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Saturday, June 14, 2008

Simple Calculation

I have been pondering about how much money Malaysia has gained from the crude oil we are pumping out of our seabed. Let me present this simple calculation for you.

Malaysia is not a member of OPEC. One of the reasons is that, our production does not reach 1million barrel a day. Therefore, we remain a non-member and do not have much say in determining the crude price.

I am sure everyone is aware of the crude price. USD130 per barrel, USD140 per barrel. But one has to know that the price of crude differs between crude sources. The one that is being used as the marker is Brent, an oilwell in North Sea. This is a very high quality crude, and therefore, the price is treated as the ceiling price. Other crudes will follow the price rise usually in the same pattern.

Let us do this calculation

From our 650,000 barrel per day production, say we sell them at USD120 per barrel. From this amount, let's assume the oil operators (Shell, Exxon, and Petronas) take their cut of 40% (depending on their acreage agreement). This leave Malaysia with USD47m or RM150m a day. This money should 100% belong to Rakyat Malaysia, considering Petronas should have had their share, and they should not be too greedy in making profit.

Now, let's look at our consumption. At the rate of 450000 barrel a day, and product (gasoil, gasoline) price is around USD140 per barrel, this would cost the nation USD63m or RM202m a day.

At the previous price (around RM2), people will pay for about USD42m a day, or RM134m. The government, on the other hand will have to subsidise USD21m or RM67m a day.

Based on that calculation, the nation is still banking in USD28m or RM83m a day. And this amount translates to about RM30b a year.

Don't forget, that's not all that the government has. The other 40% (remember the 40% of crude income that goes to the operators) will be taxed as in corporate tax from the company profits, the income tax of the employees, and other relevant taxes.

If 25% of this 40% amount goes to the government, the nation would have an extra RM25m or USD8m a day. The amount is estimated around USD2.8b or RM9b a year. This easily covers the subsidy amount the government WAS giving every day.

And mind you, that was the profit the nation was making when crude is at USD120 per barrel. At USD130 pb, one can only expect more income to the nation.

With the new subsidy scheme, the government would spend around USD6.3m or RM20m a day. This amounts to RM7.3b a year.

I have done more calculation, and assuming our crude is being sold at USD120pb, and product around USD140pb, the government will bag around RM51b, that is RM19b more than the income from previous year.

And that if we assume Malaysian crude (Tapis n co) is sold at USD120pb. I have done further calculation and it can be seen that the national income will increase with increase in crude price.

Yes, there is more money, and let's hope the government will be wise enough in spending it. I don't fully support the subsidy system. But I think it is time the nation per capita income be reviewed, and the poverty level is redefined.

2 Comments:

Blogger ihsan_huhu said...

not so good with numbers..kes2

6:04 PM  
Anonymous SK said...

Have u taken into account the cost of operation which is also increasing by the day?

4:49 AM  

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