The Senate Committee on Studying and Inspecting Corruption, Misconduct and Enhancing Good Governance received a briefing on the principles of good governance of Petronas, exchanged opinions and visited the Petronas Twin Towers. On this occasion, the Committee conversed with Tan Sri Dato’ Seri Megat Najmuddin Bin Datuk Seri Dr. Hj. Megat Khas, Former Chairman and current Independent Non-Executive Director of the Board of Directors and Chairman of the Board Governance and Risk Committee of Petronas. The summary is as follows:
1. Composition of the Board of Directors
The Board of Directors of Petronas comprises members who are experts in specific fields that are beneficial to the organization.
2. Transparency of the Organization
Petronas reports to the parliament to emphasize their transparency even though the law does not prescribe the company to report to the parliament, agencies or organizations. To be more transparent, Petronas organizes public meetings to announce their quarterly report of their past management and future plan. Moreover, Petronas is an independent organization from the government system. Therefore, when Petronas expands their business abroad, for instance expanding their business to Canada, such action will be viewed as a private company that has no relation with the government and gives confidence to customers that the company will be run commercially without politics involved.
3. Code of Conduct and Ethics in Business
Petronas implemented the notion on Code of Conduct and Ethics in Business together with 5 disciplinary principles namely good behaviour, professionalism, loyalty, honesty and good relations within the organization. Furthermore, the organization organized the “Not Giving or Receiving Gifts” project to prevent employees of every level in the organization from receiving and giving bribes and also implemented the “Whistleblowing Committee” to give opportunities for employees and members of the public to complain or disclose information regarding corruption or any misconduct. Ever since such projects have been implemented, there have been 40 – 50 disclosure cases, suggesting that employees are confident the system protects the petitioner.
4. Mass Media Advertising
Tan Sri Dato’ Seri Megat mentioned that mass media advertising is a sensitive matter. Therefore, the budget expenses for advertisement must be approved by the Board of Directors.
5. Research and Development
Petronas emphasizes on research and development and have used their research, namely Commercial Employment Contract System. This research helps the people who are at risk and who receive a low amount of petroleum resource.
6. Notion on Subsidizing Oil Price
Tan Sri Dato’ Seri Megat mentioned, “Petronas (which is a government enterprise) does not emphasize on allocating the profit within the company such as private companies, but is an organization to serve the national public. Every single national is a shareholder of the organization. The government uses the profit to subsidize the oil price for the people. If a company requires profit, then it should have done by exporting petroleum products.” Besides, the government has implemented a policy for Petronas to sell liquefied petroleum gas in an economical price to the people without going bankrupt. To maximize profit, the most profitable business for the company is to produce petroleum. On the other hand, oil refinery has the least profit and the company must monopolize the market to make oil refinery profitable.
7. Opinion on the Characteristics of Petroleum Resource in Thailand
Tan Sri Dato’ Seri Megat (who is a lawyer and a member of the Board of Directors of Petronas since 2001) mentioned that “petroleum resources in Thailand should not be scarce, hard to drill or have a high investment cost because Thailand and Malaysia is in the same geological sphere and some reservoir are drilled by both countries. In the beginning, Malaysia also started with a few resources.”
8. Opinion on Petronas entering the Stock Exchange
Tan Sri Dato’ Seri Megat mentioned that “It may be possible if one Prime Minister of Malaysia changes Petronas to enter the stock market. However, if it happens, that Prime Minister will never be re-elected”.
Views and Suggestions from the Study Visit
The Senate Committee sees that even though there is an increase in interests from the people regarding energy, especially on the management of petroleum resources, the amount of people interested is still low compared to the amount of the whole population. Moreover, the people have an understanding that “energy can only be understood by experts”.
It does not matter if Thailand has a large or small amount of petroleum resource, but there is a limited amount of it. The petroleum will disappear forever when one uses it. Therefore, the government should use petroleum for the upmost benefit for the people. Regarding the procedure, it will be implemented in accordance with the intendment of the Constitution of the Kingdom of Thailand B.E. 2550 on the State Administration Policies, Section 78 (5) prescribing that “to organize a working system for official tasks and other tasks of the State in order to enable the swift, efficient, transparent and accountable formulation and provision of public services with due regard to public participation”. Furthermore, the Standing Committee has recommendations for the people and government as follows:
Suggestions for the People
The people should assemble and establish an academic organization to simplify the language and information on energy for the better understanding of the general public. Furthermore, the organization should coordinate through the networks to create understanding and distribute the information to every group of people with characteristics of “increase knowledge for the people and create network for development”.
Suggestions for the Government
1. The government and Ministry of Energy should stop the 21st concession until an amendment of the Petroleum Act B.E. 2514 for the government to maintain their ownership or sovereignty of petroleum resource in the future. Besides, the new act should have some flexibilities for the upmost benefit for the people. Therefore, the petroleum management system in the future should be a system that allocates the resource equally.
2. For the petroleum reservoir that almost reach its concession’s expiration date, the government and Ministry of Energy shall not extend the concession until there is an amendment to the law to divide the resource equally or employ the old reservoir that has expired already.
3. The government and Ministry of energy should examine every petroleum well invested by private companies to inspect which petroleum reservoir utilizes drilling rig that are rented or self-made in order to change the mentality of private companies from renting to investing by their own equipments.
4. Regarding the process of drafting the new Bill on Petroleum, it requires a public participation as prescribed in the Constitution of the Kingdom of Thailand B.E. 2550 Section 78 (5) that “to organize a working system for official tasks and other tasks of the State in order to enable the swift, efficient, transparent and accountable formulation and provision of public services with due regard to public participation”.
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