?????????????????????? 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 (click on image to enlarge). 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but said that “it is safe to note that it is partial, taken out of context and to the extent factually correct, is outdated”.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.
Posted on: Wed, 12 Feb 2014 11:22:39 +0000
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