PP2986/02/2008 vol.1/08

Engen Soldiers on in Sub-SaharanAfrica with SRDCAcquisition

A Stellar Performance

� e Merdeka Award

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FOCUSENGEN SOLDIERS ON IN SUBSAHARAN AFRICA 4WITH SRDC ACQUISITIONWith representation in 14 African countries including Botswana, Ghana, Kenya, Mozambique, Namibia, Swaziland and Zambia, future prospects remain bright in the African continent for Engen.

ELNG: PARTNERING FOR MUTUAL BENEFIT 6Initially conceived as a strategic energy project to meet the gas requirements of Egypt and the Atlantic Basin markets, Egyptian LNG is testimony of the successful partnering and commitment of various parties for the sustainable development of the Egyptian LNG sector.

AOGC PONDERS A SHARED FUTURE 8While demand for energy resources looks set to continue on an upward trend, the energy industry must fi rst get its act together to prepare for that future scenario.

INDUSTRYSUSTAINING LNG BUSINESS THROUGH 10 PARTNERSHIPFlexibility and long-term mutual benefi ts are key to expansion of the LNG industry.

A STELLAR PERFORMANCE 12PETRONAS Group’s continuous emphasis on operational effi ciency and reliability results in a much improved fi nancial showing.

INNOVATION THE ENGINE THAT COULD 14Engine development initiative by Research and Technology Division promises to be a strong catalyst for technology competency development and increasing the scope of PETRONAS’ offerings.

CORPORATE ROUNDUPPETRONAS AROUND THE WORLD 16PETRONAS Carigali breaks new ground in Turkmenistan.

MERDEKA SPECIALSCELEBRATING 50 YEARS OF HARMONY 20

IN THIS ISSUE OF NADA

Your Say....We want your feedback on what you want to see in future Nada issues. We also welcome your views on stories featured in the current issue. To share your opinions or contribute articles, please write to:

The Editor

Nada PETRONASCorporate Communications DepartmentLevel 70, Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre, 50080 Kuala Lumpur, Malaysia

Cover rationale:

Redza Piyadasa’s work reminds us of the historical background of present-day Malaysia’s social make-up; multi-cultural realities; migration and cultural assimilation; tradition and heritage; political and social history. The artist’s metaphorical visual commentaries remind us of Malaysia’s multi-cultural roots and its rich cultural past conveyed by his Malaysian Series exhibition that was held in conjunction with Malaysia’s 50th anniversary of independence at GALERI PETRONAS. The piece entitled ‘Malaysian Story No. 2’ is reproduced here courtesy of Datuk and Datin Charan Dass Sharma.

Nada PETRONAS is the corporate newsletter of the PETRONAS Group of Companies published quarterly by the Corporate Communications Department of the Legal and Corporate Aff airs Division. Opinions expressed in the newsletter do not necessarily refl ect the offi cial views of PETRONAS and its Group of Companies.

Layout design by:

Creative Section, Corporate Communications Department

Printed by:

Cetakrapi Sdn Bhd

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IN this edition of Nada, we feature PETRONAS subsidiary Engen Ltd, where its Chief Executive Offi cer (CEO) shares the company’s future prospects and opportunities for growth in the African continent in line with Engen’s African aspirations. Also included is Engen’s progress in three focus areas in its EPIC 2016 vision, namely retaining its market share in South Africa, expanding its capabilities in the sub-Saharan Africa market and improving refi ning as well as trading performances.

Then, ponder on key messages from the 12th Asia Oil and Gas Conference that feature opinions and ideas by leaders of oil corporations, government offi cials, consumers and industry experts on a variety of pertinent issues aff ecting the oil and gas industry today. These include high oil prices as well as concerns over energy security and climate change.

On the industry front, read about PETRONAS’ involvement and success story in Egypt’s Liquefi ed Natural Gas (LNG) sector, and how this partnership of mutual benefi t for Egypt and PETRONAS has been an enriching experience. Also read about sustaining the LNG business through partnership, as shared by PETRONAS President and CEO Tan Sri Dato Sri Mohd Hassan Marican in his keynote address at the LNG15 conference held in Barcelona, Spain.

Nada also highlights PETRONAS’ healthy growth and record profi ts for fi nancial year ended 31 March 2007, thanks to higher contributions from overseas operations and strong global demand for oil.

On the innovation front, read about PETRONAS’ K200 go-kart engine development, which is part of the company’s eff orts in technology innovations aimed at addressing environmental concerns such as carbon emissions and climate change, among others.

Then, read how PETRONAS’ was named as one of ‘The New Seven Sisters’, a group of increasingly infl uential oil and gas companies from countries outside the Organisation for Economic Cooperation and Development (OECD), marking a change in the global oil and gas sector.

Capping off this issue are the Merdeka Specials, featuring various programmes and activities that celebrate the values that have guided and inspired all Malaysians on our journey as a nation throughout 50 years of independence. They include the prestigious Merdeka Award introduced in conjunction with Malaysia’s 50th Merdeka anniversary.

We thank all those involved in making this edition a special one.

Nada Editorial Team

Our JourneyContinuesBOUND by Malaysia’s shared legacy, PETRONAS presses on in the journey to become a Global Champion.

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With a 23.7 per cent market share of South Africa’s fuel market, Engen’s wholly-owned operating company Engen Petroleum Ltd is clearly among the industry’s

forerunner. Its core business includes crude oil refi ning, marketing of its primary refi ned petroleum products and the provision of convenience services through its retail network

of over 1,230 service stations and more than 530 Quickshops and Convenience Centres in South Africa.

E n g e n i s 2 0 per cent owned by Worldwide African Investment Holdings (Pty) Ltd, the only South African black-c o n t r o l l e d a n d managed company focusing exclusively on the broader energy sector in sub-Saharan Africa.

On 30 May 2007,

Engen announced that Engen Petroleum agreed to acquire a 60 per cent stake in Shell Republique Democratique de Congo (SRDC) and Royal Dutch Shell PLC’s petroleum business in the Democratic Republic of Congo (DRC).

Looking ahead, Mohd Rashid Mohd Yusof, Managing Director and Chief Executive Offi cer of Engen, says the future prospects for the company remain bright in the continent. There is much scope for growth, he tells Nada in a recent interview.

What are Engen’s African aspirations?

We aim to signifi cantly grow the size of our business beyond South African borders and across sub-Saharan Africa. The goal is to move the business from our current fourth position in sub-Saharan Africa behind Total, Shell and Chevron to the number one or number two position. Currently, we have a presence in 14 countries, with signifi cant market share in a number of these countries, and we are in the number one position in South Africa.

What are Engen’s medium- and long-term plans to further

advance such aspirations?

Engen’s plans for both the medium- and long-term are to grow by acquisition as well as organically. On the acquisition landscape, we are positioning ourselves to take advantage of the changing

ENGEN SOLDIERS ONIN SUBSAHARAN AFRICAWITH SRDC ACQUISITION

FOCUS

With representation in 14 African countries including Botswana, Ghana, Kenya, Mozambique, Namibia, Swaziland and Zambia, future prospects remain bright in the African continent for Engen.

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strategies of some multinationals. Nigeria is a major market in Africa and we intend to be a player there. Other focus areas are in East Africa but we will also pursue good opportunities wherever they may arise in sub-Saharan Africa.

How has Engen fared in Africa over the years? What are

the factors that have enabled Engen to achieve some of

these things?

We have had a challenging history. Africa is a diffi cult business environment and there have been setbacks in the past. We have the benefi t of a resilient, dedicated team of people who are conversant with doing business in sub-Saharan Africa. We also leverage on our expertise gained from our South African operations, as well as the Engen value system which holds the company to a common set of values and aspirations. We have steadily grown the size and profi tability of the business over the years by taking advantage of growth opportunities as they arise.

Engen introduced the EPIC 2016 vision in 2006. What

progress has been made in the three focus areas

identifi ed by Engen under the vision, namely retaining

its market share in South Africa, expanding capabilities

in the sub-Saharan Africa market and improving refi ning,

manufacturing and trading performances?

We are the number one market leader in South Africa, and we aim to defend that position and market share vigorously, while remaining innovative in our service off erings. For expansion in sub-Saharan Africa, we have done a comprehensive review on the strategic markets and supply infrastructure, and we have identifi ed the target markets and countries. The SRDC deal is one example and we are making bids in other countries. The refi nery

has put in place its plans to improve operational excellence through various initiatives – PIP (Profi t Improvement Plan), GEMS (Global Energy Management System) and GRS (Global Reliability System). These initiatives are now moving forward using the Operating Performance Improvement (OPI) methodology which has been implemented successfully in PETRONAS.

What prompted Engen’s purchase of the 60 per cent stake

in SRDC?

DRC is a signifi cant market in Africa and we see it as an important match for us. Shell’s decision to sell its interests in SRDC is a good business opportunity for us and has enormous synergy with our joint venture with Total in SRDC. This deal is an important strategic step in expanding our investments in SRDC and will be a good stepping stone for our growth across sub-Saharan Africa.

What is the SRDC deal about? How would the latest deal

help in advancing Engen’s African aspirations?

SRDC is jointly owned by the Royal Dutch Shell Group (60 per cent) and the government of DRC (40 per cent). It is headquartered in Kinshasa and operates 26 retail sites. It also supplies fuel to six airports, two lubricant depots and has about 40 commercial customers, with combined sales in the region of 162.7 million litres for the financial year ended 30 June 2005. Most of the volume sold by SRDC is stored and delivered using the shared petroleum distributor SEP Congo. The deal is certainly not just about building a portfolio of new businesses. It is also about how well they fi t together with our existing businesses. We will examine the synergies of our operations, together with those opportunities that exist in West Africa, East Africa and Nigeria, as we strive to build market share across sub-Saharan Africa.

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FOCUS

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Initially conceived as a strategic energy project to meet the gas requirements of Egypt and the Atlantic Basin markets, Egyptian LNG is testimony not only of commercial success but of the successful partnering and commitment of various parties for the sustainable development of the Egyptian LNG sector.

ELNG: PARTNERING FOR MUTUAL BENEFIT

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PETRONAS’ foray into Egypt began in 2001 when it signed its fi rst farm-in agreement with Royal Dutch Shell plc to explore and develop gas fi elds in the North

East Mediterranean Deepwater (NEMED) concession area. PETRONAS took a 16 per cent stake in the concession, while Shell, as the operator, held the remaining 84 per cent in the ultra deepwater block.

But the breakthrough came two years later, when PETRONAS acquired a 35.5 per cent interest in the Egyptian LNG (ELNG) Project at Idku, and a 50 per cent working interest and joint operatorship of the West Delta Deep Marine (WDDM) concession block off shore Egypt from Edison SpA of Italy. The other partners in the ELNG joint venture (JV) included British Gas, Egyptian General Petroleum Corporation, Egyptian Natural Gas Holding Company and Gaz de France.

Subsequently, in July 2005, PETRONAS inked a cooperation agreement with Tharwa Petroleum Company of Egypt to create and add value to the oil and gas resources in and outside Egypt, and to help develop the human resource capability of its Egyptian partner.

From the onset, PETRONAS and its JV partners knew that a strategic and mutually benefi cial partnership was the key to

creating value from Egypt’s rich gas resources, while sustaining the ELNG Project at Idku on a long-term basis.

This has proven to be true. Today, ELNG is Egypt’s largest LNG partnership. It has successfully built a capacity of 7.2 million tonnes per annum and a two-train gas liquefaction plant that has brought in nearly USD2 billion of foreign investment into the Egyptian economy.

In terms of export capacity, Egypt currently ranks as the world’s eighth largest LNG exporter.

The LNG industry is projected to provide export revenue for at least 20 years, creating long-term job opportunities. At the same time, it has led to the transfer of technology and technical expertise that will go a long way in supporting the strong development of Egypt’s petroleum industry in particular and its national economy in general.

For PETRONAS, the ELNG Project provides an important international source of LNG that has positioned it to establish a foothold in the Atlantic basin market.

Chief Executive Offi cer of ELNG Adnan Zainal Abidin says ELNG is signifi cant at many levels, not least because it represents the largest project fi nancing arrangement in Egypt and is the single largest investment made by PETRONAS outside Malaysia that integrates the upstream, downstream and marketing activities of LNG.

PETRONAS’ involvement in the ELNG Project has been an enriching experience, Adnan adds. “PETRONAS has learnt project execution strategies that can be replicated in new projects to ensure shorter project schedule and minimisation of cost, for instance. We have also learnt about project fi nancing with its associated intricacies when it comes to a consortium of banks and multiple parties, from consultants and lawyers to shareholders and government.”

Equally valuable is ConocoPhillips’ licensed LNG technology employed at the ELNG facility. “It is diff erent from the process developed by Air Products & Chemicals Inc at our Malaysia LNG plants (in Bintulu, Sarawak) and it has proven to be a simple and robust design that eases construction work and is easy to operate,” Adnan explains.

ELNG has been awarded the ISO 9001:2000 accreditation company-wide and Idku Port has been awarded ISO 9000 certifi cation, the fi rst specialised port in Egypt to achieve this.

With fi ve partners in the joint venture, decision making in ELNG is being done by consensus among all the partners. As Adnan says, “The percentage of the equity stake (35.5 per cent in the case of PETRONAS) does not make any diff erence in how the company is managed, as decisions have to be based on unanimous agreement of all parties. Managing and engaging all partners at all levels is important. A lot of off -site engagement has to be carried out to understand various viewpoints and concerns, so that issues can be addressed and taken into account before decisions are made.”

What are PETRONAS’ plans for the ELNG Project in the foreseeable future? According to Adnan, as PETRONAS has interests in upstream blocks under exploration, if there are signifi cant gas fi nds, the realisation of other trains will strengthen the Group’s position in the LNG business. ELNG has been designed to accommodate another four LNG trains, he points out.

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AOGC PONDERS A SHARED FUTURE

While demand for energy resources looks set to continue on an upward trend, the energy industry must get its act together to prepare for that future scenario, participants at the 12th Asia Oil and Gas Conference (AOGC) were advised.

Widely recognised as the premier platform for networking and exchange of ideas within the Asia-Pacifi c oil and gas fraternity, the annual event

was organised by PETRONAS in Kuala Lumpur from 10 - 12 June 2007. It was attended by more than 1,000 leaders and representatives of oil and gas corporations, government offi cials, traders, suppliers, consumers and industry experts to discuss and evaluate the prospects and challenges in the industry.

Citing fi gures from the International Energy Agency, James Mulva, Chairman and Chief Executive Offi cer (CEO) of ConocoPhillips, projects the world will require 40 per cent more oil – or 120 million barrels per day – and 66 per cent more natural gas by 2030. Driving this demand growth is strong world economic expansion, especially in the Asia-Pacifi c region.

However, high demand growth may not be sustainable due to several factors, one of them being rising awareness of environmental consequences, such as carbon dioxide emissions, Mulva cautions.

Additionally, to meet new demand, the industry will have to replace well over 100 per cent of its current production, translating into 105 million barrels a day of new production by 2030. This will require massive investments amounting to USD20 trillion, Mulva says.

But a number of obstacles may jeopardise these new investments. Some governments may decide to hike energy taxes or channel revenues from their national oil companies (NOCs) to meet social needs, draining the oil companies of the money needed for capital investments.

Another issue is that only seven per cent of the world’s oil and gas resources are fully available to international oil companies (IOCs) for exploration and development. Partnerships with NOCs enable IOCs to gain access to another one-quarter. That leaves two-thirds of the world’s resources out of reach of the IOCs, Mulva notes. In cases where IOCs are granted new licences, they are for the more challenging areas such as deepwater fi elds, where complex geology or remote locations typically drive up exploration costs.

Additionally, infl ation in the cost of industry equipment and services stretches delivery time by a few years. This, coupled with a shortage of skilled personnel, slows down the badly needed increase in production, Mulva adds.

FOCUS

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It is, thus, important for governments to make appropriate policies and for industry leaders to spearhead the development of oil fi elds and critical infrastructure, ranging from pipelines to refi neries, Mulva urges. Oil and gas companies must also address environmental concerns by promoting energy-effi cient technology and alternative energy resources.

His Excellency Syed Kazem Vaziri Hamaneh, Iran’s Petroleum Minister, says energy security is crucial to ensure continuous expansion of world economic activities and requires the cooperation of all countries.

Peaceful conditions, stability in the international arena and the free fl ow of trade in oil and gas markets are preconditions for global energy security, he adds.

As Asia is home to both major oil and gas producers as well as consumers, the region should consider establishing a uniform energy market to promote energy cooperation, he suggests.

With its huge oil and gas reserves, Iran is capable of playing a vital role in the world’s energy equation. But Iran cannot meet the required level of investment and technology needs on its own, and as such, participation from major consuming countries is welcome, says the Minister. He estimates Iran will require USD93.7 billion in foreign investments, plus USD43.7 billion in domestic resources through 2014.

Dr Fereidun Fesharaki, Chairman and CEO of FACTS Global Energy, says high oil prices have had an impact on Asia. Demand is growing fast in China and more slowly in India but the rest of Asia is seeing some stagnation.

Persian Gulf countries have now emerged as a major demand growth centre. In 2007, China, India and the Middle East were expected to collectively lock in growth by about one million barrels per day, providing a fl oor for global demand, he says.

On alternative fuels, Fesharaki observes that industry enthusiasm has somewhat waned after an initial burst of excitement. In particular, biofuel makers now have to contend with high feedstock costs, which have risen relatively faster than those of oil, due to competition with food supplies.

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• “Despite concerns about China’s increased strength and aggressive search for raw materials including energy, there are real possibilities for Sino-US cooperation to protect sea routes from sabotage and to protect their shared interest in stability in the oil-producing regions of the Middle East.”

– Raymond F. Burghardt, Director of East-West Seminars, East-West Centre, US

• “The partnership between resource holders and the international industry has enabled the development of Asia-Pacifi c Liquefi ed Natural Gas (LNG). National companies are, of course, no longer just resource holders, but highly capable operators with great knowledge of their businesses. Some, like PETRONAS, are developing wide international experience.” – Peter de Wit, Executive Vice President for Global Business,

Shell Gas & Power International, The Netherlands

• “The industry needs to overcome new challenges such as climate change and sustainability of natural resources. Solutions for these challenges can be found through increased technological innovation and collaboration.”

– Norman Gildorf, Senior Vice President, UOP LLC, US

• “A new energy structure architecture is emerging as

Middle East producers look to secure long-term markets, while Asian economies seek to secure long-term energy supplies. One example of the new energy architecture is the trend towards cross- and joint-investments to create win-win partnerships between the Middle East and Asia.”

– Ali Obaid Al Yabhouni, UAE Governor and National Representative for OPEC

• “High oil prices and sharply increased upstream spending budgets of most oil companies have not yet provided any signifi cant improvement in global additions to reserves but more time may be needed.”

– Thomas E. Wallin, President, Energy Intelligence, US

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At the beginning of 2007, there were 225 Liquefi ed Natural Gas (LNG) tankers criss-crossing the world’s oceans, with close to another 150 in the order books scheduled to be delivered between 2007 and 2010. Th ere were 32 LNG trains worldwide producing LNG, with 13 under construction and 17 more being planned.

SUSTAININGLNG BUSINESS THROUGH

PARTNERSHIP By Beatrice Lye

INDUSTRY

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Clearly, LNG is a booming industry. The global LNG export volume has more than doubled since 1996 to more than 200 billion cubic metres in 2006. The

current 17 importer countries are expected to increase to 47 by 2020.

The industry is also changing rapidly. The signing of long-term contracts for the supply of LNG, currently an estimated 88 per cent of all sales, is being supplemented by a growing number of arbitrage or spot buys. These short-term buys enable the supplier to sell at higher prices in markets where demand is spiking due to supply shortages during unseasonably cold winters and pipeline disruptions.

China’s growing requirements for energy and the shutdown of Japan’s largest nuclear power plant after the Kashiwazaki earthquake continue to put pressure on buyers to secure the much-needed quantities of LNG.

The word in the industry is that it is a sellers’ market. Are happy days set to continue for PETRONAS’ LNG business?

The PETRONAS LNG Complex in Bintulu is still the world’s largest production facility in a single location. Consisting of three trains, the complex produces about 23 million tonnes per annum and supplies almost 15 per cent of the world’s LNG demand. Much of it goes to long-term buyers in Japan, South Korea and Taiwan.

PETRONAS also made a breakthrough with the growing Chinese LNG market this year when it secured a long-term contract with Shanghai LNG Company Ltd.

In the area of LNG shipping, which is an inseparable element of the LNG business, PETRONAS subsidiary MISC Berhad is also the world’s largest single owner-operator of LNG tankers. Its fl eet of 26 LNG ships is scheduled to increase to 29 by 2010. MISC has maintained an unblemished record of delivering more than 4,700 LNG cargoes on time since 1983.

PETRONAS also has a 35.5 per cent stake in Egyptian LNG, which increased the corporation’s LNG production capacity by 1.8 million tonnes for fi nancial year ended 31 March 2007. This is part of its endeavour to retain its status as the world’s second largest equity owner of LNG production capacity.

The corporation’s third LNG asset is the upcoming Dragon LNG receiving and regasifi cation terminal in Milford Haven, Wales. Scheduled for completion in 2008, the terminal gives PETRONAS an entry point for its LNG into the United Kingdom and European markets.

However, while global demand for LNG continues to rise, the industry is not immune to challenges. In July, PETRONAS and Britain’s biggest domestic gas supplier, Centrica Plc, mutually terminated an agreement for PETRONAS to supply LNG to Centrica for 15 years, enabling both parties to capitalise on opportunities presented by market forces. PETRONAS can now seek higher prices for its LNG elsewhere, while Centrica is able to secure its gas supplies at a cheaper rate from other sources.

Against this backdrop of abundant challenges and opportunities in the LNG industry, how does PETRONAS remain one step ahead in this increasingly competitive fi eld? As PETRONAS President and Chief Executive Offi cer Tan Sri Dato Sri Mohd Hassan Marican emphasised in his keynote An aerial view of the PETRONAS LNG Complex in Bintulu

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address at the industry’s biggest triennial conference, the LNG15 in Barcelona, Spain, he believes in the long-term model, where “traditional market solutions will help buyers and sellers manage the volatility of demand, attract timely supply to markets and support the substantial upstream and downstream investments that suppliers and customers must undertake to meet rising demand.”

Nonetheless, he called upon suppliers to off er more fl exibility and continue their commitment to safety, on-time delivery and reliability.

Tan Sri Hassan concluded his address by saying, “The LNG industry is built on a strong foundation of partnerships. Relationships fostered in the early days of the LNG market still prosper today.

“In our over two decades in the business, PETRONAS has forged long-term relationships with our customers and business partners. To us, all our buyers and partners are important regardless of size, and we have demonstrated our willingness to be fl exible in meeting their needs for long-term mutual benefi ts.

“The fl exibility and importance of long-term mutual benefi ts is a prominent feature in the relationship anchored on mutual understanding, respect and trust.

“These elements and values have stood the test of time and I strongly believe that long-term relationships will continue to be the foundation for a robust and healthy LNG industry.”

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Revenue and profi t soared to record levels yet again for the fi nancial year ended 31 March 2007, thanks to the Group’s continuous emphasis on operational effi ciency and reliability, as well as the integrated nature of its operations. Th is has played a key role in cushioning the impact of the disproportionate increase in operating cost.

A STELLARPERFORMANCE

PETRONAS Group delivered another record performance for the fi nancial year ended 31 March 2007. While supply disruptions, ongoing geopolitical uncertainties

and growing global demand continue to push crude oil prices higher, tight capacities and operating cost escalations resulted in a more complex and increasingly challenging

global oil and gas industry environment. Revenue and profi t before tax rose to an all-time high

of USD51.0 billion and USD21.1 billion respectively, both increasing by approximately 15.0 per cent. The Group’s balance sheet continued to strengthen with total assets increasing also by 15.0 per cent to USD85.2 billion.

INDUSTRY

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Shareholders’ funds expanded 23.8 per cent to USD49.4 billion while Return on Average Capital Employed remained strong at 40.4 per cent, on par with or superior to other established players in the industry.

While stronger prices were a factor, PETRONAS’ ability to achieve higher sales volume for its key products, i.e. crude oil, refi ned petroleum products and Liquefi ed Natural Gas (LNG) in a highly competitive and challenging environment was also a signifi cant contributor to the growth in revenue.

The Group’s manufacturing activities, comprising the manufacture of petroleum products, LNG, processed gas and petrochemicals, contributed USD28.5 billion to Group revenue, compared to USD25.9 billion last year, eff ectively adding value to its oil and gas resources.

Revenue from international operations and exports contributed USD39.1 billion, accounting for 76.7 per cent

FINANCIAL YEAR ENDED 31 MARCH

FY 2007 +/- FY2006 restated FY2005 USD billion USD billion USD billion

Revenue 51.0 14.9% 44.4 36.1

Profi t Before Tax 21.1 14.7% 18.4 15.3

EBITDA 24.5 14.0% 21.5 17.9

Profi t After Tax & Minority Interests 12.9 13.2% 11.4 9.4

Total Assets 85.2 15.0% 74.1 62.9

Shareholders’ Funds 49.4 23.8% 39.9 31.5

Total Cash & Fund Investment Balance 28.7 14.3% 25.1 19.8

Total Debt 10.4 (12.6%) 11.9 13.9

of Group revenue, refl ecting the success of the Group’s globalisation strategy. Export revenue of USD20.3 billion accounted for 39.8 per cent of total revenue, representing 12.4 per cent of total Malaysian exports.

The Group generated strong cashfl ow from operations this year, more than suffi cient to cover its investing and fi nancing needs. With this surplus, the Group’s cash and fund investment balance expanded to USD28.7 billion.

The year’s outstanding fi nancial and operational performance was a testimony to the success of the Group’s overall strategy of integration, value adding and globalisation. This strategy, coupled with the Group’s eff ective management policies and operational excellence, has served and continues to serve PETRONAS well in addressing the challenges encountered by the volatile and unpredictable oil and gas industry.

STRONGER MANUFACTURING REVENUEUSD billionSTRONGER MANUFACTURING REVENUEUSD billion

00

1010

2020

3030

4040

5050

FY03FY03 FY04FY04 FY05FY05 FY06FY06 FY07FY07

CAGR 20.8 %13.4

21.4 25

.7

36.1

44.4

51.0

15.2 20

.6 25.9 28

.5

INCREASING REVENUEFROM GLOBAL OPERATIONSUSD billion

INCREASING REVENUEFROM GLOBAL OPERATIONSUSD billion

00

1010

2020

3030

4040

5050

FY03FY03

CAGR - Compound Annual Growth RateCAGR - Compound Annual Growth Rate

FY04FY04 FY05FY05 FY06FY06 FY07FY07

CAGR 24.8 %

16.1

21.4 25

.7

36.1

44.4

51.0

20.0

27.9

34.5 39

.1

Manufacturing Sector Non-Manufacturing Sector International Operations & Exports Domestic Market

FY2007 FY2006Domestic 4.1 3.1International 1.9 1.9Total 6.0 5.0

(by business)

Exploration & 3.5 3.0Production

Others 2.5 2.0

Total 6.0 5.0

CAPITAL EXPENDITURE (in USD billion)

KEY FINANCIAL RATIOS

FY2007 FY2006

Profi tability restated

Profi t Before Tax Margin 41.4% 41.4%Return on Total Assets 24.8% 24.8%Return on Average Capital Employed (ROACE) 40.4% 41.3%

LiquidityCurrent Assets/Current Liabilities 2.73x 2.55xCash & Fund Investment/Current Liabilities 2.09x 1.96x

GearingTotal Debt/Total Assets 0.12x 0.16xInterest Cover 26.38x 23.00x

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Since 1996, PETRONAS has embarked on a series of engine development projects with considerable success. The latest addition to its family of engines is

the K200 developed specifi cally for go-kart racing. It all began with the Third Technology Transfer

Programme in 2003 when a team of engineers at PETRONAS Research Sdn Bhd was selected for a stint at Sauber PETRONAS Engineering AG (SPE) in Switzerland.

Upon completion of the programme, the engineers were keen to put their skills to the test. At the recommendation of the then Commission Internationale de Karting - Federation Internationale de L’ Automobile (CIK-FIA) President Yvon Leon, they formed a team to produce an aff ordable, cleaner and environment-friendly four-stroke go-kart engine that could potentially bring about a signifi cant shift in the market dominated by less-effi cient two-stroke engines.

Building from scratch

Headed by Azahari Yahya (then Manager and Development Engineer, Special Projects, Corporate Planning and Development Division (CPDD)), the team began by benchmarking the engine they had in mind against top engines of similar class readily available in the market.

As soon as the engine target specifi cations were set, design works followed using 3D modelling. Next up was the sourcing of parts needed for the engine.

And after many man-hours of labour, the fi rst K200 four-stroke go-kart engine was produced in June 2004.

Project Leader and Designer Md Isham Isnin says that the letter ‘K’ in the name refers to ‘Burung Kelicap’, a type of sunbird species that closely resembles the energetic hummingbird. The fi gure ‘200’ signifi es the engine capacity of 200cc.

“And true to its name, the K200 is small and light due to the fewer parts needed to build the engine,” Isham adds.

But the engine’s simple appearance is deceiving, in that the K200 off ers more power across the diff erent engine speed bands, relative to a conventional two-stroke engine.

Moreover, the K200 is cleaner because it allows for a better air-fuel mix. Unlike a two-stroke engine, a valve system in the K200 prevents exhaust gases from fl owing back into the chamber, thus improving combustion effi ciency.

Equally important is the fact that the K200 promises longer engine life because of a dedicated lubrication system for moving parts (which is absent in two-stroke engines). The K200 also produces less noise compared to a two-stroke engine.

A total of six K200 engines were built in Switzerland. Each engine was tested in a special room called a ‘dynamometer’. At that stage, many crucial technical questions had to be answered.

Research and Technology Division’s initiatives promise to be strong catalysts for future growth by way of increasing technological competency and increasing the depth and breadth of PETRONAS’ off erings. Th e recent success of the K200 go-cart engine is a shining example.

THE ENGINE THAT INNOVATION

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eff orts that are aimed at addressing those concerns.Mohd Suffi an Sahadan, one of the Design Engineers

in the K200 project, estimates that if the engine is commercialised, it could sell for less than US$2,000. This would make go-karts more aff ordable and appealing to Malaysian youths.

In turn, this would help the country to identify talents in motor sports, he reckons.

The key is to persuade original equipment manufacturers to take up four-stroke engines like the K200. However, this is not an easy task because of sheer economics, Isham concedes.

A switch to four-stroke engines requires substantial investments in new production lines on the part of the manufacturers, not forgetting the fact that established go-kart championships still prefer to run on two-stroke engines. But Isham is confi dent this will happen eventually.

Go-kart championship

“Our engine has a big commercial potential as the public gets more environmentally conscious about the pollution caused by two-stroke engines,” Isham argues.

Meanwhile, PETRONAS is not sitting idle on the engines. The company is considering a single-make championship using the K200.

The idea is to assess all drivers purely on skills since everyone will be using a common vehicle with the same engine specifi cation.

Apart from introducing the K200 to Malaysia’s go-kart circles, the championship will also serve as a platform for the branding and marketing of PETRONAS’ products.

Regardless of the outcome, the journey thus far has been rewarding. Fadhlan Nik Abd Aziz, an Analysis Engineer, says the Technology Transfer Programme taught him more than just the technical know-how.

At one SPE dinner in Switzerland, Fadhlan had the opportunity to meet Peter Sauber, owner of the Sauber Formula One team and co-founder of SPE. To Fadhlan’s surprise, before he could introduce himself, Sauber said he already knew who he was and even went on to chat with him.

“That really opened up my eyes,” Fadhlan says.

Do the engines run smoothly as intended? Do they have noise vibration and harshness issues? Does the cooling strategy work? How about gasoline consumption and the durability of the engines when subjected to extreme running conditions?

To Kyairol Izwan Ghazali (then Development Engineer, Special Projects, CPDD) who was in charge of development and testing, the process was as thrilling as watching a baby take its fi rst steps.

Once the engines passed the test, they were put into a go-kart chassis for actual driving. The Alpha Kart chassis was chosen in line with the requirements for a four-stroke World Formula Go-Kart championship.

The experience turned out to be unforgettable, recalls Shaharuddin Hamid Mustapha, the Development and Testing Engineer, who conducted the inaugural test drive. Having driven the go-kart at as fast as 115 kilometres per hour, and being an amateur at that, he believes the performance could be a lot more exciting with a professional go-kart driver behind the wheel.

Multiple benefi ts

Overall, the K200 is promising on a number of fronts, says Isham. Amid environmental concerns such as carbon emissions and climate change, the K200 is testimony - among many others - of PETRONAS’ research and development

COULD

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Currently, drilling is in progress at well EWT/3, a development expected to enhance PCTSB’s oil production to 15,000 barrels per day.

To enhance local technical expertise in Turkmenistan, PETRONAS Management Training Sdn Bhd and PCTSB are jointly operating a training centre in Turkmenbashy. Programmes at the centre are designed to train Turkmen workers to qualify as operators and technicians at PCTSB’s onshore and off shore oil and gas facilities.

The centre started training the fi rst batch of 50 Turkmen students in July 2005. The students graduated in July last year. The second batch of 49 students commenced their two-year training programme in October 2006 and a third batch of 32 began training soon after.

PETRONAS has also provided scholarships to more than 80 Turkmen students to further their education at Universiti Teknologi PETRONAS in Malaysia.

PETRONAS Carigali’s operations in Turkmenistan reached a new milestone on 5 June 2007 when the President of the Republic, His Excellency Gurbanguli

Berdymukhamedov, offi ciated the ground-breaking ceremony, launching the construction of PETRONAS Carigali (Turkmenistan) Sdn Bhd’s (PCTSB) fabrication yard at Kiyanli.

At the event, Berdymukhamedov said PETRONAS was the fi rst foreign oil and gas company to have been awarded the right to operate in Turkmenistan. He added that the corporation had contributed signifi cantly to the realisation of his country’s plans to develop and construct off shore loading and gas terminals, as well as other related infrastructure.

Present at the ceremony were PETRONAS Carigali’s Managing Director and Chief Executive Offi cer (CEO) Datuk Abdullah Karim, Malaysia Marine & Heavy Engineering Managing Director and CEO Wan Yusoff Wan Hamat, members of the Turkmenistan Cabinet, and PCTSB General Manager Sulaiman Abdullah.

PCTSB, which has been operating in Turkmenistan since July 1996 under a production sharing contract (PSC), produced its fi rst barrel of oil in March 2006. Under the PSC, PETRONAS holds a 100 per cent interest in Block 1 - a 1,900 square kilometre off shore area that includes three discovered oil and gas fi elds, as well as other undrilled prospects.

Initial gas production at a capacity of 250 million standard cubic feet per day (mmscfd) is targeted for the end of Quarter One of 2010. This will be followed by 500 mmscfd six months later.

The gas will be exported via a subsea pipeline to an

onshore gas terminal currently being constructed at Kiyanli. Currently, almost 50 per cent of the fabrication yard has been completed, with piling, civil building and other works progressing smoothly.

In the area of oil production, PCTSB’s operations in the Diyarbekir Field reached the two million barrel mark without incident on 11 June last year. Production involved the use of a mobile off shore production unit in the Caspian Sea, with storage facilities provided via a fl oating storage and offl oading vessel - a mode of operation said to be the fi rst in the Caspian.

PETRONAS Around the World

PETRONAS CARIGALIBREAKS NEW GROUNDIN TURKMENISTAN

CORPORATE ROUNDUP

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PETRONASGAZPROM TIEUP

The memorandum provides for the development of comprehensive cooperation between the companies on the implementation of projects in Russia, Malaysia

and third countries. It also defi nes the basic principles of Gazprom-PETRONAS

cooperation on projects to build gas infrastructure, including underground gas storage facilities, pipelines and re-gasifi cation terminals.

PETRONAS and Gazprom have also agreed to share scientifi c and technical expertise in the areas of gas prospecting, production, transport and storage.

At a meeting with PETRONAS President and Chief Executive Offi cer Tan Sri Dato Sri Mohd Hassan Marican in the second quarter of 2007, Gazprom Deputy Chairman Alexander Medvedev said, “The memorandum lays a solid

PETRONAS has signed a Memorandum of Understanding with Russian gas giant Gazprom, marking the beginning of an international collaboration between PETRONAS and one of the world’s largest oil and gas companies.

foundation for long-term cooperation between Gazprom and PETRONAS. We are talking about diff erent projects ranging from exploration and production to marketing energy products and the sharing of experience.

“We are sure that joint work will strengthen the positions of both parties in the foreign energy market.”

Medvedev also attended the 12th Annual Asia Oil and Gas Conference in Kuala Lumpur, during which he said the Asia-Pacifi c region was one of Gazprom’s key regions.

The Russian company intends to enhance its market presence in the region by developing gas delivery systems, LNG trading and hydrocarbon fi elds. The collaboration with PETRONAS will provide valuable new opportunities for both companies.

PETRONAS Vice President of Gas Business Wan Zulkifl ee Wan Ariffi n was appointed as a new member of the Board of PETRONAS with eff ect from 1 August 2007.

APPOINTMENT

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this period was its expansion into international operations in the early 1990s, starting with its fi rst upstream project as an operator in Vietnam. It also became actively involved in Africa where it saw a general lack of interest from other petroleum companies.

PETRONAS has also entered the shipping business through MISC Berhad. Although the move attracted much criticism initially, it proved to be both highly profi table and commercially viable. The PETRONAS subsidiary is currently the world’s largest single owner-operator of LNG vessels and the world’s second-largest owner-operator of Aframax tankers.

By 2005, PETRONAS had signed agreements in 35 countries in Africa, the Middle East, Asia and Europe. PETRONAS was involved in upstream exploration and production in 59 ventures in 26 countries and was the operator for 29 of these ventures.

Another example of PETRONAS going global was its 2006 purchase of a USD1.1 billion stake in Russia’s Rosneft, its fi rst Russian venture.

For fi nancial year ended 31 March 2007, revenue from international operations and exports contributed USD39.1 billion, accounting for 76.7 per cent of Group revenue,

Despite being in existence for only 33 years, PETRONAS has made enormous strides that have earned the company a more-than-respectable

position in the international arena of oil and gas. This is an observation made by Dr Fred R. Von der

Mehden at Rice University in Houston, Texas and Al Troner of Asia Pacifi c Energy Consulting in their paper entitled ‘PETRONAS: A National Oil Company with an International Vision’.

In the paper written for an energy forum by the James A. Baker III Institute for Public Policy and the Japan Petroleum Energy Centre in March 2007, the two industry observers noted that PETRONAS had an advantage from the start. It was set up as a company with the goal of profi t-making, rather than a statutory body that could have been misconstrued as the nationalisation of Malaysia’s hydrocarbon resources.

PETRONAS has been given the entire ownership of and control over the country’s petroleum resources, and it operates like any other commercial oil and gas entity. But as a profi t-oriented business entity, it has been making signifi cant contributions to Malaysia’s national monetary reserves annually.

In the early years, PETRONAS underwent a steep learning curve, expanding its upstream operations domestically while acquiring the necessary technological know-how and capabilities. At the same time, it also actively expanded and diversifi ed into a broad range of downstream activities in order to create value from the oil and gas resources produced by its upstream operations.

This was in line with its value-adding, business integration strategy. These included oil refi ning; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline operations; marketing of liquefi ed natural gas; petrochemical manufacturing and marketing; and logistics and maritime operations.

The most noteworthy move PETRONAS made during

PETRONAS EXTENDS ITS FOOTPRINT

CORPORATE ROUNDUP

refl ecting the success of the Group’s globalisation strategy. Export revenue of USD20.3 billion accounted for 39.8 per cent of total revenue, representing 12.4 per cent of total Malaysian exports.

PETRONAS has also grown beyond its traditional core energy interests by fi nancing major Government-sponsored infrastructure projects, such as the construction of the PETRONAS Twin Towers and the new administrative capital of Putrajaya. In recent years, PETRONAS contributed to little over a third of total Government revenue.

“PETRONAS has been a generally solid and well-respected partner to both private and state entities around the world,” the report concluded.

BEYOND NATIONAL SHORES UNDERTWO DECADES

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Half a century after the second world war, the term ‘Seven Sisters’ was coined to describe

the Anglo-Saxon companies that controlled oil in the Middle East. Since then, a startling change has taken place, changing the terrain of the global oil sector, possibly for good.

A report by the Financial Times (FT) published on 21 March 2007 identifi ed the ‘New Seven Sisters’, a group of increasingly infl uential oil and gas companies from countries outside the Organisation for Economic Cooperation and Development (OECD).

The original Seven Sisters included Standard Oil of New Jersey, Royal Dutch Shell, Anglo Persian Oil Company, Standard Oil of New York, Standard Oil of California, Gulf Oil and Texaco. ExxonMobil, Chevron, BP and Royal Dutch Shell are ‘descendants’ of the Seven Sisters.

On the other hand, the New Seven Sisters are Saudi Aramco, Russia’s Gazprom, CNPC of China, NIOC of Iran, Venezuela’s PDVSA, Brazil’s Petrobras and PETRONAS.

PETRONAS, in particular, has been described as a role model, ripe for emulation.

Mostly state-owned, the FT says the New Seven Sisters control almost one-third of the world’s oil and gas

production and more than a third of its total oil and gas reserves. The original Seven Sisters on the other hand – which compacted to four following industry consolidation in the 1990s – account for about 10 per cent of the world’s oil and gas production, while holding just three per cent of reserves.

The rise of the New Seven Sisters is bound to scale up and get more prominent in years to come. The International Energy Agency, an established and trusted watchdog, has estimated that 90 per cent of new supplies will come from developing countries over the next 40 years.

The shift is extraordinary. For the past 30 years, 40 per cent of all new production came from industrialised nations, most of it controlled by the original Seven Sisters.

“The reason the original Seven Sisters were so important was that they were the rule makers; they controlled the industry and the markets. Now, these New Seven Sisters are the rule makers and the international oil companies (IOCs) are the rule takers,” Robin West, chairman of PFC Energy, was quoted as saying in the FT.

This change of hands in oil muscle has carried with it another phenomenon - the resurgence of

resource nationalism which began in Mexico in the 1930s, found its way to the Middle East in the 1970s, and cooled only when oil prices declined in the late 1980s and 1990s.

Having turned resource seekers, national oil companies (NOCs) are banding together to help develop each other’s reserves, leaving industry growth and the resources for world economic development in the hands of the New Seven Sisters and the respective governments that control them.

The biggest state-backed resource competitor is CNPC whose rapid push to secure international reserves makes it powerful. But smaller NOCs such as Petrobras and PETRONAS are also “keeping international energy executives awake at night.”

PETRONAS is an easily recognisable name on the global stage, having established its presence, most notably in Sudan and Myanmar. About 30 per cent of its corporate revenues are from abroad and it operates in more than 26 countries, producing oil from about 50 projects, more than half of which it runs, the FT notes.

Source: The Financial Times Limited 2007 at http://www.ft.com/cms/s/471ae1b8-d001-11db-94cb-000b5df10621.html

FINANCIAL TIMES IDENTIFIES

‘NEW SEVEN SISTERS’

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Today Malaysia stands at the threshold of a new age. We are aff orded opportunities in life that

our parents and grandparents only dreamt of.But we also stand in danger of forgetting our past –

the values that have defi ned us as Malaysians for half a century.

MERDEKA SPECIALS

CELEBRATING 50 YEARS OF HARMONY

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T his sentiment resonates deeply within the heart of PETRONAS. For over three decades, PETRONAS has held the nation’s oil and gas resources in trust for its people

and is deeply committed to the future of all Malaysians.

Hence, for the 50th Merdeka Celebration, PETRONAS put forth a single important message to all Malaysians: One Legacy. One Destiny. (Satu Warisan. Satu Matlamat.)

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A Nation Rejoices –the ‘Saya Anak Malaysia’ Contest

FOR the 50th Merdeka Celebration, PETRONAS rebroadcasted its fi ve most memorable merdeka television commercials over major television channels. These formed the basis of a public contest – the ‘Saya Anak Malaysia’ contest – wherein participants were required to match a message to each of the commercial and pen down a personal account of what the nation’s independence means to them.

The contest attracted 4.4 million entries, more than double the expected number. Part of the proceeds of the sales benefi tted the ‘Kumpulan Wang Amanah Pelajar-Pelajar Miskin’, a Ministry of Education trust for disadvantaged students.

‘Khazanah Bumi Merdeka’EVERY Friday evening at 9.00pm, from the month of July through September 2007, a special presentation by the major oil and gas players in Malaysia aired over TV3. ‘Khazanah Bumi Merdeka’ (Treasures of an Independent Land) was an 11-episode account of the history of the oil and gas industry and the many strides it has made in its 100 plus year history.

Shot on location in various parts of East and West Malaysia, the documentary also marked the fi rst time that the major oil and gas players in the country - PETRONAS, Shell, ExxonMobil and BP - had come together to present Malaysians with an opportunity to learn about an industry that has been playing an immense part in shaping the nation’s development.

Aimed at educating the public on the various aspects

Fifty winning entries were selected by a distinguished panel of judges composed of the eminent historian Prof Emeritus Dato’ Dr Khoo Kay Kim, educator and activist Rasammah Bhupalan, former New Straits Times Group Editor P. C. Shivadas, celebrated cartoonist Datuk Mohd Noor Khalid (better known as Lat) and anthropologist Prof Dr Rokiah Talib.

PETRONAS Vice President for Oil Business and Chairman of PETRONAS Dagangan Berhad Datuk Anuar Ahmad gave away thirty cars and twenty motorcycles, all of national make, to 50 very happy winners.

In addition, 500 consolation prizes comprising PETRONAS products, each worth RM500, were also given out.

of the industry, the documentary took viewers on an educational journey from the moment oil and gas was discovered, through to the value-added processes in turning crude oil not only into petrol for vehicles but also into a range of products that Malaysians use in daily life.

But more than just plants and processes, oil and gas have changed the lives and livelihood of many Malaysians. The series told the story of development, opportunity, progress and a better life from the eyes of the Chief Executive Offi cer, schoolteacher, shopkeeper and fi sherman. Employment and educational opportunities were perhaps the most obvious, but commercial vibrance and a new work culture and standards have elevated their lives to a whole new plane.

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What started out as a simple commemoration of an important national event, PETRONAS’ Merdeka advertisements have gained almost a cult following. Th eir lasting popularity was largely due to the ability of the advertisements to capture the inner thoughts of Malaysians with messages that clearly resonate within their own belief system.

IN RETROSPECT

PETRONAS MERDEKAADVERTISEMENTS

THROUGH THE YEARS

One Little Indian Boy: 1996

A fl ashback account by a now-grown Indian man of the day when, as a little boy, he was woken up early by his father. Still half asleep, he was given a bath and made to put on his best clothes. He knew it was a special day, but did not know exactly why. He and his father then cycled down the crowded streets of Kuala Lumpur to an even more crowded place. Lifted off the ground and seated squarely on his father’s shoulder, he saw that he was in Merdeka Stadium and in the distance was the Tunku proclaiming independence.

Local Hero: 1998

Amidst a nation maturing and gaining confi dence as to who we were and what we stood for, the advertisement featured a young man riddled with self-doubt because he wore only Gombak-made shoes. He thought that this was why he could not fi nd a girlfriend. He saw and felt imagined snubs everywhere he went – from the attractive shopkeeper to even the girl on a bus. He fi nally snapped, “So what if my shoes were made in Gombak?!” The girl replied, “Nothing. They make good shoes in Gombak.”

PETRONAS Merdeka advertisements have always centred on the important principles of trust and unity. While each of them deals squarely with this issue, each possesses a humour and lightness of touch that appeal to both the heart and mind. The following are the fi ve most memorable ones.

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My House: 1999

“Why do I like my house?” a precocious little boy wondered out loud. “It’s big, it’s nice. My house is the best”, he proclaimed. Indeed, if we could see things like children do, we would agree that our ‘house’, with all the joys and pains, and all things that pulsate with life, is the greatest.

Param’s Bicycle: 2003

Atan, Lim and Param lived and grew up together in the same village, playing little pranks as children do and getting into the usual trouble. Particularly memorable was an episode involving some mangoes, a beehive and running for dear life. Over the years life took them down diff erent paths, until fate intervened and they met, as old men, in a hospital. Param and his bicyle were no more. But still, the memories of the genuine friendship they shared were fresh and vivid. And they noted too, with a tinge of regret, that their sons, seated on opposite ends of a hospital bench, absorbed in their MP3 players and in their own worlds, were completely oblivious to each other.

Special Shoes: 2005

‘Independence is synonymous with responsibility for oneself’ - this was the realisation two brothers came to after ogling a pair of shoes in a shop window, griping about their father who would not let them have the money to buy them. Their conversation was overheard by a man who was having a cobbler repair his shoes nearby. He, in turn, narrated the story of a boy who had no leg, who was determined to be independent and live a full life. As he put on his prosthetic leg, the boys realised that he had told them his own story . As the man walked to his chauff eur-driven car, he turned back to them and said, “I have travelled far with it. When you choose to walk, walk forward, not backward”.

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Any seasoned Merdeka veteran will tell you that the nation’s independence was won through unparalleled dedication and commitment to the task, and the coming together of the various races in the then Malaya to chart a common destiny.

The fi rst in the series was ‘The

Boatmaker’ which extoled the value of hardwork and genuine commitment in building a thing of value that would stand the test of time. It told the story of a soon-to-retire boat maker who half-heartedly built one last boat when asked to by his friend.

The materials used were inferior and his workmanship shoddy. When the boat was fi nished, the boatmaker was pleasantly surprised when told that he could keep it as a token of their friendship. His friend even threw in a new engine for good measure.

His happiness, however, was short-lived when he found that the boat he built was not fi t to sail.

ALL TOGETHERNOW

“Upon the conduct of each depends the fate of all”- Alexander the Great

Fifty years on, hard work and unity still remain the principal ingredients of nation building. And lest these lend themselves to the dark recesses of our minds, PETRONAS in celebrating the nation’s 50th year of independence aired a series of advertisements in the months of August and September 2007 on the themes of dedication to the cause and

national unity, with the latter entirely through the uncomplicated and untainted eyes of children. They all invite us to take a retrospective look at ourselves and fi nd the true meaning of independence, and to always embrace the values of mutual trust, tolerance, respect and understanding.

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Th e Children ‘Get It’

Against the background of globalisation and new opportunities for growth and self-discovery stands our precious legacy – the cornerstone of our achievements as a people. And it is only by recognising our shared legacy can we understand and achieve our shared destiny.

The other commercials in the series were of children who off ered their candid, uncomplicated and completely unprejudiced view of life and friendship.

Tan Hong Ming in Love

A doe-eyed boy gave a spontaneous confession of how he secretly admired his best friend Umi Kazrina. His admiration was not unrequited when Umi, in turn, confi ded that Hong Ming was her ‘boyfriend’.

Kawan Baik’ (Good Friend)

When asked who his best friend was, a Malay boy shyly pointed to a Chinese boy beside him. Then he was asked, “If he is your best friend, what is his race?” The question was met with puzzled expressions on both the boys’ faces. “Race?” asked the friends. “Race....like race car…?”

She/He

“ My best friend? He…. And she… and he….”

‘Tunjuk’ (Point)

“Who is your best friend?” The spontaneous pointing to each other said it all.

‘Karate’

“What will I do if anybody messes with Rachel? I’ll do this... like this… and this…”

‘Kita’ (Us)

After successfully building a ‘country’ and their own respective ‘houses’ in a sandpit, a group of children were seriously thinking of a name to give their new country. One was unanimously agreed upon – ‘Kita’.

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On the 50th anniversary of our independence, we celebrated the values that have guided and inspired us on our journey together as a nation. Many Malaysians have made history in service to the country but, to date, there has been no single award that honours their achievements.

In the spirit of unity and shared responsibility for our nation’s future, PETRONAS led a core group drawn from the Malaysian oil and gas industry to create the nation’s

most prestigious industry-led award. Together with Shell and Exxonmobil, PETRONAS founded

the Merdeka Award to give due recognition to Malaysian citizens and organisations that have made outstanding contributions in their respective fi elds, and towards the betterment of Malaysian society.

Benchmarked against the Nobel Prize, the Merdeka Award seeks to inspire excellence in a nation that has reached a new milestone in its history. It also aims to instil an awareness of the challenges - and equally the responsibility in preserving our precious legacy. In working to promote a more competitive society, the Merdeka Award underscores the fact that the quest for individual excellence will prove an important driving force for the future of our nation.

Launched by Prime Minister Dato’ Seri Abdullah Haji Ahmad Badawi on 27 August 2007, the Merdeka Award values human achievement regardless of race, sex, religion or ideology. It explores

the liberation of the human mind and spirit, and fosters the realisation of human potential through the pursuit of excellence.

Four of the fi ve award categories are open to all Malaysians living at home or abroad. The winners of each

THE MERDEKAAWARD

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postgraduate studies who has displayed exceptional scholarship in the academic fi eld.

The fi nal category is about outstanding contributions to the people of Malaysia. It is open to foreign nationals who have made substantial contributions to the lives of Malaysians.

All categories of the Merdeka Award are open to institutions and organisations, with the exception of outstanding scholastic achievement, which can be awarded only to an individual. Former Malaysians who are naturalised citizens of another country will not be eligible.

Nominations, which will be open each year, from November to February in the following year, will be managed by a nominations committee of at least three qualifi ed Malaysians or foreign individuals in each category. The committee will invite qualifi ed individuals to submit names of candidates for consideration. Past winners of the award will be ex offi cio qualifi ed nominators for life, while appointed nominators will hold their positions for a period of three years.

The Merdeka Award strongly reiterates the Corporate Social Responsibility (CSR) initiatives that oil and gas players are already carrying out in their own capacities. The Merdeka Award complements and enhances the CSR objectives of the industry as a whole. Through joint endeavours of oil and gas players, it would elevate the position and prominence of Malaysian oil and gas CSR initiatives to national and international platforms.

For all Malaysians, the Merdeka Award strengthens the message that we each have a responsibility to give back to humanity.

category will receive a gold medal and prize money of RM500,000. With the total prize money awarded in all categories estimated at RM2.5 million, the Merdeka Award will be the largest in Malaysia and is comparable to other renowned prizes.

The Merdeka Award will be given away annually in the month of Merdeka by the Prime Minister as the Award’s Patron.

The fi ve award categories are broadly defi ned to encourage the widest possible fi eld of nominations. Each category emphasises the concept of excellence in the broadest sense and acknowledges that our collective good stems from the individual goal of doing one’s best.

The fi rst award category recognises outstanding contributions in the fi elds of education, the arts, sports and the community. The contribution may be in any specialised fi eld, such as educational research, linguistics, fi ne or performing arts, sports and community services, and must or potentially be of high benefi t to a large segment of the community.

The second category rewards excellence in the area of health, science and technology, either in primary or applied research, innovation or advancement of technology in all aspects of health, science and technology.

The third category – the environment - encompasses the broader spectrum of environmental issues and eff orts, including renewal and conservation, and heritage preservation.

As for the outstanding scholastic achievement category, it is the only award that is of purely academic merit. This award is presented to a Malaysian student or Fellow undertaking

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Th rough a year-long programme (Th e Heart of ‘07), GALERI PETRONAS highlighted a broad range of themes and issues in art and Malaysian society, refl ecting the evolution of our society in the past half-century.

MEANWHILE AT THE GALLERY…

IMAGES OF INDEPENDENCE

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The year 2007 kicked off with the blockbuster Voyage: Kembara Latiff Mohidin exhibition by the

iconic Malaysian artist, which was followed by the art-historical show Photojournalism and the Imaging of Modern Malaysia from March to May 2007.

Highlights in the month of August 2007 included 50 Ways to Live in Malaysia, which showcased half a century of relevant works by Malaysian artists in the evolution of an independent Malaysia.

Building Merdeka explored the iconic monuments built to mark our independence (such as Stadium Negara, Parliament House and Subang Airport), and the exhibition also documented how they transformed Kuala Lumpur for its future growth.

From October to December 2007, the gallery featured explorations of contemporary movements, new media and gender-driven projects such as Out of the Mould, a group show of prolifi c new-generation Malaysian women artists.

From December 2007 through to February 2008, GALERI PETRONAS features The Independence Project, an international collaboration which explores contemporary independent artistic practices from Malaysia and Australia.

The Heart of ‘07 presents a vibrant and entertaining view of the social, cultural and historical events that have helped shaped our nation - a view seen through the eyes of artists who continually push the boundaries of their creativity to fi nd new forms of expression.

What follows is a summary of The Heart of ‘07.

GALERI PETRONAS is located at Level 3, Suria KLCC. Admission is free.

Voyage: Kembara Latiff Mohidin

(16 January – 11 March 2007)

Fifty new paintings (produced between 2002 and 2006) and the poetry of prominent Malaysian artist Latiff Mohidin were featured in this much awaited exhibition. Highlights included book publications, transliterations of Rumi/Khayyam, Gitanjali and Tao Te Ching; an anthology of poems (Sajak-Sajak Lengkap); and a republication of the book Garis.

Curated by T. K. Sabapathy and Dato’ Baha Zain.

Photojournalism and the Imaging of

Modern Malaysia

(23 March – 20 May 2007)

A subtle portrait of the shaping of modern Malaysia is captured through the lens of working photojournalists. Containing some 90 images from the photographic archives of present and past newspapers, the exhibition highlighted the principal social, cultural and historical events that infl uenced and aff ected the course of Malaysia’s history in the last 50 years.

Curated by Eddin Khoo and Prof Dato’ Dr Khoo Kay Kim.

‘BUMI MANUSIA: Nusantara

Journey’ with PETRONAS Expedition

(26 May – 15 July 2007)

This debut solo exhibition by Masnoor Ramli Mahmud, a key member of the MATAHATI artist collective, showcased paintings, photography and video clips illustrating his experiences from the 55-day PETRONAS Nusantara 2006 Expedition from Bintulu to Banda Acheh in Indonesia. It also featured photographic accounts of the expedition by the PETRONAS Adventure Team.

Curated by GALERI PETRONAS and presented by GALERI PETRONAS and PETRONAS Motorsports.

TOKITSUMUGI - The Grain of

Strands from Some Moments

(10 April – 13 May 2007)

This exhibition of kinetic sculptures by Japanese kinetic artist and multi-dimensional space designer Masato Tanaka was the artist’s Malaysian premiere. He presented a ‘scenic movement presentation’ of 12 moving sculptures which combined art and technology to create free movement. GALERI PETRONAS and the Japan Foundation, Kuala Lumpur collaborated to bring this unique exhibition to the public in celebration of Malaysia’s 50th Merdeka and the Japan-Malaysia Friendship Year 2007.

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Building Merdeka – Independence

Architecture in Kuala Lumpur

1957 -1966

(15 August - 30 September 2007)

Ten iconic building projects were realised between 1957 and 1966, endowing Malaysia’s capital city with new national landmarks and structures. The buildings were Merdeka Stadium, Merdeka Park, Dewan Bahasa dan Pustaka, Stadium Negara, Houses of Parliament, Muzium Negara, Masjid Negara, National Monument, University of Malaya campus and Subang International Airport. These iconic structures provided key institutional and national spaces that highlighted the emerging geopolitical importance of Kuala Lumpur.

The exhibition also showcased the documentation of these 10 projects and included architectural drawings, models, photographs, murals, sculptures and fi lms. The exhibition told the stories behind each construction - the people, architectural rationales and feats involved in the construction of each building. It also examined the balance between aesthetics, practicality, national pride and affi rmations of social and infrastructural progress.

Curated by Associate Prof Dr Lai Chee Kien.

‘Daerah Samad’: 100 Sketches

by A. Samad Said

(12 June – 15 July 2007)

This debut exhibition of ink sketches and handwritten documents by National Literature Laureate Datuk A. Samad Said demonstrated the celebrated author’s understanding of line and colour, and his astonishing command of the visual medium. With visual expressions that were sometimes abstract, personal and obscure, this exhibition illustrated how Samad succesfully created a visual language to express ideas that could not be communicated by the written word.

PIYADASA - The Malaysian Series

(20 July – 5 August 2007)

This tribute exhibition was held in memory of modern Malaysian artist, art theorist, art historian, critic, educator and writer Redza Piyadasa, who died in May 2007. The exhibition featured 40 selected paintings from Piyadasa’s Malaysian Series.

These paintings continued his conceptual thrust of combining traditional Asian art forms with contemporary Western art impulses, while addressing issues of nation, religion, race and globalisation. The works span approximately two decades of Piyadasa’s art practice up to his demise, bringing his career to a defi nitive close.

Curated by T. K. Sabapathy.

50 Ways to Live in Malaysia

(21 August – 30 September 2007)

The collective geniuses of 50 of Malaysia’s most well-known artists were showcased in this exhibition, featuring 50 artworks made since 1957 to the present day. The exhibition showcased a broad cross-section of Malaysian artists and included celebrated pioneer modernists such as Syed Ahmad Jamal, Ibrahim Hussein, Latiff Mohidin, Jolly Koh, Nirmala Shanmugalingam Dutt, Ismail Zain, Joseph Tan, Khalil Ibrahim, Eric Peris and Sulaiman Esa.

Senior artists represented included Fatimah Chik, Dzulkifl i Buyong, Simryn Gill, Wong Hoy Cheong, Yusof Ghani, Victor Chin, Amron Omar, Zakaria Ali, Kok Yew Puah and Raja Shariman. Contemporary practitioners included Juhari Said, Ramlan Abdullah, Ahmad Zakii Anwar, Jailani Abu Hassan, Bayu Utomo Radjikin, Ahmad Fuad Osman, Hasnul Jamal Saidon, Shia Yih Yiing, Soraya Talismail, Paiman, Ivan lam, Kow Leong Kiang, Yee I-Lan, Sharon Chin, Ise and Mutalib Musa.

The exhibition painted a picture of modern Malaysia that was inspired by sub-themes such as the environment, society, communities, religion, politics, gender, architecture, leisure, food and historical events, both local and global - all of which have contributed to the way we think and feel as Malaysians. It also showcased the range of media that Malaysian artists have explored in their quest, specifi cally painting, sculpture, installation, printmaking, photography, textiles and new media.

Curated by GALERI PETRONAS.

Watermark of Piyadasa’s Malaysian Story No 2, 1999, mixed media and collage on board.

Nada PETRONAS 31

The Independence Project -

Contemporary Spaces in Malaysia

and Australia

(13 December 2007 – 10 February 2008)

This exhibition covers aspects of independence as seen through the lens of artistic practices, independent spaces and social contexts in Malaysia and Australia. The Independence Project features the works of 16 contemporary Australian and Malaysian artists, and emphasises the ways individual artists question and defi ne themselves, and construct independent positions outside mainstream artistic practice.

Curated by Alexie Glass, Rahel Joseph and GALERI PETRONAS. Presented by the Australian High Commission and Australia International Cultural Council (AICC).

PETRONAS on Film

(21 August – 30 September 2007)

In tandem with the 50 Ways to Live in Malaysia exhibition, GALERI PETRONAS screened a compilation of the best PETRONAS Merdeka and religious festival television advertisements (which were in reality short fi lms), directed by celebrated director Yasmin Ahmad. Over the years, these award-winning commercials, which portray our multiracial essence, have resonated deeply in viewers’ hearts with fi ne stories that cut across boundaries of gender, age, race and religion.

These important fi lms also give voice to PETRONAS’ message of One Legacy.One Destiny.

Spain through the Lens of a

Malaysian Photographer - A

Glimpse of Islamic Heritage in Spain

(14 December 2007 – 6 January 2008)

An impressive collection of 44 colour photographs showcases the beauty of Islamic heritage in the Spanish region of Andalusia, as captured by the lens of Alex Moh. The exhibition is presented in collaboration with the Embassy of Spain.

‘Out of the Mould’: Age of Reason

(25 October - 2 December 2007)

The works by Malaysia’s most prolifi c ‘new generation’ of women artists are showcased in this exhibition. Their internationally recognised artistic practices refl ect the freshness of their own presence within a modern Malaysian society.

The exhibition featured the art of Yau Bee Ling, Shia Yih Yiing, Nur Hanim Mohammad Khairuddin, Nadiah Bamadhaj, Azliza Ayob, Hayati Mokhtar, Bibi Chew, Sharmiza Abu Hassan, Umibaizurah Mahir Ismail and Yee I-Lann.

Curated by Shireen Naziree and GALERI PETRONAS.