Sir Wenger J Khairy's "Will Petronas give Najib ‘GAS’?"

Thank you to Anon 7:25 am (yesterday's post) who sent me this. Please convey my thanks to Sir Wenger for this analysis. I have some comments at the end.

Will Petronas give Najib ‘GAS’? – Sir Wenger J Khairy

Published: 1 March 2016 

Samy Vellu forced from MIC after GAS ("Gerakan Anti Samy Vellu")

GAS threat facing Najib is in financial reports of Petronas 

Petronas's loss RM3 billion in 4th quarter 2015 

key risk that could end Najib

If ringgit past RM4.80 pressure for Najib to resign unbearable

ringgit trading at about RM4.20, 12.5% below critical RM4.80 level.

does ringgit reflect fully country’s exposure to GAS threat?

risk is more (from) natural gas than oil 

2015, Malaysia exported US$12.1b of (LNG) 

compared to only US$6.6b of crude oil

2015 LNG export average US$9.79 per MMBTU 

crude oil exports averaged US$58.5 per barrel.

brent crude trades today at US$36.6 per barrel (37.4% lower than before)

LNG is trading at far more depressed levels 

spot for LNG US$4.85 per MMBTU (50.5% lower than last year)

future market sentiment decidedly weaker for LNG than oil.
next five years LNG "mega projects" in Australia, US and Cameroon

total supply of LNG increasing by 46.3%.

long-term effect of this is “economics 101” 

price differential between LNG and natural gas will evaporate.

old supply contracts get renegotiated
LNG is a buyers’ market 

prices may go as low as US$3 per MMBTU.

assuming LNG in 2016 average US$5 per MMBTU 

and crude prices average US$35 per barrel 

serious impact to Malaysian current account balance

At those prices, loss in export revenue about US$8 b per year. 

comparable to current account surplus for 2015 of RM34 billion 

should this persist in 2016, M'sia register current account deficit.

additional pressure on ringgit 

twin current and capital account outflow.

10%-20% depreciation of the ringgit inevitable 

tremendous pressure on Najib to step down 

- See more at: http://www.themalaysianoutsider.com/sideviews/article/will-petronas-give-najib-gas-sir-wenger-j-khairy#sthash.Ap8II3Bq.dpuf

My comment : This is a great analysis. Our daily nasi lemak actually comes from sales of LNG (gas) which Wenger says adds up to US$12.1b  (RM51b) a year versus crude oil that brings in US$6.6b   (RM27.7b) a year.

Gas exports earn almost TWO TIMES as much as crude oil exports. And it is the gas prices that are crashing much, much worse than crude oil prices.

To make things worse Petronas is investing another US$36 Billion (RM151 billion) in more gas production in Canada !! 

Wenger says if these weak prices persist, the ringgit will weaken to RM4.80 and beyond which will at last, finally trigger Najib to step down.

This is where I disagree. 

My view is even if the Ringgit goes down to RM5.00 against the USD,  Najib will see no pressure from UMNO and the Malays to step down.

My reasoning is like this - the UMNO guys, the PAS guys and the folks in the towns and villages will not understand the meanings of all this. Even Najib does not understand.  

Current account deficit, Ringgit weakening, weak gas prices - you may as well speak Punjabi to them. Depa langsung tak faham.  

Secondly you cannot hold Najib responsible for weak gas and oil prices. Even if Najib packs up, the oil and gas prices will not change. We will still suffer severe economic problems.  

You can hold Najib for being the idiot that he is. For not knowing what to do when he goes to work.  But UMNO, PAS and the Malays may not see that.

The whole country is hurting. The Chinese business classes especially are hurting.  But the Chinese economy is a little more resilient and a lot removed from the gomen economy aka the bumiputra economy.  So the Chinese will come through.

It is the bumiputra economy aka the Malay economy aka the gomen economy that will suffer. 

But again the Malays will not riot in the streets. This is not Thailand. This is as per Mat Sabu's recent description. People are none too brave. 

UMNO and the vast majority of Malays will simply say, 'ini takdir', 'ini dugaan', 'ini cabaran', 'ini cobaan' and all the other 'an's. Some are already saying 'masa Jepun dulu kita lagi susah'.

Meaning no Malay is going to riot and demonstrate against Najib even if the USD goes to RM4.80 or RM5.00.  They just do not understand the meaning of all this.

However the Malays and the whole country may wake up  if the gomen does not have money to pay its Civil Servants salaries.  This is a possibility.  There are 1.6 million civil servants, 99% of whom are Malay and if they miss one pay check, then there will be chaos.

Yesterday a news report said some cleaners in a school in Kepong, KL have not been paid salaries since January this year.  It was not because of any labour dispute etc. They were just not paid. The school had to appeal to the Jabatan Pendidikan. Dont know if the case has been resolved.

The VC or Head of University Kuala Lumpur recently met with Annuar Musa the Chairman of MARA about releasing some funds for student loans at Uni KL. Over 200 new students dropped out of Uni KL last week because of no financial aid from MARA. The issue is still not resolved. 

Annuar Musa told Uni KL to tell their future applicants that MARA student loans will not be available anymore.  There is no more money.

Peope claiming GST rebates (if their GST collection is LESS than their GST payments to the gomen) are being told that NO rebates will be paid. It will be offset against their FUTURE GST payments. There is no more money.

Companies (like Shell Malaysia) claiming tax rebates have been told the same thing. No tax rebates / tax refund claims will be paid out. It will be offset against your FUTURE tax payments. There is no more money.

If the gomen misses paying one month's salary to the 1.6 million Civil Servants then UMNO, PAS and the Malays will wake up.

But even then, no one is going to demonstrate in the streets This is not Thailand. Mat Sabu was correct.

My reading is first the gomen then the country will just grind to a halt. People will drive their cars until the petrol tank becomes empty. Then they will get down and just start walking. 'Ini takdir' they will say. They will not demonstrate or riot.

Cash will really be king then. Other people with cash will buy them out. Watch out. 

Houses will be put up for fire sale. 

They will sell their land.

Cars will be put up for fire sale. 

Women will sell their jewelleries.

Still Najib may remain in office.