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PAS calls for Petronas’ direct contracts to be audited

June 10, 2013
First  Published:     5:16pm, Jun 09, 2013
  • PAS' Dr Dzulkefly Ahmad said that the final audit report should be made available for deliberation in Parliament.PAS’ Dr Dzulkefly Ahmad said that the final audit report should be made  available for deliberation in  Parliament.
KUALA LUMPUR (June 9): PAS wants directly negotiated and sole source  contracts awarded by Petronas to be audited by the National Audit Department,  and for the evaluation criteria and contract terms to be opened for  scrutiny.
PAS research centre executive director Dr Dzulkefly Ahmad said that the  final audit report should be made available for deliberation in  Parliament.
He claimed that in terms of transparency, Petronas’ performance was not up  to par because important information such as the evaluation criteria for  contracts awarded are not disclosed to the public.
He pointed out that Petronas, as the de facto owner, custodian and  regulator of upstream oil and gas in Malaysia, is morally answerable to all its  stakeholders, essentially every single citizen of Malaysia.
Therefore, Petronas shoulders added responsibilities which public listed  companies such as Exxon-Mobil and Shell do not have to bear, he told a press  conference at the PAS headquarters here today.
Dzulkefly was responding to a statement by Petronas president Tan Sri  Shamsul Azhar Abas  that the national oil corporation’s disclosure is in  the same standards of  other oil and gas companies
Dzulkefly had recently highlighted the Malaysia’s ranking dropped from the  22nd spot in 2010 to 34th this year in the 2013 Resource Governance Index (RGI).  The RGI measures the quality of governance in the oil, gas and mining sector of  58 countries.
Minister in the Prime Minister’s Department Datuk Paul Low has attributed  the drop to Petronas’ overseas agreements disclosure.
However, Dzulkefly opined that in the context of RGI,  the disccussion  about Petronas is centered on its role inside Malaysia.
He pointed out that Petronas has the responsibility to ensure that it  operates businesses in the most efficient way, with lowest total cost of  ownership, not merely lowest initial capital expenditure and highest yield amid  fair and transparent contract distribution, as well as to groom local oil and  gas service and technology providers to become global champions.
Petronas, being a company bestowed with a monopoly, should do at least  reasonably well, but it should also benchmark its performance against peers such  as Norway’s Statoil or Brazil’s Petrobras, he added.
“The real performance can only be evaluated if the public is allowed  dissect deeper, and obtain secondary-level information such as the unit  production cost (UPC), unit development cost (UDC), total initial cost of each  contract, total cost of variation orders, crude and refined products trading  procedures among other things.
“More often than not, the ups and downs of these indicators can be directly  attributed to strength or weaknesses in executing works due to competency and  performance of selected contractors and subcontractors,” said Dzulkefly
Citing an example, Dzulkefly asked why the corporation’s subsidiary  Petronas Carigali had to pay for the non-performing time of the Kencana-Mermaid  1 (KM1) drilling rig owned by SapuraKencana when most of the faults were clearly  attributed to the inefficiency of the contractor.
He added that external auditors must be allowed to examine the basis for  awarding the contract to Kencana-Mermaid, basis of rates agreed in the contracts  and the loopholes made available in the contract, whether intentionally or not,  in order to facilitate subsequent variation orders.
Dzulkeflt went on to say that with regards to contracts awarded to  SapuraKencana, Petronas must disclose:
a)  How much variation orders it or its Production Sharing Contractors  (PSCs) have to paid to SapuraKencana via its subsidiary TLO for the various  marine installation contracts which have been almost a near-monopoly for the  last few years;
b) What is the evaluation criteria used in various tender evaluation  exercises that has allowed SapuraKencana to keep on winning contracts despite  high variation orders and below average performance; and
c) Contract terms and conditions for external auditors to ascertain the  weaknesses and loopholes that have caused hundreds of millions in variation  orders.

Read more: http://www.fz.com/content/pas-calls-petronas-direct-contracts-be-audited#ixzz0VaZwiP54

Read the full text in “A reply to Petronas’ response”

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One Comment leave one →
  1. najib manaukau permalink
    June 10, 2013 4:41 am

    Everything Petronas is enforcing and implementing is always, I repeat, is always on the advice of the grand son of the pariah from Kerala, the shenanigan Mahathir. That is the sole main purpose of his presence on the board as the advisor of Petronas, not because of his experience in the business of petrol. Or for his acumen in business, anyone else and at his age would have resigned from the board, but he is on the board just so he will ‘advise’ the board what they should do or who should be awarded any contract Petronas is going to award. That is his only role and purpose on the board.
    How else do you think his schlub son can become a multi millionaire or even a billionaire ?
    Also what else do you think he is so proactive supporting Umno during the last GE ? Aside from making sure that his US$44- billions are well protected. Anyone one at his age would have really retired to spend time with his grand children and tend to the garden. Do you need any more reasons ?

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