Petronas subsidiary MISC has surfaced in a global bribery and corruption scandal involving US$10 million (RM33.4 million) of more than US$250 million (RM834 million) in bribes and other malpractices spanning six years, which centres around Dutch oil and gas (O&G) services company SBM Offshore.
According to a document listing possible fraud by SBM
Offshore in various countries spanning Africa, Equatorial Guinea,
Brazil, Iraq, Kazakhstan and Italy in addition to Malaysia, MISC was
allegedly involved in payments to Barnado Limited and Delcom Limited
totalling US$10 million (RM33.4 million) related to the Kikeh field
floating production, storage and offloading (FPSO) platform.
“Payments to Barnado Limited and Delcom Limited totalling
approximately US$10,000,000, paid on (ie. by way of bribes) to “MISC”
for the Kikeh FPSO (leased to US oil company Murphy),” noted an entry on
Malaysia
Dutch
business magazine Quote reported last week that the information from
the document came from within SBM Offshore itself, stolen by a
disgruntled former employee.
“It was stolen by a former employee who wanted to blackmail us,” said SBM Offshore to Quote.
After SBM Offshore refused to entertain demands for some €3
million (RM13.69 million) in exchange for non-disclosure of the
information, the former employee then posted the contents of the
document on SBM Offshore’s Wikipedia page on Oct 18, 2013, SBM Offshore
said.
SBM Offshore’s updated Wikipedia page no longer contains
said text from the document but the information can still be accessed by
accessing a historical version of the page dated Oct 18, 2013 and Feb
4, 2014.
In a press statement following Quote magazine’s report, SBM
Offshore declined to comment on the contents of the document, but said
that “it is safe to note that it is partial, taken out of context and to
the extent factually correct, is outdated”.
“This information has been secured illegally by an angry
former employee who tried to extort SBM,” said an SBM Offshore
spokesperson to Quote. “We are engaged in legal action against this
person. This information is placed out of context.”
At press time KiniBiz was still waiting for an official response from MISC on the issue.
Responding to KiniBiz queries, SBM Offshore neither
confirmed nor denied the alleged bribery payments involving MISC,
reiterating that investigations are still ongoing.
“There is nothing we can add to what we already have
communicated,” said a representative of SBM Offshore in reference to a
previous press statement dated Feb 7, 2014.
At 5.00pm, MISC closed at RM6.10, down 2% or 13 sen.
Fresh allegations sink SBM Offshore shares
SBM
Offshore saw its shares plunge last Friday as news of the information
leak broke, which analysts reportedly said may lead to hefty fines for
the company.
Reuters reported that the allegations hint at a bigger problem surrounding SBM Offshore than was previously believed.
“The implications are larger than many, ING included, had
expected and could eventually have a bigger impact than considered thus
far,” said ING analyst Quirijn Mulder in a research note, which saw SBM
Offshore removed from the research house’s Benelux favourites list.
In light of the new developments, Mulder said that ING’s
previous estimate of a US$100 million to US$150 million fine for one
African country was too low. “Even our worst case of US$400 million
might be too low.”
SBM Offshore’s investigations into the scandal began in
2012 after the company became aware of alleged payments involving sales
via intermediaries between 2007 and 2011. The company later said that it
may have violated anti-corruption laws, which opens the possibility of
criminal investigation into alleged bribe payments to officials in
African countries.
In a March 2013 update, the company said “there are
indications that substantial payments were made, mostly through
intermediaries, which appear to have been intended for government
officials”, although no conclusive proof had been found then of alleged
improper payments in countries outside Africa.
According to Reuters, this latest development follows a
steady stream of bad news for SBM Offshore over the past two years,
including heavy losses and a management shake-up.
Who is Barnado Ltd and Delcom Ltd?
The reference to Kikeh FPSO in the leaked document is
notable as it was the first FPSO in Malaysia, which followed the first
deepwater oil discovery in the country at the field.
MDFT Labuan and MDPX Sdn Bhd, two joint venture companies between SBM Offshore and MISC, own and operate the FPSO respectively.
It not immediately clear what role Barnado Limited plays in relation to the Kikeh FPSO.
However, Delcom Limited and SBM Offshore made history at
Kikeh as they were awarded the fluid transfer lines (FTL) Gravity
Actuated Pipe (GAP) project, which was the first such system in the
world.
Delcom, SBM Offshore and Murphy Oil undertook the project between 2006 and 2007.
Located 120km northwest of Labuan, Kikeh field is operated
by Murphy Sabah Oil Company on behalf of its partner Petronas Carigali,
comprising an FPSO vessel which receives production from wells drilled
from a Spar dry tree unit that has 24 slots.
Kikeh field is said to have a recoverable reserve base in excess of 400 to 700 million barrels of oil.
MISC made headlines last year when parent company Petronas
attempted to privatise it at an initial offer price of RM5.30 per share,
which was criticised as too low given changing fortunes of the shipping entity at the time.
Notably, Employees Provident Fund (EPF) which owned 9.5% in
MISC then accepted a revised offer of RM5.50 per share some eight days
ahead of the deadline to do so, prompting criticism on the retirement
fund for not holding out for what was perceived to be a better offer
from Petronas.
In the end Petronas only managed to obtain 86.07% of MISC’s shares, short of the regulatory 90% threshold and the proposed privatisation was off in April.
However, later in 2013 Petronas directly procured new-build Liquefied Natural Gas (LNG) ships, which raised questions
given that MISC had been the sole supplier of LNG ships to Petronas
since Petronas acquired MISC stakes in 1998 and injected Petronas’s
owned five Puteri Class LNG ships into MISC.
For 3Q13 ending last September, MISC posted RM401 million
in net profit from RM2.16 billion in quarterly revenue, up from RM138.8
million in net profit recorded from RM2.15 billion revenue in 3Q12.
Year-to-date, MISC’s 9MFY13 net profit stands at RM1
billion from RM6.82 billion in revenue, an improvement over RM49.13
million in net profit from RM6.72 billion revenue in the previous
corresponding period in 2012.
It must be noted however that in 9MFY12 MISC’s net profits
were dragged down by losses from discontinued operations amounting to
RM637.5 million.
MISC is expected to announce its 4Q13 results later this week.
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