Former Malaysian prime minister Najib Razak has urged the current government to protect cash-strapped Sapura Energy from bankruptcy — and one suggestion he mooted was for the administration to instruct national oil company Petronas to acquire the contractor.

Najib said that Sapura must not be allowed to fail — if the offshore and marine giant were to go to the wall, it would take with it 10,000 “high-paying jobs” and some 4500 vendors and suppliers would also be impacted.

Other alternatives he proposed included the government providing loans to Sapura or for the contractor to be taken over by Khazanah Nasional — the Malaysian government’s sovereign wealth fund.

Khazanah Nasional is entrusted with growing the nation’s long-term wealth via distinct commercial and strategic objectives, according to Wikipedia.

Sapura today is 40% owned by Permodalan Nasional (PNB), and Najib criticised the state-controlled unit trust company for failing to pump more money into the oilfield services giant, given its financial woes were exacerbated by the fallout of the coronavirus pandemic.

Before 2020, Sapura’s annual income was between 6 billion and 7 billion ringgit (US$1.43 billion to US$1.66 billion), Najib said in an online post.

“PNB and the government need to think about the country’s strategic interests. The ecosystem of Bumiputera vendors, creating high-value jobs for the people and the economy as a whole — it is more than just making another investment,” he was quoted by Free Malaysia Today. (A Bumiputera is a Malaysian of indigenous Malay origin.)

“If Sapura goes bankrupt, 10.6 million… [local] investors will suffer direct losses of 4 billion ringgit.

“PNB, the Employees Provident Fund and other provident funds will face indirect losses due to debts of 10 billion ringgit owed to local banks, such as Maybank of which PNB owns 50%.”

Najib added that not only might Malaysia lose its largest petroleum services player but also that its assets could be snapped up at bargain-basement prices by foreign companies.

The government should therefore step in and perhaps direct Petronas or Khazanah Nasional to take over ownership of Sapura.

Petronas not only still requires Sapura’s services for its projects, but the energy giant has a better understanding of the oil and gas sector, he noted.

“This was how Petronas saved MISC (now an indirect subsidiary of the energy giant) in 1998. Upon recovery, Petronas… can resell part of Sapura’s shares to the local market just as Petronas resold MISC’s shares to make a profit,” he said.

Sapura Energy last week revealed it had made an 8.9 billion ringgit net loss for its 2021 financial year — reportedly the largest-ever loss for any Malaysian government-linked company

“Sapura is on the verge of bankruptcy, faced with dozens of bankruptcy suits filed by its vendors,” confirmed Najib.

PNB early last year reshuffled Sapura’s management, appointing industry veteran and ex-Shell and ex-Petronas senior management official Anuar Taib as its chief executive with the aim of turning around the company’s fortunes.

However, PNB did not want to furnish Sapura with any new loans, instead telling the contractor to dispose of assets to raise much-needed funds.

“Lockdowns, as well as the closure of international borders, complicated the sale of the assets,” added Najib.

“Without bank facilities and working capital to continue existing or undertake new projects, Sapura will certainly go bankrupt,” he said.

Upstream has approached Sapura Energy and Petronas for comment.

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