BIG oil names like ExxonMobil, Shell, Chevron and TotalEnergies had a weaker financial year in 2025 mainly due to softer energy prices despite the strong growth of the world economy.
Petroliam Nasional Bhd (PETRONAS) was no exception. Malaysia’s national oil company’s (NOC) earnings for financial year 2025 (FY25) slipped 18% year-on-year to RM45.4bil, as average crude oil prices eased to about US$70 a barrel from an average of US$80 in 2024.
Revenue fell 17% to RM266.1bil due mainly to lower average realised prices, lower sales volume and the divestment of Engen Group.
The stronger ringgit against the US dollar in 2025 also had a dampening effect on the profit number, according to management. The company declared a dividend of RM20bil to the government, a payout rate of 44% of its net profit.
PETRONAS’ balance sheet remains healthy in a net cash position.
Although FY25 earnings were lower, its integrated portfolio remained resilient.
The gas and petrochemicals divisions have become the backbone of its earnings. Its core energy business market outlook is bright.
The artificial intelligence (AI) thematic has made energy security more pressing and hydrocarbons like natural gas will likely remain the anchor feedstock for most countries. The move to lower carbon output from coal-based electricity production is another market its natural gas can help to substitute.
The group’s petrochemicals segment, however, is facing headwinds from global oversupply fundamentals for most of the commodity chemicals while demand growth remains soft, more so as China has reduced its dependence on imports.
This saw its downstream PETRONAS Chemicals Group Bhd (PetChem) posting a RM2.1bil net loss for its FY25, the first since listing in 2011.
Industry analysts only expect to see some relief at the earliest by late 2027 as new greenfield capacity add-on continues, while less efficient older standalone crackers continue to hang on, operating as low as 60% to 70% of capacity. So PetChem remaining in the red in 2026 is likely.
The warring in the Middle East, however, has provided temporary support to crude oil prices after averaging lower for much of 2025 due to bearish demand supply fundamentals.
As some 20% of global oil consumption flows through the Straits of Hormuz, any disruption could see a violent price response in the markets.
Hence, the negotiations between the White House and Iran over the next few days could have major implications for the world economy.
PETRONAS, however, has its own battles to fight.
The moat it built in the domestic market as the sole NOC is now being challenged by the legal attempt by the Sarawak government to regain control of resources in its offshore waters under the Malaysia Agreement 1963.
The state government is challenging the role PETRONAS has played for some 50 years in the state under the Petroleum Development Act 1974.
The Office of the Premier of Sarawak in a recent statement, said the federal laws infringe upon and restrict Sarawak’s rights over its natural resources, particularly oil and gas that are located in the seabed of the continental shelf.
In contention are some 43 trillion standard cubic ft of natural gas or about 50% of Malaysia’s reserves and about 10% of Asia- Pacific proven reserves. PETRONAS ships out about 400 liquefied natural gas (LNG) cargoes out of its Bintulu LNG plans annually to clients across the Far East.
The Bintulu facility is the backbone of Malaysia’s LNG exports.
Meanwhile, PETRONAS’ brownfields in the peninsula have aged, so there is much at stake.
A breach of the moat would be material but PETRONAS can rebuild. In some ways, the dispute highlights the need for PETRONAS to build a more robust portfolio. The catch is that this will require big money, especially if it wants to stick with an integrated business model for downstream and upstream operations.
That means the amount of dividend it pays to Putrajaya could be limited to a more palatable level to build its portfolio ex-Sarawak. Its LNG Canada project is a good example of the type of investment it will have to make.
PETRONAS’ financial performance could be a little more resilient if it can scale up its non-hydrocarbon business, which accounts for less than 5% of revenue, and help offset the volatility in energy and petrochemical prices.
Currently, its non-hydrocarbon segment includes investments in renewables, biofuels, green mobility and other services.
Scope to grow internationally is there but slow traction on policy measures domestically is said to be limiting investability here.
On paper, by 2030, Gentari, PETRONAS’ clean solution arm, aspires to build renewable energy (RE) capacities of 30GW to 40GW, supply up to 1.2 million tonnes per annum of hydrogen, and to become a preferred green mobility solution provider with a 10% market share in the Asia Pacific.
As of end-2025, PETRONAS’ RE capacity in operations and under development stood at 9.1GW, of which 4.2GW is installed capacity.