UNIVERSITI PUTRA MALAYSIA

A CASE STUDY ON
PETRONAS CARIGALI SDN BHD
(Facing the International Challenges)








WAN ZAINUDDIN HJ WAN MUDA







GSM 1997 7
'ESIS
A CAE STUDY ON
PETRONA CAGA SDN BHD
(Facing the Interational Challenges)
BY
WA ZNDDIN HJ WA MUDA
MATRC NO. : 45161
MTER OF BUSINESS ADMINISTITION
MYSI GRDUATE SCHOOL OF MAGEMEN
UNRIT PUR MYSI
SERlG
SELGOR DmUL EHSAN
DECEMBER, 1997
A Case Study On
Petronas Carigali Sdn Bhd
(Facing The International Challenges)
By
Wan Zainuddin Hj Wan Muda
Matrie No. : 45161
This Case Study is submitted in parial fent of the
Ieqement fol the Mastel of Business Acministation,
Malaysian Grduate School of Management, Univelsity Putn
Malaysia, Seldang, Selangol Dall Ehsan.
Confidentialit Statement
The Case Study is purely an academic exercise undertaken by the
author. The case herewith contains certain information that shall
not be disclosed to the public. Thus no part of this document is to
be reproduced in any form and be used in any manner without
prior written permission from the author.
Acknowledgement
First, I would like to extend my deepest gratitude and appreciation
to my Supervsor, Professor Dr.Mohd. Ismail Ahmad for hs
gudance, coments and valuale suggestions during the course of
preparing this case study. A big thank you and credt shall also be
given to all lecturers throughout the whole MBA programme for
their interesting lecture whch makes al of us more clear and
understanding on the business concept and strateg which is
important for today's competitive business environment.
A word of than shall also go to my wife and chldren who provde
me a valuable inspiration and have been the most patient,
understanding, supportive and encouraging for taking this course.
Without them, the completion of ths case study and the MBA
programme woud not have been possible.
Than you so much - I love you all ..... .
Originalit of the Document
I, Wa Zanuddn Hj Wa Muda, Matrc No.: 45161, a fnal year
sudent of the MA progame at the Unversity Ptra Malaysia,
Serdang, Selangor Dar Ea hereby conrmed that the case
prepared for the aove progame is puely the sole efor of my
goodel.
Name: ' ddn Hj Wa Muda
Date : ,1998
PART I
PAT I - CASE
Tale of Content
Secton Descrpton Pge
Diaoe
1 .0 Introduction 4
2.0 Background 6
2. 1 PEONA 6
2.1.1 Vsion & Mission Statement 11
2. 1 .2 Shared Values 1 1
2.2 PEONA CAGA SON BHD (PCSB) 1 2
2.2. 1 Vision Statement 1 3
2.2.2 Business Objectves 1 4
3.0 PCSB Organisation Strcture 1 5
4.0 PCSB Milestones 1 8
4. 1 Domestic 1 8
4.2 Interational 1 9
5.0 Core Business Actvtes 1 9
Domestc
Interatonal
6.0 Market Trend i Oil and Gas Industr 25
7.0 Manpower / Workorce Management 28
8.0 Organisational Efectiveness Study (OES) 31
9.0 Financial Situation
32
Eioge 34
PAT I - CASE AAYSIS
Tale of Content
Secton Descrpton Page
1 .0 Eecutv Summar 35
2.0 Problems ad Opporunities 37
3.0 PCSB Vsion Statement Aalysis 38
4.0 Aalysis and Discussions 4 1
4. 1 Situaton Aalysis 4 1
a) Nature of demand
b) Eend of demad
c) Nature of competton
d) Evronmental climate
e) Sklls of the compay
f
Distrbuton B Promoton
4.2 Financial Aalyis 52
4.3 SOT Aalyis 59
4.4 SPACE Aalyis 76
5.0 Strateg Ateratvs 81
5. 1 Exasion Strateg 81
5.2 Combinaton Strateg 84
6.0 Strategies Implementaton 86
7.0 Conclusion 9 1
References
Fige 1.0 -
Fige 2.0 -
Fge 3.0 -
Fgre 4.0 -
Fgre 5.0 -
Fgre 6.0 -
Fge 7.0 -
Fgre 8.0 -
Fge 9.0 -
Fge 10.0 -
Fge 11. 0 -
Table 1.0
Tale 2.0
Tale 3.0
Tale 4.0
Table 5.0
Append I -
Append u-
Lst of Ilustatons
Figes
PETONAS Group of Companes
PETONAS Organsation Strctue
PCSB Organsation Strctue
PCSB Buiness Activties at Domestic
PCSB Business Actvties at Internatona
PCSB Buiness Activties Focu Coutres
PCSB Manpower Distrution
PCSB Tover
PCSB Proft Aer Ta
Process of Internationa Marketing Strateg
SPACE Matr
Tales
Globa Oil Demand & Supply
World Crde O Prce
Aia Oi and Gas Poducton
Broad Crtera for Coutr Ay
PCSB Fnancia Standng Su ar
Andices
PCSB Fnancial Statement
SWOT Aalysis Table
- Tale 1.0 External (Indutr) Aaysis
Table 2.0 Interna Anaysis
Table 3.0 SWOT Matr
PAT 1 - CASE
PTRONA C.GA - Facig te Interatona Chaenges
Dialoge
Yag Aat Behorat Dato' /d, te Maagg Diecor of PCSB kept on
pondeg lookg at te blue s out of te taest budg i te wrld, te
Petona T Tow He w fou on te fte of te cmpay Havg n
te compay eveice its icpton, he wndeed i te compay coud kep
pace wt te c et compettv buiess evonent. mt te c et
ueeced economica proble fe ed wt c ec proble fcg by te
naton he tought tat he ought to do sometg rte ta st dow
pondeg te ftue.
He piced up h phone ad cal up h seceta I
Rg .... Rg .... Rg ...
Magge
YADato'
Magge
YADato'
: He o, what ca / do for you Dato'?
: Magge, ca you scedue a boad meetg on Tuday, 21 8
Juy. 97 at 9:0 a i te Boad Meetg room ?
: Ceay ca Dato Do you wt a te boad of decor to
ated te meetg?
: Yes, pleae ca a te boad of dector le E Ja, Dr.
Kad, E. T ad Dr. Ha. Te te tat tey a mut
come to t ut meetg.
Te cacters i t daoge ae puely fctous ad does not resemle of ay rea people
either lvg or dead.
- 1 -
Magge
YADato'
: Vez wl , I ior tem rght awy Dato Is tere ayg you
wt me to do ?
: Tt' alMagge, ta you.
On Tuday 20 Sept. 1997 i te Boad Meetg Room
YADato'
E/a
DrKad
YADato'
Dr. Kad
: Good morg geteme. I have been tg had latey
ponderg how PSB coud cope wt te cet compettve
bues ad economca staton. A t mght aect ou
buies, I t w soud do sometg more tat what w
have done to sua te buiess. Tu, I hope t meetg ca
provde a ft step towd deveopig te approprate
stte to be adopted by te compay. Ay suggeston fom
te mee ?
: We Dato I agee wt you tat cet staton ceay wJ
a ec ou buess. Wat more tat w ae i te oi ad ga
idut whee w need hgh ivestet, h-tec eqpmet,
ad eere to n te idut.
: But what ca w do? Uw deped soley i te oi ad g
resouces domestcaly w deftey be a eced by te cet
economc sitaton. Uness w ead ou buess outde
Maayia.
: You mea, w go itematonaly ?
: Yes Dato It' a ted tese day tat may coutes ead
tei buiess outside tei ow coutes.
- 2 -
E. Taa
Dr. Ha
E Taa
DrKad
YADato'
Dr.Kad
YADato'
:
:
:
:
Tat' a good idea. Do w have eough resoues ad prepae
to go iteatonaJy?
Ca you eaorate a bit more what do you mea by tat ?
We ..... what I mea i tat do w have te rght people to look
for iteatona buies acvtes. We need eerence
people a wla capita.
I need to add sometg ... Apa fom tese resoues, w ao
need to look at ote facor i w w to get ito itematona
buess l poltca staton, itce, cte,
economc ad may more.
: Dr. Kad, ca you prepae a repor on te c et compay
peorace ad staton beore w dcsfe on te ne
coue of acon.
: I ceaiy ca Dato I wlprpae ad pasit to aJboad
mee whe w meet ag i te forght.
: T meetg detey a good step towd plan g
sttecaJy for te ft gow of te compay We ca
brtor aga i te ne meetg.
(r Kad, E. ja, E Ta & Dr Ha uaouy ageed
wt Dato' idea.)
U tere i no more qeston, w adjou te meetg ad meet
aga wt te ne t we say on te 5 t Augt, 1997 at
te sae te.
*********
Ed of Diaoge
*********
- 3 -
1.0 INTRODUCTION
It was envsaged that globalisation of the world economy in ters of trade
and investment would become more evdent wth rapid advncements in
transpor, communication and inforation technologies. A the
twenty-frt centur approaches, the word would undergoing enorous
change, a process of great upheavl and great possibility. In just a few
shor year, we have wtnessed the daw of post-industral society, the
advent of the inforation age, the rsh to computersation and therefore
intensity compettion.
Te increasing trend towards regionalism in trade and economical
relationships would make it more imperatv for small open economies
like Malaysia to adapt efectvely and speedily to the conseqent
challenges to maintain their comparatve positon. Interational
competitveness would be a movng target. Howevr, it has the
underinning objectve of maxmising and increasing productvty as well
as efciency.
Business envronment has grow dramatically more intense including in
Malaysia, and competition has become more global and more energised.
Ad technology races on. No longer could business safely ignore their
customer's wants and needs. No longer could personal relatonships be
granted. No longer could so much human creativty go so scandalously
untapped.
- 4 -
PERPUSTAKAAN SULTAN ABDUL SAMAD
UNIVERSITI PUTRA MALYSIA
Malaysia was a unique countr in the sense that it was one of the few
countres in the world which has, wthin the span of to decades,
succeeded in brnging about a socio-economic transforation of socet
whch h enabled Malayian fom all w of life to gain beneft of
development and enjoy a better quality of life. Vision 2020 that pavd the
way for meaningfl growh and ordery development would ofer vst
opporunites and challenges for Malaysian industres parculary in the oil
and gas industres. I the world of rapid and profoud change, the role of
a multnational in the oil and gas industr was still one of the contnuing
and increasing contrbuton to the development of natonal economies and
to the improvement of the qality of life of the communities in which we
operated and whom we shared a common fture. (1)
A a signifcant contrbutor to the naton's growh as well as major exor
earer and contrbutor to the national revenue, the oil and gas industr has
played a key role in the nation industralisaton jourey towards attaining a
flly devlop naton status by the year 2020. Being the leading integrated
Multinatonal Petroleum Cororation, PEONA would continue to
spearhead the development of the oil and gas industr ad contrbute to
the nation through on-going technology transfer and technical sklls
trg gain in varous projects underaken. In order to realise the above,
the key to PEONA fture growh and success was through the market
globalisation such as venturng business activties in the interational
arena. Recognising this, the cororation has embarked on a globalisation
programme to expand its operation into it's chosen strategic market
around the world.
- 5 -
2.0 BACKGROUD
2.1 PETRONA
Te frst commercial oil development in Malaysia dated back as early as
1910 when the Aglo-Saon Petroleum Company, forernner of the
present day Sarawak Shell, developed the Mir oilfeld in Sarwak.
Beteen that perod and Aprl 1, 1975, oil companies in Malaysia was
operated under the Concession Sytem for exploitaton of the
hydrocarbon. Under the Concession System, oil companes had the
exclusive rght to exlore and produce oil and gas felds. Roylty and
taes were paid to the respective state/federal goverment.
On October 1, 1974, the Petroleum Development Act (PDA) was enacted in
parliament. Under the PDA, the entre owership and exclusive rghts,
power, liberes and prvlege of explorng, exloitng and obtaining the
oil and gas in either onshore or ofshore Malaysia were vested in a
cororton called Petroleum Nasional Berhad.
(2
PEONA, the acronym for Petroliam Nasional Berhad, was the natonal
petroleum cororation wholly owed by the goverment of Malaysia.
Since its incororation in 1974, PEONA which has been vested wth the
entire owership and control of the countrys oil and gas resources under
the Petroleum Development Act, 1974, has grow to become a flly
integrated petroleum cororation, divrsifng rapidly fom its upstream
activties into the dowstream sectors.
- 6 -
PEONA has made tremendous progress since its inception in 1914 to
gain a favourable reputation interationally. Today, PEONA has grow
into an integrated oil and gas company operating beyond national
boundares.
Curently, PEONA business actvty for both domestc and interational
level was underaken by the vrous group of companies. Te PEONA
Group of companies consisted of 41 wholly owed subsidiares, 20 parly
owed subsidiares and 21 associated companies. Figure 1.0 illustrated
PEONA Group of Companies. Meanwhile, Figure 2.0 illustrated
PEONA Organisaton Strctures and business activtes at the cororate
levl.
- 7 -
WO((Y-OWEDSUS|D/AR|ES

MO&W
.

1=

W|W
~

{QWW
=
WW
l
WW
UOwMl=W
~
W
'
WW

MW8w
'
!MlWW

WW
POWW

MWW
'
MPM M
HC
TWW
lYTW1WW
PWW
'
WW
YlW
.
WW
ww{P

WWWWW
=

m
MTWmMW
~

~
=W
~
SA
!W
W

MOCWW
PARTLY-OWEDSUS|DMR|ES
- OPTDW

MWW't
I
_ MUDWW I
.
OTHER COVPANES

W~>W|

WW
=
WWI4
'
'

^P^W|
y |
l=(
@}(MI
WW
T
FIGURE 1.0 PETRONAS GROUP OF COMPANIES
- 8 -

MANAGEMNT
COMMITTEE
GOUP PVBUC

A
F
FAIRS

RGIOAL OFACCS l
J
COMANY SECRETAR

LSERVICES

LL PlANNING

BUSINESS DVOPMENT
BRD OF

DIRECTORS
PRESIDENT ICEO

DTO'M. HM ...

l
.

HAUDIT
COMMrE
!L
INTERNAL AUDIT
HLLH.Wm
ENVIRONMENT
LLVN
LHLL

FINANCE SECTO

UK
RESORCES

REFING
'

SECTO
MAGEMENT SECTOR
NK1M SECTO
I

I I
TNSPORTATIO
I
) HUMA RESOCES

LWK &MRINE
MMENT
SECTOR SERVICE SECTOR
SCTOR
|
|

FIGURE 2.0 PETRONAS ORGANISATION STRUCTURE

- 9 -
PEONA was now a fll-fedged oil and gas company which engaged in
a wde range of activtes. coverng petroleum exloraton ad production.
oil refning. marketng. trading and distrbuton of crde oil and petroleum
products. natural gas processing. transmission and distrbuton. natural
gas liqefacton and marketng oil liqefed natural gas. and manufacturng
and marketng of petrochemicals and ferlisers. Due to the goverment's
depleton policy. oil producton in the countr was levelled of between
600.000 bopd to 650.000 bopd.
Today. wthin a strong foothold in the countr. while building on to its
domestc operatons. PEONA was actvely expanding into the global
market forging towards its vsion of becoming a mult-national petroleum
cororaton. A PEONA President says . . . .
"
Te most crtcal challenge
would be to achiev and keep our compettve edge in the interatonal
arena where we would be up against the most established and exerence
player. I order to realise the above. we need to rexae ouelvs
id cOltuously iprve 01 evg w do in order to achieve the
most cost efectiveness. efcient utilisaton of our resources .... we must
continuously seek improvement in our organisaton and respond positvely
to the constant changes in the dyamic business envronment that we
t
"
(3)
opera em . . . . . . .
- 10 -
2. 1 . 1 VSION STATEMENT" MISSION STATEMENT
PEONA, havng consolidated its positon at home and wth the
exerse and kowledge acquired ovr the span of 20 years of its
exstence, was spreading its wng ad venturng abroad to pursue its
"dreams". I order to realise organisatonal goals, PEONA has recently
launched the long ter Vsion Statement as well as creating a Mission
Statement to benchmark and evluate organisaton success.
PETONA VSON STAT
" To be a Leading Oil and Gas Multnatonal of Choice "
PEONA MSSON STAT
" We are a business entty,
Petroleum was our resources,
Our prmar objectiv was to develop and add vlue to this natonal
resources,
Our obj ective was to contrbute to the well being of the people and the
naton"
2. 1 .2 SIED VALUES
In additon to havng both Vsion and Mission Statement, PEONA also
launched organisational "Shared Values" to enhance organisational
objective in achievng the goals.
- II -
L
yt
Pofessiona -
Itegt
Cohesveess
Loyalty to the Nation & Cororaton
Committed, Innovtve and Proactve and
Away Strvng for Ecellence
Honest ad Uprght
United in Purose and Felowhip
With the above Vsion, Mission Statement as well as establishing "Shared
Values" statement, it ws envsaged that PEONA employee could foster
a better teamwork, qality product ad serces which could provde
competitve edge, ad hence would porray PEONA image, reputation
and success of the organisaton not only at home but also at the
interational arena.
2.2 PETRONA CJGA SDN BBD
PEONA CAGA SON. BH. (eSB) was one of the PEONA wholly
owed subsidiares incororated on 11 a May 1978. With the increase
business activties in the exloraton and producton of oU and gas and
good potential for industr development, peSB has been entrsted by
PEONA to spearheaded the challenge in the oil and gas exloraton,
development and producton not only locally but also at the interational
arena. To date, peSB was the operator of more than 12 felds, producing
about one third of the countrs total oil and gas production. Te felds
operated by PCSB locally are Ouyong, Oulang, Bekok, Tapis and Pulai in
Peninsular Malaysia, the Tembungo and Samarang in Sabah, nine oilfeld in
- 12 -
Baram Delta area in Sarawak. Meanwhile, i te iteratonal area, peSB
was operating Dai Hung in Vietnam, and few plators in the Caspian sea
which undergoing development phases.
Curently, PCSB has been involved in a number of projects interatonally.
Aong the interational projects underaken by PCSB was in the Aia
region such as Tailand, Philippine, Vetam, Bura, Indonesia, India; in
the Middle East such as in Ir, Irq, Sya; in Easter Europe such as
Trkenistan, Uzbekstan, Aerbaijan; in Aca such as in Sudan and
many more. Trough the year, PCSB kept on venturng into new
concession area and aggressively parcipate in the interatonal arena to
frher strengthen its business. (4)
2.2.1 PCSB VSION STATEMENT
May multnatonal companies set a long ter organisational objectives or
goals kow as vsion statement. Lkewse, as business activtes were
faCing a stchallenge in todays global market envronment, PCSB has
also established company vsion i realising its goals and objectives. With
te vsion, peSB was expected to enhance its capabilities. PCSB vsion was
" To Be A Multiatiolal E & P CompaY ofCloice, Creatig Value
Tugh COltuous Iprovemelt & Grw ".
- 13 -
2.2.2 PCSB BUSINESS OBJECTIVES
One could argue that it was vrually impossible for an organisation to
fnction wthout havng establish some business goals or objectivs. A
objectve set a fture target or end result that an organisation wshes to
achiev. It also set a direction where the organisation was heading
towards achievng its dream. A par of globalisaton efor to purse its
business actvtes, PCSB has set few organisatonal objectves to
spearhead the challenge of the oil ad gas industr that was ver
compettv parcularly in the interatonal arena. PCSB business
objectves were ;
o To acvey pacpate i te elorton of petolew rsoues for te
maw beet of te peopJe
o To ata lopetona ad tecca eee tough mapow
deveopmet ad te te of tecolog i te sorest posle
te
o To aceve a adeate producon leve so a to met te naton tota
cde oi ad ga outut
o To eue mau Maayia ivolvet i te frcatg ad
asemlg of a producton factes ad provion of aca ad
supporve seces i te oi ad ga idut
Te above business objectives were in line wth PEONA President
wshes who said that" ... Te most crtical challenge would be to achieve and
keep our cometitive edge in the interational arena where we would be
- 14 -
up against the most established and exerenced players. In order to be
compettv. we need to constantly re-eae ouelves id
Cltbuously Iprove Oi everbg we do in order to achieve cost
efectvness. efcient utlisation of our resources ....... we must contnuously
seek improvement in our organisation and respond positively to the
constant chages in the dyamic business envronment that we operate

11(
m .... .
3.0 PCSB ORGAISATION STRUCTUR
Havng divrifing its business actvtes outside the domestc
envronment. PCSB basically adoptng fnctonal concept of the
organisaton strcture. Curent PCSB organisaton strcture composed of
essentally fv (5) main divsions that were Eploration. Development.
Commercial Serces. Domestc Operaton. and Interational Operaton.
Each of these divsions was headed by the General Manager who repored
directly to the Managing Director/Chief Eecutve Ofcer. Exploraton
divsion focus on fnding new oil and gas reser that could provde
substantal retur to the company. Wenevr Eploration teams fnd new
oil and gas resere. the feld development ws then be the responsibility
of the Development divsion to frher study how to produce hydrocarbon
fom ofhore. Development divsion composed of Petroleum Deparment.
Drlling Deparment. Design Deparment. Constrction Deparment. and
Serces Deparment that specialise in cerain work scope. Commercial
Serces Divsion manly focused on all contractual matters peraining to
the project devlopment and exloraton actvtes. Meanwhile. for both
- 15 -