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Petronas Gas Berhad and Bumi Armada Berhad

Essay by   •  April 8, 2019  •  Case Study  •  5,325 Words (22 Pages)  •  16 Views

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1.0 Background of Petronas Gas Berhad (PGB)

PGB is a leading gas infrastructure and utility company is Malaysia. The main business of PGB is to provide natural gas and processes gas for customers in Malaysia and Singapore. From the annual report which state that the Vision of PGB is to become a leading gas infrastructure and utilities company. PGB’s mission stated that they are operating in a safely, reliably and competitively manners. Also, PGB maximise returns to their stakeholders by optimising the gas value chain[1]. Mission statement of PGB reflects high level. Through this, it shows that PGB has high level of accountability towards their shareholder as they are putting efforts in increasing the sales of the company, and high responsibility to their stakeholders as they are operating in a safe working environment.

The strategic business units of PGB are divided into 4 core segments which are Gas Processing, Gas Transportation, Utilities and Regasification. Firstly, Gas Processing is one of the main segments of PGB. It is the course of machining the natural gas into sales gas, ethane, propane and butane which will then supply to the customers. Secondly, PGB also provides Gas Transportation service. This service transports processed gas to end customers of PGB via pipeline network which located in separated locations throughout Malaysia. Thirdly, PGB also supplies Utilities which include electricity, steam, industrial gases, water and others and they receive utilities revenue in this segment. Lastly, one of the core segments of PGB is Regasification. This is a process where the company acquires imported Liquefied Natural Gas, which will be stockpile in the floating storage units and storage tanks before converted into sales gas for customers.

1.1 Background of Bumi Armada Berhad (BAB)

Bumi Armada Bhd (BAB) is a Malaysia-based international provider of offshore energy facilities and oilfield services[2]. BAB was incorporated in December 1995 and is headquartered in Kuala Lumpur, Malaysia[3]. The company is listed on Bursa Malaysia under the Main Market. The Bumi Armada group of companies include diversified subsidiaries and joint venture companies. They have conducted businesses in over 17 countries, spread across five continents, supported by over 1,700 people from 49 nationalities[4].

        BAB has engaged in the provision of offshore marine services (OMS), floating production storage and offloading system (FPSO) operations, vessel construction, and engineering and maintenance services to offshore oil and gas (O&G) companies. The company provides services through its ownership and operation of marine assets across the O&G value chain, which is from exploration to field development and construction, production and operations and eventually, decommissioning.

        The Vision of BAB is to be the preferred provider of offshore production and support services to their clients. Their mission has reflected high level of responsibility to their stakeholders as they commit to operate and deliver their commitments to the satisfaction of their stakeholders, safely, timely and within budget. A continuing effort is showed on the company effectively managing risks through a hands-on approach, and they have continuously enhanced their capabilities and to apply the lessons learnt to the company future plan. Besides, to ensure a good corporate governance in the company, BAB also reflect high sustainability by reducing the environmental footprint, supporting local communities and promoting social sustainability awareness.

2.0 Corporate Governance (CG) Issues

2.1 PETRONAS Gas Berhad (PGB)

  1. Transparency

Firstly, PGB has high levels of transparency. From the annual report, we found that information on PGB’s business activities and financial performance is disclosed timely through comprehensive announcements to Bursa Malaysia. Immediately after the AGM, PGB held a press conference with the media and published on the company’s website regarding any materials distributed during the press conference[5].

Besides, PGB is being transparent through disclosure of detail information in its Cash Flow statement. PGB also maintain a healthy cash flow and balance sheet by showing all the breakdowns of their cash flow items and notes on balance sheet to disclose detail information on how they utilize shareholders’ fund.

From this, it is proven that PGB is accountable to the shareholders as it has established an internal Corporate Disclosure Guide to facilitate the disclosure of information to the shareholders transparently and maintain high standards of stewardship of their capital. Also, PGB is responsible to the stakeholders as it promotes transparency in the communication and dissemination of material information amongst its organisation and public. They also responsible to its creditors by paying interest and repayments to them without delay.

  1. Independence of the Board

According to Practice 1.3 of MCCG 2017, the positions of Chairman of the Board and CEO are held by different individuals. This is to promote accountability and facilitate division of responsibilities between them in the company. The separate roles and responsibilities of the Chairman and Managing Director/Chief Executive Officer (MD/CEO) are provided in the Board Charter which is available on the company’s official website. Chairman is responsible to supervise the management whereas CEO focuses on the business and day-to-day management of the company. Independence of board is achieved as the Board practices a clear demarcation of duties and responsibilities between the Chairman and MD/CEO to ensure a balance of power and authority in the Board (Appendix 1). According to Guidance 1.3 of MCCG 2017, separation of the positions of the Chairman and CEO promotes accountability and facilitates division of responsibilities between them. PGB is responsible to its stakeholders as it is able to maintain good performance of the company without bias.

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