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Malaysia's Petronas profit falls 23 percent

A Petronas logo is seen near its twin towers in Kuala Lumpur, Malaysia, Thursday, July 1, 2010. Malaysia's national oil company Petronas reported a second consecutive year of decline in net profit Thursday, blaming lower energy prices and higher costs amid the global slowdown. A Petronas logo is seen near its twin towers in Kuala Lumpur, Malaysia, Thursday, July 1, 2010. Malaysia's national oil company Petronas reported a second consecutive year of decline in net profit Thursday, blaming lower energy prices and higher costs amid the global slowdown. (AP Photo/Lai Seng Sin)
July 1, 2010

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KUALA LUMPUR, Malaysia—Malaysia's national oil company Petronas reported a second consecutive year of decline in net profit Thursday, blaming lower energy prices and higher costs amid the global slowdown.

Net profit fell 23 percent to 40.3 billion ringgit ($12.4 billion) in the financial year ended March 31, it said in a statement. Revenue shrank 18 percent to 216.4 billion ringgit ($66.8 billion).

Chief Executive and President Shamsul Azhar Abbas said it was an "unusually difficult and challenging year" as energy prices tumbled amid weaker global demand while production costs remained high.

For the year under review, the average price of benchmark crude West Texas Intermediate eased 20 percent to $70.59 a barrel while that of Malaysian crude oil declined a similar amount to $72.69, he said.

Despite the lower profits, Shamsul said Petronas -- Malaysia's only Fortune 500 company and the country's most profitable -- remained competitive with its 31 percent return on revenue and 16.4 percent return on assets higher than that of other oil majors.

He said payments of taxes, royalties, export duties and dividends by Petronas -- a major contributor of revenue to the government -- dropped 22 percent to 57.6 billion ringgit ($18 billion).

Petronas spent 37 billion ringgit ($11.4 billion) in capital expenditure and investments during the fiscal year, down nearly 16 percent from a year earlier, he said. It signed 17 new production sharing contracts abroad, bringing its total ventures to 76 projects in 23 countries.

International operations, mainly in Africa, contributed 45 percent of the company's revenue while exports made up 35 percent and domestic operations about 20 percent.

Shamsul said Petronas faced significant challenges in maturing domestic acreage, with both reserves and production set to decline unless new investment are made. The group will focus more on developing discovered oil wells, rather than exploration overseas, he said.