Experts divided on special dividend payment from Petronas

AFP pic.

PETALING JAYA: An economist has urged the government to review its special dividend payment from Petronas, saying it may affect the state oil firm’s capital expenditure programmes.

Yeah Kim Leng, a professor of economics at Sunway University, suggested that the government consider other revenue sources such as the monetisation of assets instead of Petronas reserves which may suffer due to the low oil prices.

“If Petronas is unable to carry out its capital expenditure programmes, it may attract negative ratings from international credit rating agencies,” he added.

However, Phua Lee Kerk, the chief strategist at investment manager Phillip Mutual, differed, saying the government should continue with the special dividend payment.

At present, he said, government finances are not strong and lack room for additional sources of revenue.

“The RM30 billion dividend payment should continue for now and be reviewed next year, when the government coffers are more stable,” he told FMT.

The issue surfaced after former prime minister Najib Razak said yesterday that he had left large cash reserves in Petronas when the Pakatan Harapan government took over in May.

Najib, who was also finance minister, cautioned the government against continuing with its RM30 billion special dividend payments as this could affect Petronas’ capital expenditure programme.

He claimed that Petronas reserves had increased to almost RM180 billion in June 2018 compared to RM128.2 billion at the end of 2017.

The increase was mainly attributed to higher crude oil prices at the time and payments from Saudi Aramco for the Refinery and Petrochemical Integrated Development (Rapid) Pengerang project.

The government collected RM26 billion in dividends from Petronas in 2018 and is planning to collect RM54 billion in 2019. This includes a special dividend of RM30 billion which will be used by the government to pay goods and services tax and income tax refunds.

Brent oil prices are currently hovering at US$62 per barrel mark. In the third quarter of 2018, Moody’s downgraded Petronas’ rating due to concerns about its ability to carry out its capital expenditure programmes in view of the large special dividend payment that it has to make to the government.

On Nov 2 last year, Prime Minister Dr Mahathir Mohamad said Petronas could afford to contribute the special dividend to the federal government in 2019 due to higher oil prices at the time.