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.
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.