The recent news of Shell’s potential sale of its petrol stations in Malaysia to Saudi Arabia’s state-owned Saudi Aramco has made headlines, covered by multiple media and news channels with Reuters citing four industry personnel that were familiar with the situation as sources. According to them, talks of the deal which was valued at RM4-5 billion have begun in late 2023, and that it might come to fruition in the coming months. However, both Shell and Saudi Aramco have declined to comment on the talks, with Shell reiterating that Malaysia is an important country to the company.
Having over 950 petrol stations across Malaysia, Shell has the second largest fuel retail network in the country and is second only to PETRONAS.
Shell has also said that it was looking to divest up to 500 stations between 2024 and 2025, and the move to sell its Malaysian stations is consistent with its sale of the refinery in Bukom Island, which supplies the Malaysian network.
Although immediate financial gains through the deal would be nothing short of substantial, it is important to address the issues that will follow.
Loss of Control and Foreign Influence
The elephant in the room would be the entry and intervention of foreign entities in a market that is vital to Malaysia’s economy and identity. Saudi Aramco has not had a presence in Malaysia’s fuel retail sector yet, but it does own 50% of the Pengerang refinery based in Johor which churns out 300,000 barrels per day in a joint venture with PETRONAS to be sold domestically and exported.
That does not mean that Saudi Aramco is inexperienced in the industry, as it operates petrol stations all over Saudi Arabia and also elsewhere in joint ventures with French major TotalEnergies and South Korea’s S-Oil Corp.
If the deal materialises, Saudi Aramco will rebrand the stations and offer promotions to retain existing customers and attract new ones, according to a report by research house CGS International, and cautioned that Saudi Aramco's potential entry could lead to a decline in PETRONAS Dagangan's sales and market share. CGS International also referenced a similar scenario from 2012 when the Philippines’s Petron Corp acquired ExxonMobil’s Esso stations in Malaysia.
Upon the acquisition, Petron’s launch of aggressive promotional campaigns at the time resulted in a decline in PETRONAS Dagangan’s retail fuel sales.
That being said, the sale of Shell’s network of petrol stations in the country to Saudi Aramco would pave the way for greater foreign intervention and influence in Malaysia’s fuel retail scene, and would ultimately affect the balance of power and control over the local energy sector. But as we understand, any post-merger will incur cutting down manpower, which may be affecting thousands of jobs in the detail downstream of Shell in Malaysia.
Apart from that, it could also potentially affect the market’s pricing, distribution, and availability of key products and services for consumers. A foreign company would also most likely prioritise its own interests above those of the country, more often than not at the expense of smaller, local businesses, resulting in the impediment of growth and opportunities for local companies in the energy market.
Fuelling the Nation’s Growth
In light of the potential sale of Shell's petrol station business to Saudi Aramco, it is essential to recognise the vital role played by PETRONAS in driving Malaysia's economic growth and contributing to the nation's development. Since its establishment in 1974, PETRONAS has been a linchpin of Malaysia's economic success, consistently generating substantial revenue for the government and funding vital public services such as education, healthcare, and infrastructure.
In PETRONAS’ banner year of 2022, when prices of oil and gas resources skyrocketed, PETRONAS underscored its pivotal role in Malaysia’s fiscal stability by paying the government RM50 billion in dividends and authorised a further RM35 billion in February, which brings the total to RM85 billion.
Being a homegrown company, PETRONAS’ achievements in the sector mean that its profits directly contribute to the nation’s revenue. The substantial revenue stream paid by PETRONAS has empowered the government to invest in crucial areas to uplift the lives of Malaysians. Apart from education, healthcare and infrastructure development, the government has utilised PETRONAS’ profits for various programmes from fuel subsidies to disaster relief.
Beyond Fuel
As one of the country’s largest corporations, PETRONAS has also leveraged its resources to drive positive changes in various areas such as environmental sustainability, community development, and education throughout the years via its numerous corporate social responsibility efforts. Yayasan PETRONAS, the social impact arm of PETRONAS, has been delivering positive and sustainable impact on the well-being of society across the nation through programmes such as Program Duta Guru to empower Malaysian educators and the BOLD programme which aimed to assist underprivileged, high-needs students during the Covid-19 pandemic.
Not too long ago, PETRONAS also solidified two new initiatives to help research and capital development in Sabah, which include a RM5.75 million grant. Under the Petronas-Academia Collaboration Dialogue (PACD), the grant was awarded to seven academics to carry out research in green energy-related fields such as bioenergy development and clean energy storage systems. Universiti Teknologi PETRONAS has also signed an agreement with University College Sabah Foundation to offer a one-year foundation programme for top SPM achievers.
The initiatives were in addition to the multiple collaborations that have been carried out between PETRONAS and environmental organizations and ministries for programmes in regard to reforestation, marine conservation and wildlife protection.
On top of that, PETRONAS is also actively involved in community development efforts across Malaysia by supporting underserved communities through funding of healthcare facilities and water supply projects to name a few. The Uplifting Lives programme by Yayasan PETRONAS donated 250 units of desferal infusion pumps to the Sabah Health Department to ease the burdens of those seeking treatment. Through its subsidiary PETRONAS Floating LNG (PFLNG), the company has also changed the lives of the residents of three remote villages on Banggi Island for the better by providing and installing solar-powered energy systems in their homes, when they previously relied only on pelita or kerosene lamps and diesel generator sets to power their lights.
Safeguarding National Interests
It is evident that PETRONAS consistently extends support to enhance the lives of Malaysians nationwide, and from an economic standpoint, it is imperative for Malaysians to back PETRONAS to maintain control over the country's energy resources and markets, as the support would aid in preserving Malaysia's economic stability and geopolitical sovereignty while ensuring the nation's interests are safeguarded on the global stage.
On top of that, the company fosters a skilled local workforce, developing a pool of Malaysian professionals within the O&G industry. This, in turn, fuels innovation and ensures the long-term sustainability of the sector, ultimately positioning Malaysia as a leader in its own right.
By ensuring that Malaysia receives a fair share of the wealth generated from its own natural resources, PETRONAS strengthens the country’s independence and bargaining power on the international stage, which would allow Malaysia to play a more significant role in shaping global energy policies and securing favourable trade deals.
For decades, PETRONAS has been the lifeblood of the Malaysian economy, and a strong PETRONAS translates to a stronger Malaysia, with more resources available to invest in its people and its future. Supporting PETRONAS is not just about choosing a local brand, it is about investing in the nation's economic security, energy independence, and long-term prosperity. A strong PETRONAS safeguards Malaysia's present and paves the way for a brighter future for generations to come.
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