JUNE 2013

www.petronas.com

Petronas Cover.indd 2-3 28/5/13 4:11 PM

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Clockwise from right: Angsi A platform, offshore Terengganu, Malaysia; Central Utility facilities in Kertih, Terengganu, Malaysia; MegaMethanol plant, Sabah

CONTENTS

MALAYSIA AND PETRONAS – A SHARED FUTUREFinding a balance is critical to Malaysia’s energy future

EXPLORATION THE KEY TO A SUSTAINABLE ENERGY FUTUREPETRONAS meets the challenge of declining reserves

PETRONAS: FINANCING THE ENERGY FUTUREAs a state company and a successful multinational, PETRONAS has a special role in Malaysia

GOLDEN AGE FOR GASPETRONAS is poised to be a significant playerin the gas landscape of the next two decades

FORGING THE LINKS IN THE PETRONAS VALUE CHAIN Balance, foresight and tough decision-making drive PETRONAS’ downstream business

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For more informationplease contact

Petroliam Nasional Berhad(Company No. 20076-K)

Registered Office:Tower 1

PETRONAS Twin TowersKuala Lumpur City Centre

50088 Kuala LumpurMalaysia

Tel: +603 2051 5000Fax: +603 2026 5050

www.petronas.com

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MALAYSIA

Left: Dulang B platform, offshore Terengganu, Malaysia

MALAYSIA

MALAYSIA AND PETRONAS – A SHARED FUTURE

Finding a balance is critical to Malaysia’s energy future

With the fortunes of Ma-laysia and PETRONAS so tightly bound together, the past few years have

been a decisive and defining period for one of Southeast Asia’s largest oil pro-ducing nations and its state-run energy multinational.

Addressing the complex matrix of strategic, economic and sustainability issues at a time when energy security has become a defining part of public policy is a tough balancing act.

For PETRONAS Group Chief Executive Officer Tan Sri Shamsul Azhar Abbas the challenges of recent years – coming as they do against the backdrop of dwin-dling domestic oil supplies – have been a test of the company’s core values.

“Since the inception of PETRONAS, its mandate has always been to safeguard and add value to the hydrocarbon resources of the nation. This continues to be the guiding principles of the exist-ence of our company,” Tan Sri Shamsul Azhar Abbas.

“At the same time, we were incorpo-rated as a business entity; one that is able to drive its strategies, operations and business decisions based on commercial merit,” he continued.

Malaysia’s oil production registered its highest output at about 650,000 barrels per day almost two decades ago. Since then, its output, with the exception of intermittent upticks, has suffered from natural decline.

“This is exactly where the challenge lies.

And in the past few years, PETRONAS has been aggressive in tackling this challenge,”

Falling supply,rising demand

Tan Sri Shamsul Azhar Abbas says that falling supply, coupled with the rising consumption typical of one of the ASEAN region’s most dynamic economies, has re-quired concerted action from PETRONAS.

“For Malaysia, the foremost energy challenge lies in meeting rising demand, in view of increasing population and economic expansion, whilst at the same time domestic production continues to experience natural decline,” Tan Sri Shamsul Azhar Abbas said.

“In this accord, we have undertaken

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insights from its Canadian experience.“As I earlier mentioned, we will

continue to invest in quality resources internationally and Progress Energy fits this profile,” said Tan Sri Shamsul Azhar Abbas. “Through Progress, PETRONAS now owns the largest acreage in the Canadian Montney, which gives us a very much needed second lease of life.”

The opportunity, he said, provides sig-nificant business merits and is mutually beneficial to PETRONAS as well as to the Canadian government and its people.

“Despite the possible initial miscon-ception, the Canadian Government concurred that PETRONAS has always operated, first and foremost, as a com-mercial entity.

“In fact, we have enhanced this further through a transformation pro-gramme which we have undertaken over the past three years.”

He said this included PETRONAS el-evating its corporate governance stand-ing in line with global best practice, even though the company is not obliged to do this. Even so, he added, securing ap-proval in Canada was only the first step.

“The real work starts now,” he said. “Beyond the C$5.3billion investment

in acquiring Progress, we will also be investing in the Pacific Northwest LNG complex.

“The total investment will provide greater monetization value to the molecule compared to the currently depressed gas prices in North America. It will also provide the impetus for eco-nomic growth in the community.”

The end of easy oil

While PETRONAS’ exploration, acquisi-tion and investment all come within the context of its dwindling reserves, keeping the oil flowing at its current rate has shown the company to be versatile and flexible in adversity.

“We have to accept that the days of easy oil is over,” says Tan Sri Shamsul Azhar Abbas. “Most Malaysian fields are already mature and the notion of ‘abun-dant untapped reserves’ is a concept of the past.

“This is not an unexpected scenario for us; we have anticipated this inevitable decline. We have to accept the fact that the reserves available today require more cost to develop – be they marginal or deepwater, or both.

“Even with huge investments made, there are massive risks involved in mon-etising these difficult reserves.”

He said that based on the aggressive initiatives put in place, PETRONAS has successfully reversed the trend of decline with an increased recovery factor.

“Whereas the international standards of decline in existing fields are at about 8-9 per cent annually, we have kept ours to at a minimal 2-3 per cent of annual decline,” he said.

“As a result, we are able to maintain our current crude production level at around 480,000 barrels per day. A lot of effort have been put in to retain this average; otherwise the decline would be much worse.”

Since 2011, PETRONAS has also in-troduced Risk Service Contracts (RSCs), awarding clusters of fields that are mar-ginal and uneconomical to be developed on a stand-alone basis.

“The idea is that, while PETRONAS re-mains the project owner, the contractors provide the upfront exploration capital,” he said. “Once these fields become com-mercially viable, we will then start paying remuneration fees based on perfor-mance and services rendered.”

Above: PETRONAS President and Group Chief Executive Officer, Tan Sri Shamsul Azhar Abbas

MALAYSIA

aggressive efforts to augment both domestic exploration and production to stem and reverse this decline,” he said.

“At the same time, we have con-structed the country’s first regasification terminal (RGT) in Melaka to receive LNG imports. This will allow Malaysia to have an open access system, in which domes-tic users can secure their own LNG and use our facility at a fee to regasify gas.”

Despite this, he said, efforts in secur-ing supply alone will not be sufficient if demand remains unabated.

“The natural gas price in Malaysia is currently one of the lowest in the world and subsidies distort transparency and efficiency. It is vital to ensure that do-mestic demand arises from competitive industries and users which are able to compete at global market energy prices.”

He said that while PETRONAS would continue to play a leading role, securing energy security would require a concert-ed effort from key stakeholders such as the government, industries and users.

Balancing options

Other options open to PETRONAS to ensure supply and safeguard energy

security – such as investing in complex technology to increase production of oil and gas from marginal fields and deepwater offshore areas and becoming an aggressive player on the international scene – have been no less challenging.

“There were some misconceptions earlier, that we wanted to focus solely on rejuvenating our production within do-mestic waters, but this is not true,” says Tan Sri Shamsul Azhar Abbas.

“Moving forward, we will be focus-ing on the quality of our assets and high grading our international portfolio. The focus will be on geology now, not just geography. It is pointless to be present in more than 30 countries globally, if they do not contribute actively to our bottom line,” he said.

“We have embarked on a portfolio-rationalising exercise to high-grade our portfolio with quality assets. We have exited from four countries (Timor Leste, Ethiopia, Equatorial Guinea, and Paki-stan) while at the same time investing in countries such as Canada, Australia and Brazil.”

Enforcing market discipline has been a key action point with PETRONAS, which has instituted a Portfolio Investment

Decision Framework (PIDF) to support this intent.

“This ensures clarity and discipline in continuously reviewing our portfolio,” he said.

PETRONAS’ growth strategy is under-pinned by the rationale of meeting the long-term energy requirements of its key customers, while adding value via integration, according to Tan Sri Shamsul Azhar Abbas.

“An example of this is our unconven-tional play in Canada,” he said. “By having a fully integrated unconventional play from upstream shale to LNG marketing, we will not only add value to Canadian resources, but also provide long term and secure supply to key customers in Asia.”

Canadian shale play

Late last year, PETRONAS only just gained control of Canada’s Progress En-ergy Resources Corp in a C$5.3billion deal that looked set to founder after a fiery national debate in Canada about foreign control of energy resources.

With the company’s increased focus on North American shale reserves, PETRO-NAS has been able to draw some valuable

Above: Angsi platform, offshore Terengganu, Malaysia

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The first RSC (Berantai) has already delivered its first production and the oth-ers are progressing as planned. In 2012 alone, PETRONAS signed nine Produc-tion Sharing Contracts (PSCs).

“I am encouraged that our efforts from the last few years have started to bear fruit and this, in turn, has brought a lot more excitement to Malaysia’s oil and gas industry.”

New technology the key to the future

The role of new technology in the utilisation of existing oil fields and the dis-covery of new ones, therefore, is crucial.

“PETRONAS is making conscious efforts to focus on pursuing value driven and sustainable growth,” says Tan Sri Shamsul Azhar Abbas. “Our exploration and pro-duction business will continue to focus on reversing our production decline, and this includes intensifying our asset integrity efforts, infrastructure maintenance, and reservoir management.

“These works, which address our ageing assets and facilities, are capital intensive.”

In addition, the main focus is also in development and deployment of tech-nologies to increase PETRONAS’ reserves and enhance the productivity as well as recovery of each field. Enhanced Oil Recovery (EOR) and high CO2 manage-ment have been identified as the focus technologies in this regard.

“We aspire to position these tech-nologies as the value proposition in our partnerships and international operations in the future,” he said.

“Aligned with this focus, in September 2011, we established the E&P Technology Centre (EPTC) that focuses on the de-velopment and deployment of EOR and high CO2 management technologies,” says Tan Sri Shamsul Azhar Abbas. “We want EPTC to be the one-stop centre in our effort to institutionalise these core capabilities within the group.”

He said the integration of research and development, field development plan-ning and deployment in the monetisation of EOR and high CO2 gas fields leverage on technical collaborations and the shar-ing of resources with other Production Sharing Contractors undertaking similar efforts in Malaysia.

“In this regard, we have existing PSCs executed for EOR with ExxonMobil and Shell, to which we have seen some

progress,” he said. EOR and marginal oil fields are expected to make up approxi-mately 20 per cent of Malaysia’s total crude oil petroleum resources.

In 2012 alone, PETRONAS made 24 discoveries (22 within Malaysia and two internationally), as compared with 19 discoveries in 2011.

“So we are very encouraged as the prospects are there,” he says. “Things are looking bright; we just have to continue with what we have been doing over the last few years.”

the pre-Front End Engineering Design (pre-FEED) stage of scoping pipeline, liquefaction and export facilities to liq-uefy and export natural gas produced in northeastern British Columbia.

“Construction is anticipated to begin by early 2015, to catch the earliest LNG shipments to customers in late 2018.”

On April 29, 2013, Japan Petroleum Exploration Co. Ltd. (JAPEX) acquired a 10 per cent interest in the project, and has agreed to buy a 10 per cent share of the LNG produced for a minimum of 20 years for domestic use in Japan.

“With GLNG Australia and Progress Energy in Canada in our portfolio, we are also expanding into the uncharted waters of floating LNG vessels. This is one example where the advancement of technology has made it economi-cally feasible to monetise stranded gas in small and scattered conventional fields,” he says. “PETRONAS does not wish to fall behind and already has two floating LNG projects on the way.

“FLNG 1, with capacity of 1.2 MTPA will undergo construction stage soon and aims to be the first of its kind in the world when it commissions in at the end of 2015. FLNG 2 will be slightly larger in terms of capacity, at 1.5 MTPA and is aimed to come onstream a year later.

“With all this in place, we aim to retain our current position as one of the major LNG players in the world,” he said.

PETRONAS and corporate responsibility

PETRONAS may be posting record growth, but it also pays a large share of tax to the government.

While many have asked whether this relationship, and the way that it pays divi-dends to the government, will change, Tan Sri Shamsul Azhar Abbas says PET-RONAS has a duty to its major stakehold-ers, the people of Malaysia.

“For the year 2012, PETRONAS has paid around RM38bn in taxes and RM28bn in dividends to the Malaysian government. We don’t foresee this relationship changing. As good corporate citizens, we will continue to pay taxes in all our countries of operation.

“Moving forward, we feel the strong need to find a balance between dividend payments and funding for growth. We believe a dividend payout of approxi-mately 30 per cent of net profit is an ap-propriate level to provide this balance.” �

LNG shapes the future

The cornerstone of PETRONAS’ gas future, meanwhile, is likely to be LNG – a business it has successfully operated in since 1983. As at June 2011 Malaysia was the 12th largest gas producer and the sec-ond largest LNG exporter in the world.

“The PETRONAS LNG Complex in Bintulu has an existing capacity of 25.7 million tonnes per annum (MTPA), and we have just reached Final Investment Decision (FID) to add an additional 3.6 MPTA to this facility,” says Tan Sri Sham-sul Azhar Abbas.

“We are not slowing down. Through Progress Energy, we have ventured into

Private sector involvement in the oil and gas space in Malaysia has seen healthy growth in the past few years

MALAYSIA

Right: Erb West platform,Sabah

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Left: Load out of the Gumusut Kakap semi-floating production system, Malaysia’s second deepwater facility and the region’s largest ultra deepwater semi-FPS

EXPLORATION & PRODUCTION

A s energy sector exploration and production costs continue to climb, PETRONAS has been engaged in a delicate balancing act to keep oil flowing. Faced on one hand with the need to preserve cash for future

investment, the oil giant also requires new and expensive tech-nology to extract reserves from domestic fields that have been stressed since the 1980s.

The pursuit of upstream activities in unconventional plays such as deepwater, enhanced oil recovery (EOR), CO2 manage-ment and shale gas are capital-intensive undertakings.

Having assumed his current role at a time when Malaysia has been facing the reality of declining production, Executive Vice President, Exploration and Production, Dato’ Wee Yiaw Hin, must not only oversee the management of hydrocarbon deple-tion but, in some cases, reverse the decline.

The challenge for PETRONAS is ensuring that its investments continue to be met with robust returns. So far, PETRONAS’ lat-est initiatives have rewarded the risks.

Maximising recovery

Based on government studies, Malaysia’s production is falling at a rate of 1-2 per cent annually (this compares with a current

global average of 6-7 per cent according to the International Energy Agency [IEA]). To reverse the decline, says Dato’ Wee Yiaw Hin, PETRONAS has launched successful projects that have increased production by approximately three per cent annually.

“To achieve this objective, we are committed to ensuring the successful execution of strategies that were put in place when I joined the company in 2010,” says Dato’ Wee Yiaw Hin, adding that PETRONAS has intensified its focus on sweating assets and maximising recovery through diligent reservoir management and pursuing EOR potential.

“Among notable achievements in this area are our ongoing collaboration with ExxonMobil to implement EOR techniques at Tapis and Guntong fields, offshore Peninsular Malaysia and the signing of Baram Delta Offshore (BDO) and North Sabah EOR Production Sharing Contracts (PSC) with Shell,” he said.

PETRONAS’ second strategy has been to drive solutions that monetise marginal fields and stranded gas.

“To date, we have seen new solutions proposed by the niche players that we have partnered with, such as Early Production System (EPS) and Extended Well Testing (EWT), which expedite production as well as help manage the subsurface uncertainties from these small and marginal fields,” says Dato’ Wee Yiaw Hin.

To support future growth, PETRONAS has been aggressively

EXPLORATION THEKEY TO A SUSTAINABLEENERGY FUTURE

PETRONAS meetsthe challenge of declining reserves

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“In Malaysia, we have already seen the Dulang Water Alternat-ing Gas (WAG) Pilot completed in 2007 and it is still producing even now. We are also anticipating the first fullscale EOR from Tapis WAG to come onstream by end of 2013.

“In the future, our combined efforts in implementing EOR techniques in suitable oil fields offshore Malaysia is expected to increase the current recovery factor from about 36 per cent to more than 50 per cent.

“This will contribute approximately between 20 per cent and 30 per cent of future oil production.”

New contracting systems

PETRONAS has already been one of the pioneers of the PSC licensing model and is now embarking on a new contracting scheme for marginal fields known as the Risk Service Contract (RSC) aimed at attracting niche players with the right capabilities and technologies.

“Malaysia has had more than three decades of exploitation of the hydrocarbon resources managed under PETRONAS,” Dato’ Wee Yiaw Hin said. “Petroleum, being a finite resource, brings us to a stage where there is no more low-hanging fruit.

“There are many challenges in a domestic oil and gas land-scape where new discoveries are smaller and have challeng-ing hydrocarbon characteristics; discovered reserves become

increasingly tougher to monetise,” he said. PETRONAS’ efforts to sustain national oil and gas production,

to attract the right players, to boost participation of local com-panies, to create spin offs and to attract foreign direct invest-ment, he said, must persist.

“Since the introduction of PSC in 1976, amid a changing business environment, PETRONAS continues to make en-hancements that attract investors to undertake exploration and production activities,” Dato’ Wee Yiaw Hin said, adding that the RSC initiative is expected to add to the suite of arrangements available to PETRONAS to attract new talent.

“In addition to the introduction of the RSCs back in 2011, PETRONAS also recently introduced the progressive volume-based partner sharing contract (PVB PSC) back in 2012, as part of our efforts to continuously attract investors to undertake E&P activities in areas where reserves become increasingly tougher to monetise,” he said.

The PVB PSC was specifically designed to provide incentives to contractors to improve oil recovery and increase production from mature oil fields. So far, PETRONAS has awarded three RSCs, one of which has commenced production, while the other two are in the development phase.

“PETRONAS will continue to explore new solutions, develop-ing new terms under PSC as well as new types of service con-tract, as need arises,” Dato’ Wee Yiaw Hin said. “These different

Above: Angsi platform

EXPLORATION & PRODUCTION

exploring its matured basins and testing new play types. “We continue to actively explore new geological plays such

as deepwater and High Pressure High Temperature (HPHT) where we believe significant discoveries are yet to be made,” says Dato’ Wee Yiaw Hin.

“Since we started to rejuvenate exploration and production in Malaysia, we have witnessed significant exploration successes in the country indicating that our exploration strategies are work-ing well for us.”

Deepwater and Enhanced Oil Recovery

For PETRONAS, the move into deepwater and EOR have been natural steps in monetising its resources and maximising value while sustaining and growing production.

“Our rationale for developing expertise in deepwater and EOR is due to the readily available opportunities in Malaysia,” Dato’ Wee Yiaw Hin said. “This expertise contributes positively to PETRONAS and the nation.”

While deepwater and EOR are risky and technology-intensive disciplines that require skilled players to unlock their potential, PETRONAS is committed to developing and harnessing these capabilities to compete globally.

“PETRONAS also aims to venture into unconventional plays

such as shale gas and coal seam gas,” says Dato’ Wee Yiaw Hin. “Through the Canadian joint venture in North Montney areas with Progress Energy Resources Corporation, we believe that we can acquire expertise in basin study, reservoir modelling and specialised fit-for-purpose technology in hydraulic fracturing and completions.”

He said that capitalising on the North Montney Joint Venture (NMJV) will allow PETRONAS to gather best practice in operat-ing these types of fields, improving its capability as an effective exploration and production company into the future.

“Currently, we are focusing on progressing the Santos GLNG Project in Australia to further improve upstream activities especially in the areas of drilling and completion through our knowledge-transfer process,” he said.

Underpinning the future of Malaysia’s energy security and PETRONAS’ continued viability, however, are innovative and ambitious EOR developments to reverse declining production.

“EOR is technology and investment intensive,” Dato’ Wee Yiaw Hin said. “PETRONAS has executed one EOR PSC with ExxonMobil and two EOR PSCs with Shell and the progress of these projects has proceeded in line with expectations.

“Over the past two years, we have already seen three pro-jects in implementation, aimed at delivering over 200MMstb.” He said PETRONAS remains committed and optimistic about its EOR plan.

Above: Executive Vice President, Exploration and Production, Dato’ Wee Yiaw Hin

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arrangements will exist in parallel to sustain effective explora-tion and exploitation of Malaysia’s petroleum resources.”

Attracting new players

Even though PETRONAS must operate within the context of dwindling reserves, Malaysia continues to be highly relevant as an investment destination in the upstream oil and gas sector.

PETRONAS has refocused on domestic exploration and production, not only because it fits with its responsibilities as a national oil company, but also because there are still substantial amount of hydrocarbon resources left untapped in the country.

“Despite Malaysia’s maturing hydrocarbon basins, there remains huge potential in new exploration plays which are still under-explored,” Dato’ Wee Yiaw Hin said. “There are also significant remaining resources in mature, small and techni-cally more complex fields.”

He said these mature basins and tech-nically complex fields also provide op-portunities for capable upstream inves-tors or product and service providers to partner with PETRONAS, overcoming the challenges and monetising the results.

“We believe that continuous collabo-rations between PETRONAS, our PSC partners and service companies, will be instrumental for effective resource development,” he said. “With a stable fiscal environment, upstream tax incen-tives, established infrastructure, and the ready availability of locally-based service companies that support upstream activi-ties, we believe that Malaysia’s upstream industry remains an attractive invest-ment destination.”

According to a report by Wood Mac-kenzie, Malaysia’s domestic discoveries were ranked among the top three largest discoveries in South-east Asia in 2012.

PETRONAS and Malaysia

PETRONAS is a major contributor to Malaysia’s national in-come, with the gas and oil sectors accounting for 20 per cent of national GDP. Under the government’s Economic Trans-formation Programme (ETP), plans for the oil, gas and energy sectors have been in alignment with PETRONAS’ strategic initiatives.

“We will always work closely with the government to ensure that the oil and gas industry sector remains vital to the growth of the nation’s economy,” Dato’ Wee Yiaw Hin said.

“As a business entity, PETRONAS has a primary responsibility to develop and add value to our national resource while con-tributing to the well-being of the people and the nation.”

PETRONAS has championed some of the ETP Entry Point Projects which are aimed at overcoming the projected decline in domestic oil and gas production, capturing value from mature fields through enhanced oil recovery, driving innovative solutions for extracting value from small and stranded oil and gas fields, and intensifying exploration efforts for future growth.

“This is an exciting time for the company as it enters new frontiers for growth,” Dato’ Wee Yiaw Hin said. “The transfor-mation journey is in progress, our strategies are set and we are progressing well, with around three per cent compound annual growth rate in our total production.

“At the same time, PETRONAS’ exploration and production capability and track record of successful onshore and offshore developments in oil and gas have earned us reputable operator-ship in 162 ventures across 23 countries in the world,” he said.

Frontier exploration

With the maturing of the Malaysian basin, PETRONAS must now seek hydrocarbons in more technically and commercially

challenging regions. In Malaysia, this means tapping underexplored areas such as ultra-deepwater and onshore Sabah and Sarawak.

“In order to retain investment at-tractiveness, PETRONAS is assuming the ‘enabling’ role as the resource owner and manager, engaging capable play-ers or pursuing different partnership arrangements to ensure the effective monetisation of resources,” Dato’ Wee Yiaw Hin said.

New incentives and commercial terms are being offered by PETRONAS to at-tract investments and promote upstream activities. These include the promotion of blocks with attractive prospects and a range of PETRONAS-led efforts to reduce risk.

“The Malaysian government also recently approved incentives under the Petroleum Income Tax Act (PITA) which seeks to attract exploration and devel-opment activity in Malaysia.

“The tax incentives on qualifying exploration expenditure, in particular, is aimed at enhancing a contractors’ risk-taking attitude, which could encourage higher levels of exploration activity,” he said.

PETRONAS and the future

According to Dato’ Wee Yiaw Hin, exploration will continue to be critical to PETRONAS going forward.

“The more important point is where and how we will ex-plore,” he said.

“As the search for hydrocarbon becomes more challeng-ing, exploration will need to look at hydrocarbon targets that are more subtle, for example, in deeper waters, more complex reservoirs and in higher subsurface pressure and temperatures.”

He said that going forward PETRONAS must continue to identify new exploration opportunities in existing as well as new basins.

“Technology will be a key enabler as we explore in more challenging environments, both in terms of subsurface imaging, as well as operational and development efficiency. Accordingly, cost, technology application and basin knowledge will also be instrumental to successful exploration,” he concluded. �

Petroleum, being a finite resource, brings us to a stage where there is no more low- hanging fruit

EXPLORATION & PRODUCTION

Right: Angsi A, offshore Terengganu, Malaysia

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ENERGY FINANCE

Left: Angsi platform offshoreTerengganu, Malaysia

ENERGY FINANCE

A mong the world’s oil majors, PETRONAS occupies a unique position. Both a state-owned entity and a full-fledged

commercial body, PETRONAS’ success has been due to its ability to strike a balance between sustainably developing the resources of the nation and running a commercial enterprise that maximises returns to its shareholders and com-petes globally.

Funding for substantial capital projects in Malaysia, both downstream and upstream, fall largely on the shoulders of PETRONAS.

“As the custodian, the government has pretty much entrusted PETRONAS with the responsibility of allocating resources (which includes capital funding) for this purpose,” explained Executive Vice Presi-dent of Finance, Datuk George Ratilal.

With a proven track record in Malaysia, PETRONAS launched a strategic globali-sation programme in the early 1990s to boost the country’s crude oil and gas re-serves and add value to its core business.

For large capital-intensive undertak-ings, the company has access to the global capital markets, but more recently

it has been encouraging local participa-tion from the private sector in Malaysia.

PSC: a tried and tested formula

The funding of exploration, develop-ment and production of hydrocarbon in Malaysia are undertaken by production sharing contractors under the Production Sharing Contract (PSC) model which has been in existence in PETRONAS for more than 35 years.

“In a way the PSC model is like public private partnership, where PETRONAS carries the ‘public’ responsibility, so to speak, and the PSC contractors carry the private interest,” Datuk George said.

“The private investors, which consist of both large and small corporations in the energy space (which also include our very own PETRONAS Carigali), undertake the risks of exploration and development, but share the rewards of production together with PETRONAS.”

With PETRONAS operating as a com-mercial entity, the capital required for these projects is set aside out of profits based on long-term plans.

“In addition, PETRONAS is able to supplement its capex funding through funding from traditional sources, such as the international debt markets. Bor-rowing is less difficult by a rated entity which operates as a multinational oil and gas company as opposed to standalone project companies,” he said.

PETRONAS recently introduced a vari-ation to its time-honoured PSC – Risk Service Contract (RSC) – which is aimed at attracting oil and gas players to de-velop and produce marginal fields.

“Under this model, contractors will provide the upfront capex, similar to PSC. However, the contractors will be paid fees (which includes capex recovery) based on their performance,” Datuk George said. “This is an example, where terms of participation in upstream are structured to entice participants as part-ners for new activities.”

Despite the variety of financial instru-ments open to PETRONAS, Datuk George said that the categories of innovation in financing are likely to expand further.

“As resources become harder and more costly to find, innovative solu-tions will need to be explored for future

PETRONAS: FINANCING THE ENERGY FUTURE

As a state company and a successful multinational, PETRONAS has a special role in Malaysia

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ENERGY FINANCE

likely to be largely financed on balance sheet supplemented with corporate debt from the bond market.

“PETRONAS' issuer ratings are all within the 'A' category and as such is able to borrow at relatively attractive rates,” he said.

As far as the downstream projects are concerned, in particular those where PETRONAS has multiple partners such as the RAPID project, financing is set to be a mix of on balance sheet and project financing depending on the agreements with the energy giant’s partners.

“Strong partners are essential, as are strong contractors, to provide confi-dence to project finance providers,” Datuk George said.

“Understanding risk classes within the project is also important as cer-tain infrastructure sub-classes within a larger project, such as RAPID, can offer

reserves gives us an advantage. We are not too highly dependent on project fi-nancing for upstream projects especially if such projects are located in Malaysia,” he said.

“Outside of Malaysia, partnerships are sought to reduce risk levels and bring about partnership funding.”

The place ofthe private sector

“As I’ve already mentioned, PETRO-NAS is largely responsible for the energy requirements of Malaysia,” Datuk George said. “Although it’s owned by the Malay-sian Government with government repre-sentations at the board level, PETRONAS operates as a commercial entity and there is no representation of the government in the management of PETRONAS.

Over the coming decades, most countries in the Asia-Pacific region will see a surge in the demand for energy

themselves for financing by the broader capital markets.

“The Malaysian banking and capital markets today are strong and fairly ma-ture and offer a good variety of financing opportunities which we can use for our lower risk downstream projects. So far, they have been able to keep up with the economic growth of the region,” he said.

While challenges remain, not least among them Basel III – the global regu-latory standard on bank capital adequacy and market liquidity risk due to come into effect this year – Datuk George says PETRONAS remains in a strong position.

“Basel III will certainly have an impact on project financing,” he said, adding that several banks have already reduced allocation of capital-to-project financing, with some ceasing this activity.

“For PETRONAS, a varied portfolio of assets and a high retention of cash

Above: Executive Vice President of Finance, Datuk George Ratilal

ENERGY FINANCE

fund requirements,” he said. “However, given the nature and risk profile of the upstream business, such solutions would mostly be confined to variations of the PSC, for the moment.”

The cost of renewal

Over the coming decades, largely as a result of economic growth, most coun-tries in the Asia-Pacific region will see a surge in the demand for energy.

Whatever the energy source or in-novation, PETRONAS will still need to upgrade and expand its existing energy infrastructure. The challenges ahead for PETRONAS are formidable, but the oil giant is committed to keeping pace with growth in Malaysia and the region.

“PETRONAS has many fronts to deal with, from upgrading existing infra-structure, such as offshore pipelines

regards to standalone upstream infra-structure projects, which are high-risk and as such are not good candidates for conventional project financing,” he added.

In this regard, PETRONAS’ already conservative financial policy of cash retention has worked well for it. For the year ended 2012, the group’s cash bal-ance stood at about US$45bn, after set-ting aside C$5.3billion for the acquisition of Progress Energy.

“The cash reserves we have accu-mulated over the years have enabled us to carry out some of these large infrastructure projects without the need to be overly dependent on external funding,” Datuk George said. “Although a non-listed entity, PETRONAS has been able to keep a strong balance sheet that is required of a large multinational of similar scale.”

Upstream infrastructure projects are

and downstream plants – many of them decades old that are aimed at sustaining current performance – to growing the business through projects with sig-nificant infrastructure like regasification terminals, floating LNG facilities and the large-scale refining and petrochemical complex in Pengerang, RAPID, to name a few,” Datuk George said.

As technology and innovations change so, too, does the financial landscape.

Since 2008, the need for banks to keep a more conservative capital base has af-fected the capacity of funding providers to outlay on large infrastructure projects.

“This is especially so in the space of project finance where allocations for project finance as an asset class is increasingly being downsized,” Datuk George said.

“The funding challenge for oil and gas companies are even more so, with

Above: Strong partnerships are essential to provide confidence to project finance providers

2322

THE FUTURE OF GAS

GOLDEN AGE FOR GAS

PETRONAS is poised to be a significant player in the gas landscape of the next two decades

A bundant, geographically diffused and environmental-ly beneficial compared with other fossil fuels, gas has the potential to be a game-changer for the energy-hungry economies of the Asia-Pacific region.

Increasingly competitive in practically all end-use sectors, it offers a cheaper power alternative for the emerging economies of India, China and the Middle East where energy demand is growing exponentially.

Globally, the estimates of existing reserves are staggering.Conventional recoverable resources are equivalent to more than 120 years of current global consumption, while total re-coverable resources could sustain the level of today’s produc-tion for more than 250 years. All major regions have recovera-ble resources equal to at least 75 years of current consumption.

Unconventional gas now makes up about 60 per cent of mar-keted production in the United States. Coalbed methane (CBM)

development is growing in Australia, while projects in China, India and Indonesia are in the early stages of development.

According to Executive Vice President for Gas and Power, Datuk Anuar Ahmad, PETRONAS is poised to be a significant player in the gas landscape of the next two decades.

Fuelling the future

“Gas, with abundant supply, easily accessible either from pipeline or LNG, and cleaner than other fossil fuels is bound to play a bigger role in meeting ever-increasing energy needs,” Datuk Anuar Ahmad said.

“The big economies of the world such as China, Japan and Korea will continue to be consumers. Emerging economies such as India and Indonesia will also join the big league in the near future.”

Left: Gas transmission operations in Segamat, Johor

ENERGY FINANCE

“PETRONAS also does not need to seek government approval, nor government funding for its operations,” he added.

Meanwhile, the private sector involve-ment in the oil and gas space in Malaysia has seen healthy growth in the past few years, due in large part to continued in-vestments by PETRONAS and its partners in upstream.

“Sustained investments have enabled local companies in the private sector to invest in support services for a range of activities in the sector,” Datuk George said. “Some of these companies have grown to provide regional services and are of a scale large enough to undertake sizeable investments in upstream support services such as rigs and upscale barges.”

Because of the rapid growth and scaling-up of some of these players, PETRONAS has recently opened up ex-ploration, development and production activities to the local private sector under the RSCs, allowing local companies to team up with foreign oil and gas play-ers to bid and undertake projects in the upstream sector.

The role of renewables

With energy companies now decades into what some analysts regard as a century-long transition to clean energy, PETRONAS’ plans to finance the energy of the future are now key considerations.

Wastage reduction, clean energy sup-ply and other energy efficient options are not only an increasing component of current operations but also part of the implementation of new projects.

“These options are particularly ap-parent in our downstream operations,” Datuk George said. “For example, waste heat recovery technology is used at refinery and petrochemical complexes as a source of power generation within the complexes themselves”.

“The RAPID project has similar consid-erations taken into account when plan-ning the overall complex,” he said.

In terms of renewable energy, PETRO-NAS has already made some significant investments. PETRONAS implemented its first solar PV project at Suria KLCC, which at 9,000 sqm² and with the capacity of 685kW peak, is the largest installation on a shopping mall rooftop. It is also pres-ently embarking on a solar power plant project in Gebeng, Kuantan, targeted for operations by end of this year.

“Other similar projects are also on the

drawing board. We have a dedicated technology team that keeps abreast in the latest technology innovation while at the same time, conducts research and invests in future technology that is heading towards cleaner energy such as carbon capture and storage, as well as the utilisation of CO2 in valuable chemi-cals,” he said, adding that the team has already been responsible for filing close to 300 patents for various technologies in numerous countries.

As part of this, and in pursuit of be-coming a high-income nation by 2020, Malaysia has embarked on an Economic Transformation Programme (ETP) which is private-sector led and government facilitated.

Under the scheme, the ETP has identi-fied certain sectors that will be the focus for change and the catalysts for growth.

“The oil and gas sector is obviously an important sector as it contributes some 20 percent of national GDP,” Datuk George said.

So far, 12 Entry Point Projects (EPP) have been identified under four thrusts.

“The total cumulative funds that will be invested between 2010-20 are estimated to be in excess of RM200bn with 99 per cent of the investments required coming from the private sector – PETRONAS and other independent private sector participants.”

The Malaysian government has grant-ed various incentives and provided solid assistance particularly for the develop-ment of upstream small fields, he said.

“Many of these incentives enhance project returns and facilitate easier access to financing from the capital markets and bank financing, as in the case of partici-pation by local private sector partners in RSC projects,” Datuk George said.

“The ETP, in a way, is a commitment by the Government to provide and facilitate necessary support and services. This gives assurance to foreign investors to further invest in this sector.”

The road ahead

Oil price volatility has made for difficult conditions throughout the industry and, while PETRONAS has not been spared by this, the company remains structurally robust with ample reserves for any future business opportunities.

Production from its many domestic discoveries is expected to bear fruit in the fourth quarter of financial year 2013 and, with its floating Liquified Natural Gas (FLNG) expected to be completed in 2015 – the first of its kind in the world – it will pave the way for further moneti-sation of small and stranded gas fields throughout Malaysia and elsewhere.

Despite the challenging global energy landscape, PETRONAS last year managed to sustain its revenue and earnings, a measure of the seriousness with which it takes its role of charting and funding the future of energy in Malaysia. �

“While renewables and clean energy efforts are key considerations, the team’s focus is in line with PETRONAS’ overall business strategies and is balanced against commercial considerations,” he said.

“With respect to financing, we do not treat such projects differently from our other projects. Economic viability is still the underlying driver before embarking on a project. However, PETRONAS still supports initiatives for development of non-conventional and alternative energy projects via our technology R&D fund.”

Financing the future

In Malaysia, energy policy and govern-ment strategy are meshing to create fertile ground for the financing of future energy projects.

In Malaysia, energy policy and government strategy are meshing to create fertile ground for the financing of future energy projects

24 25

THE FUTURE OF GAS

He said that within little more than a decade, Asia Pacific will become the world’s biggest gas demand centre and PETRONAS will be ideally placed to tap into the boom.

“In terms of LNG supply, Australia will overtake Qatar as the biggest exporter if all the announced projects are success-fully implemented,” he said. “East Africa, with significant recent discoveries, has the potential to be another major supplier. In Europe, Russia will continue to be a major supplier.”

The LNG boom

PETRONAS, with its policies of promoting self reliance, plays an important role in the Malaysian economy. However, the country’s growing importance as an LNG hub means that it is likely to play an increasingly significant role, not just domesti-cally, but across the region.

“PETRONAS has been exporting LNG since the early 80s. Today PETRONAS is one of the top suppliers of LNG in the Far East market,” Datuk Anuar said. “We want to remain relevant and continue to be an important supplier.”

To protect its position, PETRONAS has embarked on a num-ber of important projects.

“In Malaysia, we are constructing another train at our Bintulu Complex. We have started on a floating LNG project and we plan to sanction the second floating LNG plant before the end of the year,” Datuk Anuar said.

“In Australia, our GLNG joint venture is progressing well. In Canada, we have acquired Progress Energy and with this, we plan to construct an LNG plant in British Columbia.”

Besides LNG, PETRONAS has also developed an onshore gas pipeline network to serve the domestic market and Singapore.

“To supplement declining domestic production, PETRONAS has commissioned an LNG import and regasification terminal. Another terminal is being planned. To encourage other market-ers in the domestic market, we are allowing third-party access to our facilities,” he said.

The role for gas

The past two decades have been characterised by the de-velopment and diversification of gas markets worldwide, but to what extent has the profile of gas in the fuel mix changed?

Gas – due to its low carbon emission and abundant sup-ply – is becoming the fuel of choice for many countries and PETRONAS is constantly calibrating its commitment to the fuel to reflect these new realities.

“According to the International Energy Agency, gas’s share of primary energy mix will increase to about a fifth in 2020 and almost a quarter in 2035. The bulk of the increase will be for the power sector,” Datuk Anuar said. “Efforts are being made to increase its use in the transportation sector.”

Despite the fact that the exploitation of unconventional gas has made the availability of gas more evenly distributed geographically, physical and geopolitical constraints mean that supply through pipelines is not always feasible.

LNG, therefore, is likely to be at the heart of this evolution.“We can expect LNG to play a bigger role in meeting the de-

mand for gas,” Datuk Anuar said. “Today LNG contributes about 10 per cent of requirements. In 2035, it is anticipated that the contribution will increase to about 14 per cent.”

In the meantime, the growing importance of gas as a base

fuel in Asia – powering everything from transportation to electrification – is reshaping the way that gas is marketed at a fundamental level.

Costs will be key

Developing new projects that can deliver gas at an affordable and reliable rate will be a key challenge for PETRONAS in an environment where costs have been rising inexorably.

How PETRONAS delivers on its pledge to ensure Malaysia’s future energy security will require tough decisions and delicate strategic balances.

“The prolonged strength in oil prices has encouraged heavy investments in oil and gas industry. This has led to an upward pressure on costs,” Datuk Anuar said. “In the past year, costs have risen by about 10 per cent.

“In Australia, where several projects are ongoing, construction costs there have spiralled and are about three times higher than in the US. A number of projects proponents have experienced significant cost overruns.”

Plant expansion, brownfield projects and those near demand centres, where supply costs will be lower, will be able to com-pete better, Datuk Anuar said.

The unconventional gas boom

In a relatively short time, unconventional gas has altered the North American energy landscape; it is no longer dependent on gas imports. The LNG once destined for US shores must now find new markets.

PETRONAS, meanwhile, is poised to take advantage of this boom. “PETRONAS wants to continue to be a significant player, especially in the Asia-Pacific region,” Datuk Anuar said. “The abundant unconventional gas in North America certainly pro-vides us with the opportunity to acquire competitive gas assets.”

As part of this thrust, PETRONAS last year acquired Progress Energy of Canada at a cost of C$5.3bn. “This acquisition ena-bles PETRONAS to plan an LNG plant in Western Canada for export of LNG to the Asia-Pacific region. With this resource, we will be able to meet our customers’ desire to secure their LNG requirements at competitive prices.”

The role for gas-fired plants

Gas is becoming increasingly important in Asia as a fuel for electrification, and PETRONAS here is also in a position to ben-efit from this growth.

“The bulk of the gas demand globally will be for power generation and this trend is also applicable to the Asian region,” Datuk Anuar said. “As a result of this, demand for gas in this region will continue to remain strong.

“In 2010, Asia accounted for about 12 per cent of world gas demand. By 2035, its share will be 22 per cent. PETRONAS, with new LNG projects being planned and implemented, is definitely in a position to take advantage of this situation.”

Malaysia’s proximity to Singapore, which also plans to be-come a major LNG hub, offers obvious synergies.

“If Singapore succeeds as an LNG hub, our import termi-nals can be modified and utilised for trading activities by third parties,” said Datuk Anuar. “Currently, there are already parties planning to construct terminals for trading in Malaysia.” �

THE FUTURE OF GAS

Right: Executive Vice President for

Gas and Power, Datuk Anuar Ahmad;

Below: Gas processing plant,

Kertih Terengganu

26 27

DOWNSTREAM

logistics and transportation,” he said. “We also have Technology and Engineering division which amongst others, manages some of the major projects undertaken by the Group, undertakes se-lected procurement for projects and provides technical services to Operating Units in PETRONAS.

Room to expand

PETRONAS, meanwhile, has embarked on an expansion pro-gramme of selective growth in its downstream business.

“At the moment, the big piece we have on our plate is the Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Southern Johor, Malaysia and that is a huge piece for us,” Datuk Wan Zulkiflee said.

“It is a US$20 billion investment and a lot of effort has been put into that.” he added.

Southern Johor was chosen as the location for the project due to its proximity to deepwater port facilities and regional demand centres. The location enables easy transport of finished products to the market.

The complex covers an area of 2,000 hectares, includes a 300,000 barrels per day (bpd) crude oil refinery and aims to

produce nine million tonnes of petroleum products and 4.5 mil-lion tonnes of petrochemicals per year.

“The other expansion area is the ammonia and urea plant which we are building in Sabah and that is the second big project that we have currently,” said Datuk Wan Zulkiflee. “There are also small projects, essentially plant improvements and we are also looking at the viability of expanding our base oil productions.”

PETRONAS Downstream Business is aggressively growing its lubricants business.

“That is a global business with a global presence,” he said. “We are in the process of completing an acquisition of a lubri-cants company in China and that is the other growth leg for downstream.”

Challenges ahead

PETRONAS, while expanding, is also rationalising and consoli-dating its business.

“The whole idea is to have a portfolio of quality assets. That is very important for Downstream Business,” Datuk Wan Zulkiflee said. “What we are looking at are assets that give us superior

Left: Megamethanol plant, Sabah

DOWNSTREAM

P ulling together PETRONAS’ downstream opera-tions that add value to the oil and gas business is a challenging undertaking. With products as diverse as lubricants and petrochemicals to retail operations,

downstream operations must make each dollar work hard to add to the value chain.

Tasked with extracting value from these seemingly dispa-rate products, PETRONAS's Chief Operating Officer (COO) and Executive Vice President of Downstream Business, Datuk Wan Zulkiflee Wan Ariffin says that Downstream Business is a margin business.

“In terms of revenue, downstream accounts for as much as 54 per cent,” Datuk Wan Zulkiflee said. “But this is a margin business, so unlike Exploration and Production (E&P) or Gas and Power (G&P) business, our returns are very small."

“In terms of contribution to the group, our bottom line would be approximately 11 per cent,” he said.

Downstream business

PETRONAS’ Downstream Business has three strands, Datuk Wan Zulkiflee explains. Firstly, the Malaysian national oil group

operates four refineries for its petroleum products with a total refining capacity of approximately 500,000 barrels per day. In addition to the refining business, this strand also acts as a system balancer through its trading of crude and petroleum products in the global market.

The second part of Downstream Business is marketing. The petroleum products from these refineries are marketed through its network of service stations in Malaysia and South Africa, In addition, the Business also has service stations in some coun-tries in the sub Saharan Africa region as well as in Sudan.

The third strand is petrochemicals. With feedstock from the Peninsular Gas Utilisation pipeline, PETRONAS is positioning Malaysia as a regional petrochemical hub, establishing two Inte-grated Petrochemical Complexes (IPCs) with the latest logistics and infrastructure capabilities.

“We have put all the business of the petrochemicals into one listed company and that is PETRONAS Chemicals Group,” Datuk Wan Zulkiflee said.

In his role as Chief Operating Officer, Datuk Wan Zulkiflee also oversees group operational excellence.

“This is a staff function that oversees the operational excel-lence of the plants which include the operational safety of our

FORGING THE LINKSIN THE PETRONAS VALUE CHAIN

Balance, foresight and tough decision-making drive PETRONAS’ downstream business

Left: Executive Vice President of Downstream Business and Chief Operating Officer at PETRONAS, Datuk Wan Zulkiflee Wan Ariffin

28

DOWNSTREAM

returns or at least at par with our competitors.”PETRONAS is engaged in one of the world’s most competitive

industries and, as a consequence, is constantly looking at the performance of the assets in its portfolio.

“The retail business overseas is challenging,” Datuk Wan Zulkiflee said. He said in places where the environment is too difficult, PETRONAS has not shied away from taking tough decisions.

“Over the years we have divested our retail businesses in Thailand and we are also divesting our retail business in Indone-sia,” he said. "We continuously ensure the quality of our assets through an active portfolio management.”

Seeking synergies

For PETRONAS to extract the maximum benefits, it must keep adding value throughout the value chain.

“In Malaysia, our E&P colleagues supply the gas feedstock and we monetise the gas as we add value to the gas with our ethylene crackers and keep adding value further downstream,” Datuk Wan Zulkiflee said.

Over 20 years, PETRONAS’ Kertih IPC and the Gebeng IPC have grown to become home to more than 20 petrochemical plants. The complexes are supported by the synergies from the infrastructure facilities comprising the Centralised Utility Facili-ties (CUF) and the ports in Kertih and Kuantan.

“In the petrochemical business, every cent counts,” Datuk Wan Zulkiflee said. “It is a margin business, so by having these integrated complexes we can extract a lot of synergies.

“What we mean by integrated complexes is that the product of one plant becomes the feedstock of the next plant,” he said. “And since it is just across the fence, we have a lot of savings in terms of logistics.

“For example, when we go out to our service providers, we can really control our costs because we have economies of scale. It is also good in terms of manpower optimisation.

“We have a lot of shared services for our procurement and we have centralised our finance and human resources and all of these very important backroom operations. These are the kind of synergies we have.”

While much of this is nothing new for PETRONAS, constant development of these synergies allows it to build on what it already has.

“A lot of the complexes are very much integrated and we are replicating this model in Johor as well,” he said. “The big RAPID project relies a lot on integration and, in this sense, integrating the refinery with petrochemicals. Overall the complex will be very well optimised, well synergised.”

The advantage of space

In a region as densely populated as Asia, Malaysia has the benefit of land; the ability to site major projects away from large population centres, positioning the country as a regional hub for the petrochemical industry.

“We have a lot of real estate that Singapore is lacking now,” Datuk Wan Zulkiflee said. “But we do not see ourselves as being in competition with Singapore as we have many areas in which we can work together and complement each other. "

“Our big project in Johor is just a few kilometres across from Singapore’s complexes and there are many product streams

that may have the opportunity to move from one place to another.

“This will be a strong oil and petrochemical hub once it is all developed for Singapore as well as Southern Johor,” he said.

“We are able to complement each other in terms of service providers as there are a lot of synergies and we will realise more synergies when we are in operations,” he said. “Things we do not even see today, I am sure there will be a lot more opportu-nities to work together once we start operations.”

Sustainable growth

Sustainability is not just key for the downstream business but for PETRONAS as a whole. According to Datuk Wan Zulkiflee, the sustainability framework is driving shareholder value, not just for the present but decades ahead.

“When we talk about the environment, what we are look-ing at is a baseline for our water consumption across all of our operations,” he said. “We have also been baselining our CO2 emissions."

“We have an energy loss management system to optimise our energy consumption and over the past few years we have pulled all these together into one sustainability framework.”

While sustainability initiatives can be expensive in the short-term, the rewards are likely to be greater in the future.

“We are very cautious in terms of what we spend,” Datuk Wan Zulkiflee said. “But the cost-benefit is always an element we evaluate.”

“In the long term, all of this will bring benefits to the business if we invest in energy optimisation and power consumption. When you look at the total cost over the long-term, it makes sense to invest.”

Downstream and the future

Keeping a vibrant downstream business requires constant in-novation; testing new products and above all, penetrating new markets.

With much depending on its products, Datuk Wan Zulkiflee says the pursuit of quality and excellence is crucial to keeping downstream a vital part of the PETRONAS’ story.

“We go into those markets that give us the best value,” he said. “At the moment, we have our lubricants in more than 50 countries. We market more of our petroleum products in the sub Saharan African markets, while for petrochemicals prod-ucts, we focus on China and ASEAN countries."

Despite PETRONAS’ global reach, some of its best markets going forward are likely to be closer to home.

“I am very bullish about ASEAN,” Datuk Wan Zulkiflee said. “The total population of ASEAN is around half of China, and I think it is a lot easier for us to do business in ASEAN countries because of the cultural familiarities and because of its proximity.

“ASEAN for us is a big market,” he said. �

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