Oil price keep on sliding today as storage capacity is about to reach maximum level therefore Indonesia try to seek for tankers to store refined fuels at sea as it seeks to take advantage of plunging prices. This situation is so bad for oil exporting countries who rely so much on their crude oil export.
Malaysia is a net crude oil exporter
As of 2017, Malaysia is a net exporting country. 59.6% of crude oil was exported and 40.4% of it was imported. These figures made up of Malaysia as a net exporter.
Not a good time for Malaysia
Today is not a good time Malaysia as oil price hardly hit USD 30 per barrel. As a crude oil producing nation, tough times like this will severely hit national coffer. Our national budget heavily relied on crude oil revenue at 20.7%. To make it worst, it was budgetted at USD 62 per barrel prior to COVID-19 pandemic. In 2019, we used to relied up to 30.9% thanks to Petronas special dividend given during those times.
How much revenue anticipated to lost?
If the crude oil price hovering around USD 30 per barrel throughout the year due to COVID-19 as well as storage capacity issue, Malaysia is about to lose RM 2.3 million a day for every dollar dropped for 524,000 production throughput starting in May 2020.
Does Malaysian government need to revisit the 2020 budget?
A direct answer will be YES. As the policy makers were forecasting for USD 62 per barrel prior to budget hearing in the parliament. This is about 50% decreased from budgeted price. No one saw this coming. Previously we used to ‘diet’ at around 14.6% revenue reliance in 2016 to petroleum product. Cushioned the loss of petroleum product by introducing GST on April 2015.
Well, does the losses need to be cough up?
Most likely. I think the government of the day will sit down with Petronas to top up 2020 budget deficit. This is simply due to availability of their strong warchest in KLCC tower. Petronas has RM 174 billion in cash and cash equivalents according to their 2018 Annual Report
How much are we talking here?
Considering revenue losses of around 60%, this figure prove to be staggering. In terms of accounting, I really do not know. However based on finance, it should be around another RM 35 billion on top of commited dividend amounted RM 24 billion to cushion the losses.
Considering revenue losses of around 60%, this figure prove to be huge a dent. If in 2019, Petronas can contribute RM 80.8 billion thanks to higher oil price at an average of USD 71, this time they can do the same thing in the name of national interest.