e ?)- e.ports o+t o0 !alaysia, sa1e t4e cost o0 4irin3 0orei3n tan;ers, and e.pand t4e co+ntry2s 0leet +nder its own control--in contrast to car3o s4ippin3, w4ic4 was controlled $y international con0erences# S4ell >G, t4e oyal 9+tc4AS4ell s+$sidiary t4at was $+ildin3 t4e ?)- plant o00 Sarawa; wit4 Hapanese and *sian 9e1elopment >an; aid, accepted prod+ction s4arin3 wit4 ,etronas $+t $a+l;ed at s4arin3 e6+ity, transport mana3ement, or re0inin3# )e3otiations went on, p+s4in3 commencement 0+rt4er and 0+rt4er $ac;, +ntil 1977, w4en ,etronas and t4e 3o1ernment, 0aced wit4 t4e costs o0 maintainin3 t4e tan;ers $etween deli1ery and 0irst +se, s+rrendered mana3ement ri34ts-leadin3 to a repeal o0 part o0 t4e ,etrole+m 9e1elopment *ct--and settled 0or ,etronas2s ta;in3 "( percent o0 e6+ity in t4e new company !alaysia ?)-# 54e Sarawa; state 3o1ernment too; 5 percent, and t4e ot4er 35 percent was di1ided e6+ally $etween S4ell >G and t4e !its+$is4i Corporation# ,rod+ction o0 ?)- in Sarawa; at last $e3an in 19:3#

*0ter ne3otiations lastin3 0rom 1977 to 19:2, ,etronas 4ad concl+ded contracts wit4 5o;yo Electric ,ower and 5o;yo -as 0or t4e sale and deli1ery o0 ?)- t4ro+34 to t4e year 2((3# !alaysia ?)- was to send almost t4e entire o+tp+t o0 its >int+l+ 3as 0ields to Hapan, +nder t4ese contracts and anot4er one, si3ned in 199(, to s+pply Sai$+ -as o0 B+;+o;a, in so+t4western Hapan, 0or 2( years 0rom 1993#

D4en in 19:2 ,etronas Cari3ali 0ormed an e.ploration and prod+ction company wit4 SociItI )ational El0 *6+itaine o0 Brance, it allowed El0 $etter terms 0or reco1erin3 costs t4an it 4ad o00ered in earlier 1ent+res# 54is de1elopment came a3ainst t4e $ac;3ro+nd o0 t4e 3o1ernment2s imposition o0 a depletion policy on ,etronas, oyal 9+tc4AS4ell, and Esso in an attempt to postpone t4e e.4a+stion o0 oil reser1es# 54ese were t4en estimated to $e a$o+t 2#:4 $illion $arrels, and it was o00icially predicted t4at $y t4e late 19:(s !alaysia wo+ld $e a net oil importer once a3ain# >y 19:(, oil and 3as already represented 24 percent o0 !alaysian e.ports, and t4e 3o1ernment decided to impose a ta. on t4ese e.ports at a 25 percent rate# 54e new policy and t4e new ta. com$ined to ca+se !alaysia2s o+tp+t and e.ports o0 cr+de oil to 0all in 19:1 0or t4e 0irst time since ,etronas was esta$lis4ed# O+tp+t rose a3ain, $eyond its 19:( le1el, in t4e 0ollowin3 year, $+t e.ports too; +ntil 19:4 to s+rpass t4eir 19:( le1el#

@owe1er, t4e depletion policy was $ein3 +ndermined $y e.ternal circ+mstances# 54ro+34 t4e early 19:(s, a worldwide oil 3l+t, w4ic4 O,EC pro1ed +na$le to control, 0orced t4e !alaysian 3o1ernment to increase prod+ction to o00set deterioration in its $alance o0 increased payments to a de0icit o0 &1 $illion# It $ecame clear t4at t4is co+ld only $e s+stained $y rela.in3 t4e conditions 0or 7oint 1ent+res $etween ,etronas and t4e ma7or oil companies# In 19:2, t4e ,etronas-3o1ernment s4are, w4ic4 4ad risen to :( percent, was c+t to 7( percent, and ta.es on company income were also c+t#

,etronas went into re0inin3 and distri$+tion in 19:3# It initiated t4e constr+ction o0 re0ineries at !alacca and at 8erti4 in order to red+ce its dependence on oyal 9+tc4AS4ell2s two re0ineries at ,ort 9ic;son and Esso2s re0inery in Sarawa;# 54ese two ma7ors, and ot4er 0orei3n companies, already co1ered m+c4 o0 t4e domestic retail mar;et, $+t t4e new s+$sidiary ,etronas 9a3an3an was 3i1en t4e initial ad1anta3e o0 pre0erence in t4e location o0 its stations# >y 199(, 252 ser1ice stations carried t4e ,etronas $rand, all $+t 2( on a 0ranc4ise $asis, and anot4er 5( were planned# Some were set +p on 3ro+nds o0 social $ene0it rat4er t4an o0 strict commercial calc+lation#

*s prod+ction 0rom oyal 9+tc4AS4ell and Esso2s e.istin3 0ields mo1ed nearer depletion, t4e companies so+34t new 0ields and new contracts# In 19:5, t4e 3o1ernment and ,etronas re1ised t4e standard prod+ction-s4arin3 contract, increasin3 t4e rate o0 reco1ery o0 capital costs 0rom 3( percent to 5( percent o0 3ross prod+ction in t4e case o0 oil and 0rom 35 percent to "( percent in t4e case o0 nat+ral 3as, a$olis4in3 si3nat+re, disco1ery, and prod+ction $on+s payments and increasin3 t4e 0orei3n partners2 s4are o0 t4e pro0its# *t 0irst t4e drastic 0all in oil prices d+rin3 19:", w4ic4 c+t !alaysia2s income 0rom e.ported oil $y more t4an a t4ird e1en t4o+34 t4e 1ol+me o0 e.ports rose $y 1" percent, disco+ra3ed interest in t4e new arran3ements, $+t $y 19:9 ,etronas 4ad si3ned 22 new contracts wit4 31 companies 0rom 11 co+ntries# @owe1er, t4e contract period was still restricted to 0i1e years--compared, 0or e.ample, wit4 t4e 35-year contracts a1aila$le in nei34$orin3 Sin3apore--and t4ere was still a 25 percent le1y on e.ported cr+de oil, a meas+re t4at was intended to promote t4e domestic re0inin3 ind+stry# 54ese conditions, cited as disincenti1es to 0orei3n in1estment, were e1ent+ally rela.ed o1er t4e ne.t se1eral years#

54e 3o1ernment and ,etronas aimed to enco+ra3e t4e replacement o0 0ast-depletin3 oil wit4in !alaysia itsel0 and sim+ltaneo+sly to 0oster 4ea1y ind+stries w4ic4 co+ld 4elp red+ce t4e co+ntry2s o1erw4elmin3 dependence on e.portin3 its nat+ral reso+rces# In 19:(, petrole+m prod+cts acco+nted 0or :: percent o0 t4e co+ntry2s commercial cons+mption o0 ener3y, t4e rest $ein3 pro1ided 0rom 4ydroelectric plants in Sarawa;, too 0ar away 0rom t4e main pop+lation centers to $ecome a ma7or alternati1e# Bi1e years later, 3as acco+nted 0or 17 percent, 4ydroelectricity 0or 19 percent, coal 0or 2 percent, and petrole+m prod+cts 0or "2 percent o0 s+c4 cons+mption, and a$o+t 4al0 o0 eac4 year2s 3as o+tp+t was $ein3 cons+med in !alaysia#

54e ,etronas 1ent+re responsi$le 0or t4is s4i0t in 0+el +se, and--alon3 wit4 !alaysia ?)---0or !alaysia2s $ecomin3 t4e t4ird lar3est prod+cer o0 ?)- in t4e world, was t4e ,enins+lar -as <tili=ation ,ro7ect %,ro7e; ,enn33+naan -as Semenan7+n3', t4e aim o0 w4ic4 was to s+pply 3as to e1ery part o0 t4e ,enins+la# Its 0irst sta3e was completed in 19:5, 0ollowin3 t4e s+ccess o0 smaller 3asi0ication pro7ects in t4e states o0 Sarawa; and Sa$a4, and in1ol1ed t4e e.traction o0 3as 0rom t4ree 0ields in t4e )at+na Sea, $etween t4e ,enins+la and t4e island o0 >orneo/ its processin3 in a plant at 8erti4 on t4e ,enins+la2s east coast/ and its distri$+tion to t4e state o0 5ren33an+ $y pipeline and a$road 1ia an e.port terminal#

,etronas2s least 4appy 1ent+re was its owners4ip o0 t4e >an; >+mip+tra, t4e second-

lar3est, $+t least-pro0ita$le, o0 t4e commercial $an;s incorporated in !alaysia# ,etronas spent more t4an !&3#5 $illion o1er 0i1e years tryin3 to resc+e t4e $an; 0rom t4e impact o0 t4e $ad loans it 4ad made, startin3 wit4 its s+pport o0 t4e Carrian property 3ro+p o0 @on3 8on3, w4ic4 collapsed in 19:5, ta;in3 t4e $an;2s s4are capital down wit4 it# In 1991, ,etronas sold t4e $an; $ac; to anot4er state company, !inister o0 Binance Inc#, and anno+nced its intention to concentrate on oil, 3as, and associated acti1ities in 0+t+re#

H+st as ,etronas was disposin3 o0 t4is lia$ility, t4e crisis ca+sed $y t4e Ira6i re3ime2s in1asion o0 8+wait c+lminated in military action a3ainst Ira6 on $e4al0 o0 t4e <nited )ations# ,etronas 4ad already raised !alaysia2s oil prod+ction rate 0rom "(5,((( to "5(,((( $arrels per day in late 199( as t4e crisis +n0olded# 54is mo1e only rein0orced t4e company2s awareness o0 t4e need to 1ary its policies, since, wit4 ;nown reser1es o0 2#94 $illion $arrels, and ass+min3 no new ma7or 0inds o0 oil, !alaysia ris;ed seein3 o+tp+t decline to 35(,((( $arrels per day in 2((( and r+nnin3 down to depletion wit4in anot4er 0i1e years# 54is was e.acer$ated $y t4e possi$ility t4at So+t4east *sia in 3eneral wo+ld en7oy rapid economic 3rowt4 in t4e 199(s, so t4at demand 0or oil t4ere wo+ld rise twice as 0ast as demand in t4e relati1ely more sl+33is4, more mat+re economies o0 )ort4 *merica and E+rope# 54e !alaysian 3o1ernment, and its state oil and 3as company, was 0orced to decide w4at mi.t+re o0 policies to adopt in response#

>attlin3 Oil 9epletion: ?ate 19:(s

Bort+nately 0or !alaysia, e.ploration was $y no means at an end and co+ld yet prod+ce more reser1es# 54e Seli3i 0ield, w4ic4 came onstream at t4e end o0 19:: and was de1eloped $y Esso ,rod+ction !alaysia, was one o0 t4e ric4est oil0ields so 0ar 0o+nd in !alaysian waters, and 0+rt4er concessions to t4e ma7ors wo+ld enco+ra3e e.ploration o0 t4e deeper waters aro+nd !alaysia, w4ere +n;nown reser1es co+ld $e disco1ered# !eanw4ile, comp+teri=ed seismo3rap4y made it $ot4 0easi$le and commercially 7+sti0ia$le to re-e.plore 0ields w4ic4 4ad $een a$andoned, or were ass+med to $e +nprod+cti1e, o1er t4e past cent+ry# In 199(, ,etronas in1ited 0orei3n companies to ree.plore parts o0 t4e sea o00 Sa$a4 and Sarawa; on t4e $asis o0 new s+r1eys +sin3 +p-todate tec4ni6+es#

*not4er way to postpone depletion was to de1elop so+rces o0 oil, and o0 its s+$stit+te, nat+ral 3as, o+tside !alaysia# ?ate in 19:9, t4e 3o1ernments o0 Gietnam and !yanmar

%>+rma' in1ited ,etronas Cari3ali to ta;e part in 7oint 1ent+res to e.plore 0or oil in t4eir coastal waters# In 199(, a new +nit, ,etronas Cari3ali O1erseas Sdn >4d, was created to ta;e +p a 15 percent interest in a 0ield in !yanmarese waters $ein3 e.plored $y Idemits+ !yanmar Oil E.ploration Co# ?td#, a s+$sidiary o0 t4e Hapanese 0irm Idemits+ Oil 9e1elopment Co# ?td#, in a prod+ction s4arin3 arran3ement wit4 !yanmar Oil and -as Enterprise# 54+s $e3an ,etronas2s 0irst oil e.ploration o+tside !alaysia# In !ay 199(, t4e 3o1ernments o0 !alaysia and 54ailand settled a lon3-r+nnin3 disp+te o1er t4eir respecti1e ri34ts to an area o0 7,3(( s6+are ;ilometers in t4e -+l0 o0 54ailand $y settin3 +p a 7oint administrati1e a+t4ority 0or t4e area and enco+ra3in3 a 7oint oil e.ploration pro7ect $y ,etronas, t4e ,etrole+m *+t4ority o0 54ailand, and t4e <#S# company 5riton Oil# In a separate deal, in Octo$er 199(, t4e ,etrole+m *+t4ority o0 54ailand arran3ed wit4 ,etronas to st+dy t4e 0easi$ility o0 trans0errin3 nat+ral 3as 0rom t4is 7ointly administered area, t4ro+34 !alaysia to 54ailand, $y way o0 an e.tension o0 t4e pipelines laid 0or t4e t4ird sta3e o0 t4e ,enins+lar -as <tili=ation ,ro7ect#

54at pro7ect was on co+rse to $ecomin3 a ma7or element in t4e postponement o0 oil depletion# Contracts 0or line pipes 0or t4e second sta3e o0 t4e pro7ect were si3ned in 19:9 wit4 two consortia o0 !alaysian, Hapanese, and >ra=ilian companies# 54is sta3e, completed in 1991, incl+ded t4e layin3 o0 73( ;ilometers o0 pipeline t4ro+34 to t4e tip o0 t4e ,enins+la, 0rom w4ere 3as co+ld $e sold to Sin3apore and 54ailand/ t4e con1ersion o0 two power stations--,ort 9ic;son and ,asir -+dan3--0rom oil to 3as/ and t4e e.pansion o0 ,etronas2s o+tp+t o0 met4yl tertiary $+tyl et4er %!5>E', propylene, and polypropylene, w4ic4 were already $ein3 prod+ced in 7oint 1ent+res wit4 Idemits+ ,etroc4emical Co# o0 Hapan and )este Oy o0 Binland# 54e t4ird and 0inal sta3e o0 t4e pro7ect was to lay pipelines alon3 t4e nort4west and nort4east coastlines o0 t4e ,enins+la and was completed in 1997#

*not4er new 1ent+re in 199( was in s4ip-ownin3, since ,etronas2s e.istin3 arran3ements wit4 !ISC and wit4 )i3eria2s state oil company wo+ld $e inade6+ate to transport t4e additional e.ports o0 ?)- d+e to start in 1994, +nder t4e contract wit4 Sai$+ -as# ,etronas did not lose si34t o0 t4e 3o1ernment2s commitment to !alaysian sel0-reliance, and t4e company2s second re0inery at !alacca, completed in 1994, wit4 a capacity o0 1((,((( $arrels per day, promoted t4e same policy# 54e 0act t4at it was $+ilt in a 7oint 1ent+re wit4 Sams+n3 o0 8orea, t4e C4inese ,etrole+m Corporation o0 5aiwan, and Calte. o0 t4e <nited States did not ne3ate t4e policy, 0or t4e s+$sidiary company ,etronas ,enapisan %!ela;a' 4ad a decisi1e 45 percent o0 e6+ity w4ile s4arin3 t4e enormo+s costs o0 and 3ainin3 ad1anced tec4nolo3y 0or t4e pro7ect# !ore to t4e point, a side e00ect o0 t4e re0inery2s completion was t4at ,etronas was a$le to re0ine all o0 t4e

cr+de oil it prod+ced, instead o0 $ein3 partially dependent on re0inin3 0acilities in Sin3apore#

,etronas, wit4 its policies o0 promotin3 sel0-reliance, 4elpin3 to de1elop associated ind+stries, and 1aryin3 t4e so+rces and +ses o0 oil and 3as, played an important role in t4e !alaysian economy as a w4ole# <nder 3o1ernments w4ic4--$y c+rrent, i0 not 4istorical, Destern standards--were stron3ly inter1entionist, t4e contri$+tion o0 oil ta.es to t4e 0ederal 3o1ernment2s re1en+e 4o1ered at aro+nd 12 percent to 1" percent +ntil 19:(, w4en it s4owed a mar;ed increase to 23 percent, 0ollowed $y anot4er leap to 32 percent in 19:1# Brom t4en +ntil 19:: t4e proportion 0l+ct+ated $etween 29 percent and 3" percent# ,etronas was not 7+st anot4er $i3 oil company: it controlled a cr+cial sector o0 t4e economy and remained, 0or $etter or worse, an indispensa$le instr+ment o0 t4e state#

E.pandin3 -lo$ally: 199(s and >eyond

9+rin3 t4e mid- to late 199(s, international e.ploration, de1elopment, and prod+ction remained ;ey components in ,etronas2s strate3y alon3 wit4 di1ersi0ication# * ;ey disco1ery was made in t4e +$y 0ield in Gietnam in 1994# 54at year, t4e 0irm also saw its 0irst o1erseas prod+ction 0rom t4e 9ai @+n3 0ield in Gietnam and esta$lis4ed its 0irst retail station o+tside o0 !alaysia in Cam$odia# In 1995, a s+$sidiary was created to import, store, and distri$+te li6+e0ied petrole+m 3as %?,-'# In addition, t4e company2s polyet4ylene plant in 8erti4 $e3an operations# ,etronas mar;ed a si3ni0icant milestone d+rin3 t4is time period--two o0 its s+$sidiaries, ,etronas 9a3an3an >4d and ,etronas -as >4d, went p+$lic on t4e 8+ala ?+mp+r Stoc; E.c4an3e#

In 199", ,etronas entered t4e aromatics mar;et $y way o0 a 7oint 1ent+re t4at created *romatics !alaysia Sdn >4d# It also 0ormed a contract wit4 C4ina )ational O00s4ore Oil Corporation and C4e1ron O1erseas ,etrole+m ?td# to $e3in e.ploration o0 $loc; (2A31 o0 t4e ?iaodon3 >ay area in C4ina# D4ile t4e *sian economy as a w4ole s+00ered 0rom an economic crisis d+rin3 1997 and 199:, !alaysia was 6+ic; to $o+nce $ac; d+e to s+ccess0+l 3o1ernment re0orms# Brom its new 4ead6+arters in t4e world2s tallest $+ildin3s, t4e ,etronas 5win 5owers, t4e state-owned concern contin+ed its de1elopment in t4e oil and 3as ind+stry#

9+rin3 1997, ,etronas 4ei34tened its di1ersi0ication e00orts# 54e 0irm set plans in motion to $+ild t4ree petroc4emical plants in 8+antan as well as an acetic 0acility in 8erti4# Its 0irst ?,- 7oint 1ent+re in C4ina was la+nc4ed t4at year and t4e company ac6+ired a 29#3 percent interest in !alaysia International S4ippin3 Corporation >er4ad %!ISC'# In 199:, ,etronas2s tan;er-related s+$sidiary mer3ed wit4 !ISC, increasin3 ,etronas2s sta;e in !ISC to "2 percent# 54at year, ,etronas introd+ced t4e ,etronas E(1, t4e co+ntry2s 0irst commercial prototype en3ine# 54e company also si3ned a total o0 0i1e new prod+ction s4arin3 contracts %,SCs' in 199: and 1999, and $e3an oil prod+ction in t4e Sirri 0ield in Iran#

,etronas entered t4e new cent+ry determined to e.pand its international e00orts# 54e company 0or3ed deals 0or two new e.ploration plots in ,a;istan and $e3an constr+ction on t4e C4ad-Cameroon Inte3rated Oil 9e1elopment and ,ipeline ,ro7ect# >y 2((2, ,etronas 4ad si3ned se1en new ,SCs and sec+red sta;es in ei34t e.ploration $loc;s in ei34t co+ntries, incl+din3 -a$on, Cameroon, )i3er, E3ypt, Cemen, Indonesia, and Gietnam# 54e 0irm also made considera$le pro3ress in its petroc4emicals strate3y, openin3 new 3as-$ased petroc4emical 0acilities in 8erte4 and -e$en3#

>y 2((3, !alaysia was set to +s+rp *l3eria as t4e world2s second-lar3est prod+cer o0 ?)- wit4 t4e completion o0 t4e !alaysia ?)- 5i3a ,lant# ,rime !inister !a4at4ir !o4amad commented on t4e ac4ie1ement in a !ay 2((3 >ernama )ews *3ency article, claimin3 t4at Ft4e ,etronas ?)- comple. now ser1es as anot4er s4inin3 e.ample o0 a 1ision reali=ed o0 a national aspiration, trans0ormed into reality $y t4e same $elie0 amon3 !alaysians t4at 2we can do it#2F Indeed, ,etronas 4ad trans0ormed itsel0 into a 3lo$al oil company o1er t4e pre1io+s decade, $ecomin3 a national sym$ol 0or s+ccess# 54e company reali=ed, 4owe1er, t4at it wo+ld 4a1e to contin+e its a33ressi1e 3rowt4 strate3y in order to ins+re its s+r1i1al in t4e years to come#

,rincipal S+$sidiaries: ,etronas Cari3ali Sdn >4d/ ,etronas Cari3ali O1erseas Sdn >4d/ ,etronas *ssets Sdn >4d/ ,etronas !aritime Ser1ices Sdn >4d/ ,etronas 5radin3 Corp# Sdn >4d/ ,etronas *r3entina S#*#/ ,etronas *+stralia ,ty ?td#/ ,etronas 54ailand Co# ?td#/ ,etronas ,4ilippines Inc#/ ,etronas Cam$odia Co# ?td#/ ,etronas 5ec4nical Ser1ices Sdn >4d/ ,etronas So+t4 *0rica ,ty ?td#/ ,etronas India @oldin3s Company ,te ?td#/ ,etronas C4ina Company ?td#/ ,etronas International Corp# ?td#/ ,etronas !ar;etin3 54ailand Co# ?td#/ !yanmar ,etronas 5radin3 Co# ?td#

,rincipal Competitors: C4e1ron5e.aco Corp#/ E..on !o$il Corp#/ oyal 9+tc4AS4ell -ro+p#