an unwavering commitment

Transcription

Shell Refining Company
(Federation of Malaya) Berhad (3926-U) (Incorporated in Malaysia)
(Federation of Malaya) Berhad (3926-U) (Incorporated in Malaysia)
Annual Report 2008
www.shell.com.my
an unwavering commitment
08
Annual Report
...to safety, reliability
and sustainability
In touch with the needs and demands of the
future, Shell Refining Company pursues
optimum standards in every aspect of our
business. Delving deeper and reaching
further, we focus on safety, reliability and
sustainable progress as key goals. This is
our pledge that withstands economic
changes and upheavals and remains the
essence of our corporate strength.
2
(Federation of Malaya) Berhad (3926-U)
(Incorporated in Malaysia)
contents
4
vision, mission & objective
5
corporate information
6
9
notice of the
50th annual general meeting
statement accompanying
notice of the
50th annual general meeting
12
shell general
business principles
18
reliability performance
19
awards & recognition
20
2008 major turnaround
24
board of directors
26
directors’ profile
30
management team
Annual Report 2008
34
financial calendar
35
performance at a glance
36
40
shell in malaysia
chairman’s statement
50
corporate social
responsibility
70
highlights of the year
72
audit committee report
76
corporate governance
statement
84
statement of internal control
87
financial statements
126 company properties
130 analysis of shareholdings
proxy form
bahasa malaysia version
(cd rom)
3
4
vision
to be the top performing and
most admired refinery in Asia
mission
To continuously deliver shareholder value by:
•
•
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•
Manufacturing and supplying oil products and services
that satisfy the needs of our customers
Constantly achieving operational excellence
Conducting our business in a safe, environmentally
sustainable and economically optimum manner
Employing a diverse, innovative and results-oriented team
motivated to deliver excellence
objective
We are committed to deliver sustainable
excellence in business performance by focusing
on the following:
•
•
•
•
•
•
•
•
Benefit our shareholders
Realise the potential of our people
Meet our customer requirements
Maximise refinery margins
Safeguard asset integrity
Deliver structural cost reductions
Sustain a robust management system
Deliver continuous sustainable Health, Safety,
Security and Environmental excellence
Annual Report 2008
corporate information
Board of Directors
Company Secretary
Registered Address
Chairman, Non-Independent and
Non-Executive Director
Y. Bhg. Dato’ Saw Choo Boon
Pn. Rodziah Binti Zainudin
Bangunan Shell Malaysia
Changkat Semantan,
Damansara Heights,
50490 Kuala Lumpur.
(LS 0008034)
DSNS
Managing Director and
Executive Director
YM Raja Ahmad Murad Bin
YM Raja Bahrin
Senior Independent and Non-Executive
Director, Member of Audit Committee
Y. Bhg. Tan Sri Datuk
Clifford Francis Herbert
PSM, PSD, JSM, KMN
Independent and Non-Executive Director,
Chairman of Audit Committee
Y. Bhg. Dato’ Jaffar Indot DSNS, SMS
Independent and
Non-Executive Director,
Member of Audit Committee
Y. Bhg. Dato’ Seri Talaat Bin
Haji Husain
DDSA, SPMP, DPCM, DPMP, JSD, PJK, PJM
Non-Independent and
Y. Bhg. Dato’ Mohzani Bin
Abdul Wahab DPSJ, SMP, ASDK
Non-Independent and
Mr. Mark Owen Stevens
Non-Independent and
Mr. Thomas Michael Taylor
Executive Director
Tuan Haji Rozano Bin Saad
Auditors
Messrs PricewaterhouseCoopers
(AF 1146)
1 Sentral, Jalan Travers,
Kuala Lumpur Sentral,
P.O.Box 10192,
50706 Kuala Lumpur.
Share Registrar
Symphony Share Registrars
Sdn Bhd (378993-D)
Level 26, Menara Multi-Purpose,
Capital Square,
No. 8, Jalan Munshi Abdullah,
50100 Kuala Lumpur.
Tel No:
Fax No:
603-2721 2222
603-2721 2530
603-2721 2531
Stock Exchange Listing
Main Board of
Bursa Malaysia Securities Berhad
Tel No:
Fax No:
603-2095 9144
603-2091 2099
Business Address
Batu 1, Jalan Pantai,
71000 Port Dickson,
Negeri Sembilan.
Tel No:
Fax No:
606-647 1311
606-647 4622
AGM Help Desk
Mr. Hardip Singh
Tel No:
Fax No:
Email:
603-2091 2344
603-2091 2099
[email protected]
5
6
notice of the
50th
annual general meeting
NOTICE IS HEREBY GIVEN that the Fiftieth Annual General Meeting of Shell
Refining Company (Federation of Malaya) Berhad (“the Company”) will be held on
Thursday, 7 May 2009, at 11.00 a.m. at Sime Darby Convention Centre,
1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur to transact the following business:
1. To receive the Audited Financial Statements of the Company for the financial year ended
31 December 2008 and the Reports of the Directors and Auditors thereon.
2. To approve the declaration of a final dividend of Thirty Sen (RM0.30) less Malaysian
Income Tax at 25% per unit of ordinary share of RM1.00 each for the year ended
31 December 2008 as recommended by the Directors.
Resolution 1
3. To re-elect Tuan Haji Rozano Bin Saad, who is retiring in accordance with Article 81(2) of
the Company's Articles of Association and being eligible, offers himself for re-election.
Resolution 2
4. To re-elect the following directors who are retiring in accordance with Article 81(3) of the
Company's Articles of Association and being eligible, offer themselves for re-election:
a. Y. Bhg. Dato' Saw Choo Boon
b. Y. Bhg. Dato' Seri Talaat Bin Haji Husain
c. Mr. Mark Owen Stevens
5. To re-elect Y. Bhg. Tan Sri Datuk Clifford Francis Herbert, who is retiring in accordance with
Article 81(9) of the Company’s Articles of Association and being eligible, offers himself for
re-election.
6. To consider and if thought fit, pass the following ordinary resolution pursuant to Section 129
of the Companies Act 1965:
“That Y. Bhg. Dato’ Jaffar Indot, a Director who retires in accordance with section 129 of
the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to
hold office until the conclusion of the next Annual General Meeting.”
Resolution 3
Resolution 4
Resolution 5
Resolution 6
Resolution 7
7. To appoint Messrs. PricewaterhouseCoopers as auditors and to authorise the Directors to fix
the auditors’ remuneration.
Resolution 8
8. As SPECIAL BUSINESS, to consider and, if thought fit, pass the following ordinary resolution:
Proposed Renewal of the Existing Shareholders’ Mandate and Proposed New Shareholders’
Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature
Resolution 9
Annual Report 2008
“THAT subject to the Companies Act, 1965, the Memorandum and Articles of Association of the Company and the Listing
Requirements of Bursa Malaysia Securities Berhad,
(a) approval be and is hereby given for the Renewal of the Existing Shareholders' Mandate for the Company to enter into and
give effect to the category of the recurrent arrangements or transactions of a revenue or trading nature from time to time
with the Related Parties, as specified in Section 2.2 of the Circular to Shareholders dated 10 April 2009; and
(b) a New Shareholders' Mandate be and is hereby granted for the Company to enter into additional recurrent related party
transactions of a revenue or trading nature from time to time with the Related Party, namely as specified in Section 2.2 of
the Circular to Shareholders dated 10 April 2009, provided that such transactions are:(i)
recurrent transactions of a revenue or trading nature;
(ii) necessary for the Company's day-to-day operations;
(iii) carried out in the ordinary course of business on normal commercial terms which are not more favourable to the
Related Parties than those generally available to the public; and
(iv) not to the detriment of minority shareholders;
(the "Mandate");
That such authority shall commence upon the passing of this resolution and shall continue to be in force until:
(i)
the conclusion of the next Annual General Meeting of the Company following the Annual General Meeting at which such
mandate was passed, at which time it will lapse, unless the authority is renewed by a resolution passed at the meeting;
(ii) the expiration of the period within which the next Annual General Meeting is required to be held pursuant to Section 143(1)
of the Companies Act, 1965 but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the
Companies Act, 1965; or
(iii) revoked or varied by resolution passed by the shareholders in a general meeting;
whichever is the earlier;
And further that the Directors of the Company be authorised to complete and do all such acts and things (including executing all
such documents as may be required), as they may consider expedient or necessary to give effect to the Mandate”.
By order of the Board
Pn. Rodziah Binti Zainudin (LS 0008034)
Company Secretary
Kuala Lumpur
10 April 2009
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8
notice of the 50th annual general meeting
(continued)
Notice of Dividend Entitlement
NOTICE is hereby given that a final dividend of Thirty Sen (RM0.30) gross per unit of share less 25% Malaysian Income Tax in
respect of the financial year ended 31 December 2008, if approved by the shareholders, will be paid on 18 June 2009 to
Shareholders registered in the Record of Depositors or Register of Members at the close of business on 4 June 2009.
A Depositor shall qualify for entitlement only in respect of:
(a) Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 4 June 2009 in respect of share transfers; and
(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia
Securities Berhad.
Notes Relating to Proxy
Notes to the Agenda
1. A member of the Company who is entitled to attend and vote at the meeting
may appoint a maximum of two (2) proxies to attend and, on a poll, vote on
the member's behalf.
1. Pursuant to Sections 169(1) and 174(1) of the Companies Act, 1965 and
Article 124 of the Company's Articles of Association.
2. A proxy need not be a member of the Company.
3. The instrument appointing a proxy shall be in writing and signed by the
appointor or by his attorney who is authorised in writing. In the case of a
corporation, the instrument appointing a proxy or proxies must be made under
seal or signed by an officer or an attorney duly authorised.
4. The signature to the instrument appointing a proxy or proxies executed outside
Malaysia must be attested by a solicitor, notary public, consul or magistrate.
5. The instrument appointing a proxy and the power of attorney or other
authority (if any) under which it is signed or notarised must be deposited at
the registered office of the Company, Company Secretary's Office, Bangunan
Shell Malaysia, Changkat Semantan, Damansara Heights, 50490 Kuala
Lumpur, not less than forty eight (48) hours before the time for holding the
meeting or adjourned meeting.
6. Only an original proxy form deposited at the registered office of the
Company, will entitle the proxy holder to attend and vote at the meeting.
Photocopies of proxy form will not be accepted for the purposes of the
meeting. Additional original proxy forms are available to members upon
request in writing to the Company.
7. Where a member appoints two (2) proxies, the appointment shall be invalid
unless such member specifies the percentage of his/her holding to be
represented by each proxy.
8. Any nomination of a Director must be made in accordance with the Articles of
Association of the Company.
2. Pursuant to Article 112 of the Company's Articles of Association, the
Company has declared and paid interim dividend of Twenty Sen (RM0.20)
per unit of ordinary share and the Directors of the Company have
recommended a final dividend of Thirty Sen (RM0.30) per unit of ordinary
share. This amounts to a total dividend of Fifty Sen (RM0.50) per unit of
ordinary share for the year 2008. (All amounts referred to are before
deduction of income tax).
3. Re-election is Pursuant to Article 81(2) of the Company’s Articles of Association
which requires the appointment of additional Director to hold office only until
the next Annual General Meeting but shall be eligible for re-election.
4. Re-election is pursuant to Article 81(3) of the Company's Articles of Association,
which requires the rotation of one-third of the Directors to retire from office at the
first Annual General Meeting and at the Annual General Meeting in every
subsequent year provided always that all Directors shall retire from office once
at least in each three (3) years, but shall be eligible for re-election.
5. Pursuant to Article 81(9) of the Company's Articles of Association, which requires
Directors appointed by the Board to fill casual vacancies during the year to be
confirmed by the shareholders in the following Annual General Meeting.
6. Section 129(6) of the Companies Act 1965 requires Directors above seventy
(70) years of age to be re-appointed by the shareholders every year.
7. Pursuant to Section 172(2) of the Companies Act, 1965 and Article 127 of
the Company’s Articles of Association.
8. Explanatory notes to Special Business:
On 10 April 2009, the Board announced to Bursa Malaysia Securities Berhad
that the Company would like to seek approval of its shareholders for the
Proposed Renewal of the Existing Shareholders’ Mandate and Proposed New
Shareholders’ Mandate for Recurrent Related Party Transactions of a revenue
or Trading Nature. The Existing Shareholders' Mandate, obtained on 15 May
2008, will expire at the conclusion of the forthcoming Fiftieth Annual General
Meeting to be held on 7 May 2009. For further information, please refer to the
Circular to Shareholders dated 10 April 2009. All defined terms will have the
same meaning as defined in the Circular to Shareholders dated 10 April 2009.
Annual Report 2008
statement accompanying
notice of the 50th annual general meeting
pursuant to para 8.28 (2) of the listing requirements of bursa malaysia securities berhad
1. Director who is standing for re-election at the Fiftieth Annual
General Meeting of the Company pursuant to Article 81(2)
of the Company‘s Articles of Association is:
a. Tuan Haji Rozano Bin Saad
(Refer to page 29 of Directors‘ profile)
2. Directors who are standing for re-election at the Fiftieth
Annual General Meeting of the Company pursuant to
Article 81(3) of the Company‘s Articles of Association are:
a. Y. Bhg. Dato‘ Saw Choo Boon
b.
Y. Bhg. Dato‘ Seri Talaat Bin Haji Husain
c.
General Meeting of the Company pursuant to Article 81(9)
of the Company’s Articles of Association is:
a. Y. Bhg Tan Sri Datuk Clifford Francis Herbert
General Meeting of the Company pursuant to Section 129
of the Companies Act 1965 is:
a. Y. Bhg. Dato‘ Jaffar Indot
5. The place, date and hour of the forthcoming Fiftieth Annual
General Meeting:
i. Place: Sime Darby Convention Centre,
1A Jalan Bukit Kiara 1,
60000 Kuala Lumpur, Malaysia.
ii. Date:
Thursday, 7 May 2009.
11.00 a.m.
iii. Hour:
6. Details of Attendance of Directors at Board Meetings.
Five Board of Directors Meetings were held during the
financial year ended 31 December 2008. Details of
attendance of Directors at the Board Meetings are as follows:
No. of
Meetings
Attended
Name of Directors
(a) Y. Bhg. Dato‘ Saw Choo Boon
(b) Y. Bhg. Tan Sri Saw Huat Lye
5 out of 5 meetings
3 out of 3 meetings
(Resigned wef 15 May 2008)
(c) Y. Bhg. Tan Sri Datuk
2 out of 2 meetings
(Appointed wef 1 June 2008)
(d) Y. Bhg. Dato‘ Jaffar Indot
(e) Y. Bhg. Dato‘ Seri Talaat Bin
Haji Husain
(f) YM Raja Ahmad Murad Bin
YM Raja Bahrin
(g) Y. Bhg. Dato‘ Mohzani Bin
Abdul Wahab
(h) Mr. Mark Owen Stevens
(i) Mr. Thomas Michael Taylor
5 out of 5 meetings
5 out of 5 meetings
5 out of 5 meetings
5 out of 5 meetings
5 out of 5 meetings
5 out of 5 meetings
7. The 49th Annual General Meeting of the Company for the
financial year ended 31 December 2007 was held at Sime
Darby Convention Centre, 1A Jalan Bukit Kiara 1,
60000 Kuala Lumpur, Malaysia.
The date, time and purpose of the Annual General Meeting
held was as follows:
Date
Time
Purpose
11.00 a.m. To pass the Ordinary
Thursday
15 May 2008
Resolutions including Special
Business for the Proposed
Renewal of Existing
Shareholders‘ Mandate and
Proposed New Shareholders‘
Mandate for Recurrent
Related Party Transactions of
a Revenue or Trading Nature.
9
delivering
responsibility
Our shared core values of honesty, integrity and
respect for people, underpin all the work we do and
are the foundation of our Business Principles.
We conduct our business in strict adherence to
the Shell General Business Principles which is
underpinned by a comprehensive set of
assurance procedures.
By complying to these principles, we ensure
continued success in delivering stakeholder
expectations.
12
SHELL
General Business Principles
Annual Report 2008
Introduction
The Shell General Business Principles govern how each of the Shell companies
which make up the Shell Group* conducts its affairs. The objectives of the Shell
Group are to engage efficiently, responsibly and profitably in oil, gas, chemicals
and other selected businesses and to participate in the search for and
development of other sources of energy to meet evolving customer needs and the
world’s growing demand for energy.
We believe that oil and gas will be integral to the global energy needs for economic development for many decades to come. Our
role is to ensure that we extract and deliver them profitably and in environmentally and socially responsible ways.
We seek a high standard of performance, maintaining a strong long-term and growing position in the competitive environments in
which we choose to operate. We aim to work closely with our customers, partners and policy-makers to advance more efficient and
sustainable use of energy and natural resources.
* Royal Dutch Shell plc and the companies in which it directly or indirectly owns investments are separate and distinct entities. But in this publication, the collective
expressions ‘Shell’ and ‘Shell Group’ may be used for convenience where reference is made in general to those companies. Likewise, the words ‘we’, ‘us’, ‘our’, and
‘ourselves’ are used in some places to refer to the companies of the Shell Group in general. These expressions are also used where no useful purpose is served by
identifying any particular company or companies.
Our Values
Responsibilities
Shell employees share a set of core values – honesty, integrity
and respect for people. We also firmly believe in the
fundamental importance of trust, openness, teamwork and
professionalism, and pride in what we do.
Shell companies recognise five areas of responsibility. It is the duty
of management continuously to assess the priorities and discharge
these inseparable responsibilities on the basis of that assessment.
a.
To shareholders
To protect shareholders’ investment, and provide a longterm return competitive with those of other leading
companies in the industry.
b.
To customers
To win and maintain customers by developing and
providing products and services which offer value in terms
of price, quality, safety and environmental impact, which
are supported by the requisite technological, environmental
and commercial expertise.
Sustainable Development
As part of the Business Principles, we are committed to
contributing to our sustainable development. This requires
balancing short and long-term interests, integrating economic,
environmental and social considerations into business decisionmaking.
13
14
SHELL general business principles
To employees
To respect the human rights of our employees and to
provide them with good and safe working conditions, and
competitive terms and conditions of employment.
c.
To promote the development and best use of the talents of
our employees; to create an inclusive work environment
where every employee has an equal opportunity to develop
his or her skills and talents.
To encourage the involvement of employees in the planning
and direction of their work; to provide them with channels
to report concerns.
We recognise that commercial success depends on the full
commitment of all employees.
d.
e.
To those with whom we do business
To seek mutually beneficial relationships with contractors,
suppliers and in joint ventures and to promote the application
of these Shell General Business Principles or equivalent
principles in such relationships. The ability to promote these
principles effectively will be an important factor in the
decision to enter into or remain in such relationships.
(continued)
Business Integrity
Shell companies insist on honesty, integrity
and fairness in all aspects of our business and
expect the same in our relationships with all
those with whom we do business. The direct
or indirect offer, payment, soliciting or acceptance of bribes in
any form is unacceptable. Facilitation payments are also bribes
and should not be made. Employees must avoid conflicts of
interest between their private activities and their part in the
conduct of company business. Employees must also declare to
their employing company potential conflicts of interest. All
business transactions on behalf of a Shell company must be
reflected accurately and fairly in the accounts of the company
in accordance with established procedures and are subject to
audit and disclosure.
Principle
3
Principle
4
To society
To conduct business as responsible corporate members of
society, to comply with applicable laws and regulations, to
support fundamental human rights in line with the legitimate
role of business, and to give proper regard to health,
safety, security and the environment.
Economics
Long-term profitability is essential to achieving
our business goals and to our continued
growth. It is a measure both of efficiency and
of the value that customers place on Shell
products and services. It supplies the necessary corporate
resources for the continuing investment that is required to
develop and produce future energy supplies to meet customer
needs. Without profits and a strong financial foundation, it
would not be possible to fulfill our responsibilities.
Principle
2
Competition
Criteria for investment and divestment decisions
include sustainable development considerations
(economic, social and environmental) and an
appraisal of the risks of the investment.
Shell companies support free enterprise. We seek to compete
fairly and ethically and within the framework of applicable
competition laws; we will not prevent others from competing
freely with us.
a.
Of companies
Shell companies act in a socially
responsible manner within the laws of the
countries in which we operate in pursuit
of our legitimate commercial objectives.
Shell companies do not make payments to political parties,
organisations or their representatives. Shell companies do
not take part in party politics. However, when dealing with
governments, Shell companies have the right and the
responsibility to make our position known on any matters,
which affect us, our employees, our customers, our
shareholders or local communities in a manner, which is in
accordance with our values and the Business Principles.
Principle
1
Political Activities
b.
Of employees
Where individuals wish to engage in activities in the
community, including standing for election to public office,
they will be given the opportunity to do so where this is
appropriate in the light of local circumstances.
Health, Safety, Security and
The Environment
Shell companies have a systematic approach
to health, safety, security and environmental
management in order to achieve continuous
performance improvement.
Principle
5
To this end, Shell companies manage these matters as critical
business activities, set standards and targets for improvement,
and measure, appraise and report performance externally.
We continually look for ways to reduce the environmental
impact of our operations, products and services.
Annual Report 2008
Principle
6
Local Communities
Shell companies aim to be good neighbours
by continuously improving the ways in which
we contribute directly or indirectly to the
general well being of the communities within
which we work.
We manage the social impacts of our business activities
carefully and work with others to enhance the benefits to local
communities, and to mitigate any negative impacts from our
activities.
In addition, Shell companies take a constructive interest in
societal matters, directly or indirectly related to our business.
Communication and Engagement
Principle
Shell companies recognise that regular
dialogue and engagement with our
stakeholders is essential. We are committed
to reporting of our performance by providing
full relevant information to legitimately interested parties,
subject to any overriding considerations of business
confidentiality.
7
In our interactions with employees, business partners and local
communities, we seek to listen and respond to them honestly
and responsibly.
Principle
8
Compliance
We comply with all applicable laws and
regulations of the countries in which we
operate.
Living by Our Principles
Our shared core values of honesty, integrity and respect for
people, underpin all the work we do and are the foundation of
our Business Principles.
The Business Principles apply to all transactions, large or small,
and drive the behaviour expected of every employee in every
Shell Company in the conduct of its business at all times.
We are judged by how we act. Our reputation will be upheld
if we act in accordance with the law and the Business
Principles. We encourage our business partners to live by them
or by equivalent principles.
We encourage our employees to demonstrate leadership,
accountability and teamwork, and through these behaviours, to
contribute to the overall success of Shell.
It is the responsibility of management to lead by example, to
ensure that all employees are aware of these principles, and
behave in accordance with the spirit as well as with the letter of
this statement.
The application of these principles is underpinned by a
comprehensive set of assurance procedures, which are
designed to make sure that our employees understand the
principles and confirm that they act in accordance with them.
As part of the assurance system, it is also the responsibility of
management to provide employees with safe and confidential
channels to raise concerns and report instances of noncompliance. In turn, it is the responsibility of Shell employees to
report suspected breaches of the Business Principles to Shell.
The Business Principles have for many years been fundamental
to how we conduct our business and living by them is crucial to
our continued success.
Jeroen van der Veer
Chief Executive
Royal Dutch Shell plc
August 2005
15
16
assuring reliability
We maintained our record of Zero Lost Time Injury
(“LTI”) which means there were no incidents of work
related injury, and as a result, we have achieved more
than 9.7 million man hours LTI-Free since 21 May 2001.
We place a strong focus on building a
reliability mindset among our people and
emerging reliability led strategies.
Working in teams, we mitigate threats to
reliability and achieve optimal performance at
all times. Tactics include monitoring operating
parameters, planning our projects with
foresight, developing contingency plans and
targeting world-class Turnarounds.
18
Unplanned Downtime (%)
8
7.59
reliability performance
7
6
5
2.29
2
3.28
2.90
3
3.70
3.71
4
1
0
We create a reliability mindset to improve our reliability and
execute world-class turnarounds and projects that are
completed safely, on time and on budget. Reliability is having
the equipment available to run as planned to meet customer
demands at optimal economics within the physical potential of
the equipment.
An improved reliability performance leads to improved
performance in the areas of process safety, cost, energy
and margin.
•
A reliable plant has fewer process safety incidences.
•
A reliable plant is more energy efficient and results in less
unplanned releases to the environment.
•
A reliable plant produces more consistent product quality.
•
A reliable plant has the ability to achieve higher utilisation.
•
A reliable plant has lower reactive maintenance costs
along with higher utilisation and lower unit costs, making it
more competitive.
•
A reliable plant has the stability that makes margin
optimisation possible, thereby realising the full potential of
the asset.
2006
2007
2008
A measure of your Company’s reliability is reflected in the
Unplanned Downtime performance:
Year
Unplanned Downtime (%)
Target (%)
2006
2007
2008
2.29
7.59
2.90
3.71
3.70
3.28
During the year, we achieved significant improvement on
Unplanned Downtime and sustaining this improved
performance will remain a priority.
Central to our approach is to put focus on a reliability led
strategy. Core to this strategy is ensuring that all functional
teams in our organisation progress together in mitigating
reliability threats, complying to good practices that would
enable us to manufacture products efficiently, and imprinting the
reliability mindset at all levels of our organisation.
Towards this, our organisation works within a Reliability
Management Framework where Area Reliability Teams and the
Reliability Steering Team drive reliability improvement. The
Reliability Management section is tasked with coordinating all
reliability related activities, including communicating the
reliability mindset via trainings, bulletins and organising
activities such as the Reliability Day.
This has resulted in improved operational efficiency, allowing us
to achieve our desired financial and operational performance
through our first quartile reliability over the long term.
Annual Report 2008
awards & recognition
Awards are a testament to the constant inroads we strive to achieve by improving
our occupational safety and health, plant reliability, corporate governance and
contribution towards value creation. Your Company is proud to be recognised for
our achievements, not only within the Shell Group but also from governmental
and non-governmental agencies in Malaysia.
Awards & Certificates
We are proud to report that our unwavering commitment in
occupational safety and health, as well as good corporate
practices won us the following awards last year:
Malaysian Society of Occupational Safety and
Health (MSOSH) Awards 2007
Shell Malaysia facilities won multiple safety awards from the
Malaysian Society of Occupational Safety And Health
(MSOSH) in recognition of our outstanding occupational safety
and health performance. In 2008, your Company won the
MSOSH Grand Award 2007 for superior OSH performance.
National Annual Corporate Report Awards
(NACRA) 2008
Your Company was awarded a Certificate of Merit in
recognition of excellence in annual corporate reporting.
NACRA is aimed at promoting greater and more effective
communication of financial and business information through
the publication of timely and informative annual reports.
National Award for Management Accounting
(NAfMA) 2008
Best Practice Award for Public Listed Company Category was
awarded in recognition of your Company adopting best
practices in management accounting and creating value that
leads to business excellence.
Malaysian Business – CIMA Enterprise Governance
Awards 2008
The award was presented to your Company by Malaysian
Business, the oldest business magazine in the country that
recognises the achievements in enterprise governance. It is an
evolution of the successful ‘Malaysian Business Corporate
Governance Awards’ held for the last five years. The awards
have been charting the evolution of corporate governance in
Malaysia.
Shell 2008 Manufacturing Executive Vice President’s
Awards in the Cost Category
Your Company was awarded the coveted award in recognition
of our exceptional execution of the best-in-class flawless
statutory Major Turnaround which was completed 2 days
ahead of schedule.
19
20
2008 major turnaround
21
Your Company had successfully completed its 2008 Major
Turnaround (“MTA”) on 27 July 2008, delivering it in record
time, 2 days ahead of plan. The 38 day turnaround involved
the maintenance and inspection of the Long Residue Catalytic
Cracker (“LRCC”) complex, Crude Distiller Unit-2 (“CDU-2”)
Hydrotreater-2 (“HDT-2”), Mild Vacuum Unit (“MVU”) and
Platformer-2. The premise of this Turnaround was to ensure your
Company continues to operate in compliance with statutory
requirements, achieve zero overdue inspection and assure
equipment integrity for reliable operation until the next MTA.
Your Company had delivered a flawless Turnaround within
budget, with zero flaws and zero significant incidents.
•
Achieved Goal Zero targets (zero harm to people, zero
significant safety incidents, zero flaws, zero delay and zero
cost overrun).
•
Fully integrated turnarounds, projects, operations and
maintenance strategy and implementation as per Shell
Downstream Turnaround Process resulted in approval from the
Department of Occupational, Health and Safety (“DOSH”) on
statutory inspection interval from the conventional frequency
of 3 years to 6 years on specific scope.
•
The effective management of risks relating to all the planned
activities, particularly activities that lay on the critical path
using the Potential Problem Analysis, ensured no unforeseen
circumstances came about during the execution.
The 2008 MTA scope included LRCC Reactor cyclones erosion
lining repair, regenerator swirl vane tubes replacement, Reactor
and Regenerator (“R&R”) maintenance work, Platformer-2
Reactors scallop repair, heat exchangers cleaning, column
internal inspection, vessel internal inspections and refractory
repairs.
Capital projects and plant changes were also executed during
the 2008 MTA, including the upgrade of expansion Joint
Bellow, de-bottlenecking of the Propane and Propylene (“PP”)
Splitter, upgrade of Platformer-2 Reactor Centre Pipe and
Platformer-2 catalyst change-out.
Prior to this major event, detailed preparation activities were
carried out. The activities included scope and schedule
development and optimisation, establish and execute contract
strategy including timely procurement of materials, HSSE
planning, engineering work package preparation, operation
shutdown and start up planning as well as establishing cost
control processes.
The table below summarises the key achievements in the
2008 MTA:
Key Performance Areas
Target
Actual
HSSE
Lost Time Injury
Total Recordable Case
0
1 (max)
0
1
40
29
38
27
0
0
Duration
LRCC
Platformer-2
Flawless
Incident leading to Shutdown
During the preparation phase, your Company had actively
worked with local authorities and DOSH, to adopt the
risk-based inspection methodology as a way forward to
regulate statutory shutdown intervals and scope of statutory
inspection. As a result, your Company had been successful with
the application to increase statutory inspection interval from
conventional frequency of 3 years to 6 years on specific scope.
The success indicates DOSH’s confidence in your Company’s
equipment integrity management.
creating unity
We subscribe to workplace diversity as an equal
opportunity employer, which mirrors the communities
in which we operate, enabling us to better understand
and build relationships with our stakeholders and
optimising the positive impact of our presence.
We aspire to deliver results through effective
leadership at every level, by defining clear
accountabilities and driving results through a
shared vision.
Through collaboration, we continue to work
towards improving our performance and
enhancing our growth.
24
board of
from left to right
Puan Rodziah Binti
Zainudin
Company Secretary
Y. Bhg. Tan Sri Datuk
Senior Independent and
Y. Bhg. Dato’ Seri Talaat Bin
Haji Husain
Independent and
Y. Bhg. Dato’ Saw Choo Boon
Chairman,
Non-Independent and
Non-Independent and
Annual Report 2008
directors
Y. Bhg. Dato’ Jaffar Indot
Independent and Non-Executive
Director,
Chairman of Audit Committee
Non-Independent and
YM Raja Ahmad Murad Bin
YM Raja Bahrin
Managing Director and
Executive Director
Y. Bhg. Dato’ Mohzani Bin
Abdul Wahab
Non-Independent and
Executive Director
25
26
Y. Bhg. Dato‘ Saw Choo Boon
DSNS
Chairman, Non-Independent and Non-Executive Director
Dato‘ Saw Choo Boon, Malaysian, aged 62, is the Chairman of Shell Malaysia, a post that he has held since 1 March 2006. He was
appointed a Director on 23 February 2006 and subsequently as Chairman of Shell Refining Company (Federation of Malaya) Berhad
(“SRC”) on 18 May 2006.
Dato‘ Saw holds a B.Sc. Hons (Chemistry) Degree from University of Malaya. He joined Shell in 1970 as a Refinery Technologist in SRC.
He then served in various capacities in manufacturing, supply, trading and planning in Malaysia, Singapore and the Netherlands. In 1996,
he was appointed Managing Director of Shell MDS (Malaysia) Sendirian Berhad. In 1998 – 1999, he assumed the positions of Managing
Director for Oil Products (Downstream) Shell Malaysia and Managing Director of SRC. In 1999, with the globalisation of the Shell Oil
Products business, he was appointed the Vice-President of the Commercial business in the Asia-Pacific region, and in 2004, he became the
President of Shell Oil Products East. In 2005, he managed Shell‘s global marine business.
Currently, Dato‘ Saw chairs the Board of 13 Shell Malaysia companies: Shell Malaysia Limited, Shell MDS (Malaysia) Sendirian Berhad,
Shell Timur Sdn Bhd, Shell Malaysia Trading Sendirian Berhad, Shell Information Technology International Sdn Bhd, Shell Gas (LPG) Malaysia
West Sdn Bhd, Sarawak Shell Berhad, Shell Sabah Selatan Sdn Bhd, Sabah Shell Petroleum Company Ltd, Shell Treasury Malaysia (L) Ltd,
Shell New Ventures Malaysia Sdn Bhd, Provista Ventures Sdn Bhd and SRC. Dato‘ Saw is also a director of Malaysia LNG Dua Sdn Bhd.
Dato’ Saw attended all five Board meetings which were held in 2008.
Y. Bhg. Tan Sri Datuk Clifford Francis Herbert
PSM, PSD, JSM, KMN
Senior Independent and Non-Executive Director, Member of Audit Committee
Tan Sri Datuk Clifford Francis Herbert, Malaysian, aged 67, was appointed as a Director of Shell Refining Company (Federation of Malaya)
Berhad on 1 June 2008.
Tan Sri Datuk Clifford holds a Bachelor of Arts (Hons) Degree from University of Malaya and a Masters of Public Administration from
University of Pittsburgh, United States of America.
Tan Sri Datuk Clifford joined the Administrative and Diplomatic Service of the Malaysian Civil Service in 1964, serving as an Assistant
Secretary in the Public Services Department from 1964 to 1968 and as Assistant Secretary in the Development Administration Unit, Prime
Minister‘s Department from 1968 to 1975. Subsequently, he served in the Ministry of Finance from 1975 to 1997, rising to the post of
Secretary General to the Treasury. He retired from the civil service in 1997.
During Tan Sri Datuk Clifford‘s tenure in the civil service, he sat on the Board of Pepper Marketing Agency, Tourist Development
Corporation, Advisory Council of the Social Security Organisation (“SOCSO”), Aerospace Industries Malaysia Sdn Bhd, Malaysian
Highway Authority, Malaysian Rubber Development Corporation (“MARDEC”), Port Kelang Authority, Kelang Container Terminal Berhad,
Bank Industri Malaysia Berhad, Malaysia Export Credit Insurance Ltd., National Trust Fund (“KWAN”), Kumpulan Khazanah Nasional Bhd,
Malaysia Airline System Berhad (“MAS”), Petroliam Nasional Berhad (“PETRONAS”), Bank Negara Malaysia and Multimedia
Development Corporation Sdn Bhd. He also served as Chairman of the Inland Revenue Board in 1997.
Tan Sri Datuk Clifford is also the Chairman of Montfort Boys Town and is a trustee of Yayasan Nanyang and the National Kidney Foundation.
He is also a Vice President of the Federation of Malaysian Manufacturers. Tan Sri Datuk Clifford was instrumental in establishing the Securities
Commission of which he was a member from 1993 to 1994 and was also a Board member of the Institute of Strategic and International
Studies (“ISIS”) from 1989 to 1997. As Secretary General in the Ministry of Finance, he was also appointed as alternate Governor to the
World Bank. Tan Sri Datuk Clifford was Chairman of KL International Airport Bhd (“KLIAB”) from 1993 to 1999. In 2000 he was appointed
as Executive Chairman of Percetakan Nasional Malaysia Berhad (“PNMB”) and was Chairman of PNMB from 2002 to 2006.
Tan Sri Datuk Clifford at present sits on the Boards of Resorts World Berhad, AMMB Holdings Berhad, AmInvestment Bank Berhad,
AmIslamic Bank Berhad and AmBank (M) Berhad.
Tan Sri Datuk Clifford attended all two Board meetings and Audit Committee meetings held from June 2008 to December 2008,
following his appointment on 1 June 2008.
Annual Report 2008
Y. Bhg. Dato‘ Jaffar Indot
DSNS, SMS
Independent and Non-Executive Director, Chairman of Audit Committee
Dato‘ Jaffar Indot, Malaysian, aged 74, has been a Director of Shell Refining
Company (Federation of Malaya) Berhad (“SRC”) since 1981. Dato‘ Jaffar joined
Shell in 1956 and retired in 1989 after 33 years of service. During this time, he
worked for Shell in Japan and London, where he served in various capacities in
international oil trading, business development and public affairs. In 1980, he
returned to Malaysia as Executive Director and Director of Public Affairs for Shell
Malaysia, and in 1983 was appointed Managing Director of SRC, Shell
Malaysia Trading Sdn Bhd and Shell Timur Sdn Bhd. He was the Chairman of
Shell Timur Sdn Bhd from August 1989 to December 1997. He attended the
Harvard Business School International Senior Managers‘ Programme, Vevey,
Switzerland in 1983.
Dato‘ Jaffar is a director on the Boards of Guinness Anchor Bhd, Sycal Ventures
Bhd, M3nergy Berhad and Melewar Industrial Group Berhad. He is also a
director of several private companies involved in HP Financing as well as Fire
Protection and Training.
Dato’ Jaffar attended all five Board meetings and Audit Committee meetings held
in 2008.
YM Raja Ahmad Murad Bin YM Raja Bahrin
Managing Director and Executive Director
Raja Ahmad Murad Bin Raja Bahrin, Malaysian, aged 49, is the Managing
Director of Shell Refining Company (Federation of Malaya) Berhad (“SRC”). He
was appointed as Executive Director of SRC on 14 April 2004 and subsequently
as Managing Director on 1 July 2004.
Raja Ahmad Murad has 24 years experience in the oil and gas business. He
graduated from University of Liverpool with a Bachelor of Engineering
(Mechanical) degree and also holds a Diploma in Technology from Brighton
Technical College, United Kingdom. He joined Shell in 1989 as a Facilities
Engineer with Sarawak Shell Berhad. He has held various positions in
engineering (project, front-end, design and construction), human resources,
maintenance management and operations management. Prior to his appointment
in SRC, he had worked with Sabah Shell Petroleum Company Limited and was
also assigned to Shell Eastern Petroleum Pte Ltd, Pulau Bukom in October 2003
for a development assignment in Shell‘s manufacturing division.
During his 19 years in Shell, Raja Ahmad Murad has worked in Sarawak Shell
Berhad, Sabah Shell Petroleum Company Limited and Nederlandse Aardolie Mij
BV (the Netherlands). Currently, he is also the Managing Director of Lutong
Refining Company Sdn Bhd and serves as a Trustee of Kolej Tuanku Jaafar. Prior
to joining Shell, he also worked with Tenaga Nasional Berhad and Esso
Production Malaysia Inc.
Raja Ahmad Murad attended all five Board meetings and Audit Committee
meetings held in 2008.
27
28
Y. Bhg. Dato‘ Seri Talaat Bin Haji Husain
(continued)
DDSA, SPMP, DPCM, DPMP, JSD, PJK, PJM
Independent and Non-Executive Director, Member of Audit Committee
Dato‘ Seri Talaat Bin Haji Husain, Malaysian, aged 58, was appointed a Director
of Shell Refining Company (Federation of Malaya) Berhad (“SRC”) since
1 June 2007.
Dato‘ Seri Talaat obtained his early education at the Malay College Kuala
Kangsar. He holds a Bachelor of Social Sciences (Political Science) from
University of Science Malaysia, a Masters in Professional Studies (International
Planning) from Cornell University, USA and attended the Executive Programme at
London Business School and Harvard Business School. He joined the Malaysian
Civil Service in 1973 and started as an Assistant State Secretary in Penang, and
subsequently holding positions in the Prime Minister‘s Department, National
Institute for Public Administration (“INTAN”), the National Palace and the Ministry
of Education. He has also served as Mayor of Ipoh City before becoming the
Secretary General of the Ministry of Youth and Sports. Prior to his retirement, he
held the position of Secretary General of the Ministry of Domestic Trade and
Consumer Affairs. Whilst in the Government Service, he held the positions of
Chairman of Companies Commission of Malaysia, and Board Member of
Malaysian Intellectual Property Corporation, Malaysian Communication and
Multi-Media Corporation as well as Sepang International Circuit.
Besides holding the position of Chairman in several private limited companies,
Dato‘ Seri Talaat is also an Independent Director of Silver Bird Group Berhad and
Konsortium Logistik Berhad. He is also currently a Board Member of Outward
Bound Trust of Malaysia.
Dato’ Seri Talaat attended all five Board meetings and Audit Committee meetings
held in 2008.
Y. Bhg. Dato‘ Mohzani Bin Abdul Wahab
DPSJ, SMP, ASDK
Non-Independent and Non-Executive Director
Dato‘ Mohzani Bin Abdul Wahab, Malaysian, aged 55, was appointed a
Director of Shell Refining Company (Federation of Malaya) Berhad (“SRC”) on
1 August 2001. He is the Managing Director for Shell Malaysia Trading Sendirian
Berhad since 1 November 2001 and on 15 January 2005, he was appointed as
the Managing Director of Shell Timur Sdn. Bhd. He also holds the position of Shell
Cluster Retail General Manager for Malaysia, Singapore, Brunei and Hong Kong.
In Malaysia, he is also the Shell Local Senior Downstream Representative.
A graduate in Economics, majoring in Applied Economics from the University of
Malaya, Kuala Lumpur, Dato‘ Mohzani joined Shell in 1976. He has held various
positions in supply, distribution, brand and communications, marketing and retail
management in Shell‘s Downstream sector, including an assignment in the
Philippines. He was appointed General Manager of Retail in Malaysia in 2000.
Currently, Dato‘ Mohzani sits on the Board of 15 companies: Shell Timur Sdn.
Bhd., Shell Malaysia Trading Sendirian Berhad, Superkad Services Sdn. Bhd.,
Usaha Rawang Sdn. Bhd., Shell Malaysia Limited, Brunei Shell Marketing
Company Sdn. Bhd., P S Pipeline Sdn. Bhd., P S Terminal Sdn. Bhd., Pertini Vista
Sdn. Bhd., Shell Gas (LPG) Malaysia West Sdn. Bhd., Shell Gas (LPG) Malaysia
East Sdn. Bhd., Bonuskad Loyalty Sdn. Bhd., Shell New Ventures Malaysia Sdn.
Bhd., Provista Ventures Sdn. Bhd and SRC. He also sits as a Director of the
Petroleum Industry of Malaysia Mutual Aid Group (“PIMMAG”) and a member of
the Joint Management Committee. He serves as a member of the Investment Panel
in Lembaga Tabung Haji.
Dato’ Mohzani attended all five Board meetings held in 2008.
Annual Report 2008
Non-Independent and Non-Executive Director
Mr. Mark Owen Stevens, a British national, aged 52, is the Vice President of Manufacturing Operations East. He was appointed a Director
of Shell Refining Company (Federation of Malaya) Berhad (“SRC”) on 16 August 2004.
A graduate in the field of Chemical Engineering, B.Sc (Engineering) from University College, London, Mr. Stevens joined Shell in 1977 and
has extensive refinery and manufacturing experience with Shell Haven Refinery, United Kingdom, Shell International Petroleum, The Hague,
Shell Europe Oil Products, United Kingdom and Shell Global Solutions, The Hague. Currently, Mr. Stevens is also a Director of Shell Refining
(Australia) Proprietary Limited.
Mr. Stevens attended all five Board meetings in 2008.
Non-Independent and Non-Executive Director, Member of Audit Committee
Mr. Thomas Michael Taylor, a British national, aged 52, is Director of Finance, Shell Malaysia and the Business Finance Manager
– Asia Pacific of Shell Exploration and Production. He was appointed as a Director of Shell Refining Company (Federation of Malaya)
Berhad (“SRC”) on 22 November 2004.
Mr. Taylor holds a Master in Engineering from the University of Cambridge and is a Member of the Chartered Institute of Management
Accountants. He began his career in Shell in November 1984 as an Auditor for Shell Expro. Since then, he has served in various senior
finance positions in SAGF (a Shell subsidiary in the French West Indies), Shell Hungary RT, Shell International Ltd and Sakhalin Energy
Investment Company Ltd in Russia.
Currently, Mr. Taylor sits on the Board of 18 companies: Shell Timur Sdn. Bhd., Shell Malaysia Limited, Shell Malaysia Trading Sendirian
Berhad, Shell Treasury Malaysia (L) Ltd, Sarawak Shell Berhad, Shell Sabah Selatan Sdn. Bhd., Sabah Shell Petroleum Company Ltd, Shell
Petroleum Malaysia Ltd, Shell Shared Service Centre-Kuala Lumpur Sdn. Bhd., Shell Exploration and Production Malaysia, B.V., CS Mutiara
Petroleum Sdn. Bhd., Shell People Services Asia Sdn. Bhd., Shell Information Technology International Sdn. Bhd., Shell New Ventures
Malaysia Sdn. Bhd., Provista Ventures Sdn. Bhd., Shell China Exploration and Production Company Limited, Shell Philippines Holdings LLC
and SRC. He also sits as a Director of Mileflame Ltd, a private British Company.
Mr. Taylor attended all five Board meetings and Audit Committee meetings held in 2008.
Executive Director
Tuan Haji Rozano Bin Saad, Malaysian, aged 52, is an Executive Director of Shell Refining Company (Federation of Malaya) Berhad
(“SRC”) and was appointed on 16 March 2009.
Tuan Haji Rozano holds a Bachelor Degree in Mechanical Engineering College of Swansea, United Kingdom (1984). Prior to joining SRC,
Tuan Haji Rozano was the Site Director of the Huntsman Tioxide (M) Sdn Bhd plant in Telok Kelung, Terengganu. He began his career with
ICI Group in 1980, holding several senior positions including Design Engineer (Project Development, Malaysia), Plant Engineer
(ICI Fertiliser), Senior Project Manager (ICI Fertiliser) and Techno-Commercial Manager.
Tuan Haji Rozano is also a member of the Institute of Engineers of Malaysia since 1980. In 2004, he was awarded the Prime Minister’s
Quality Award.
29
30
management
1. Raja Ahmad Murad Bin Raja Bahrin
: Managing Director
Position
Nationality : Malaysian
Education : BEng (Hons) Mechanical Engineering,
University of Liverpool, United Kingdom
Joined Shell : 1989
3. Arnold Teo
: Senior Manager, Technology
Position
Education : BEng (Hons) Chemical Engineering,
National University of Singapore
Joined Shell : 1994
2. Rolando Sulit
Position
: Senior Manager, Operations
Nationality : Filipino
Education : Bachelor of Science in Chemical Engineering,
Adamson University, Philippines
Joined Shell : 2005
4. Khairuddin Bin Tamby Hashim
Position
: Senior Manager, Engineering
Education : Bachelor of Science in Engineering
(Thermal Engineering),
Southern Illinois University, Carbondale, USA
Joined Shell : 2007
9
2
8
1
3
Annual Report 2008
team
5. Leonardus Biezeman
Position
: Manager, Economics and Scheduling
Nationality : Dutch
Education : MSc in Mechanical Engineering,
Delft University of Technology, The Netherlands
Joined Shell : 2001
7. Rosly Bin Mohammed
Position
: Manager, Quality, Health, Safety,
Security & Environment
Education : Southend-On-Sea College of
Technology, United Kingdom
Joined Shell : 1980
6. Bhabhinder Kaur
Position
: Manager, Finance
Education : Association of Chartered and
Certified Accountants (ACCA), United Kingdom,
Malaysian Institute of Accountants (MIA),
and Malaysian Institute of Taxation (MIT)
Joined Shell : 1999
8. Islamiah Idris
Position
: Manager, Human Resources
Education : LLB. Hons, National University Malaysia
Joined Shell : 2005
9. Siti Nazrah Ahmad Zaiden
Position
: Manager, Procurement
Education : BSc in Electrical Engineering
(Magna cum laude),
University of Bridgeport, USA
Joined Shell : 1986
6
4
7
5
31
ensuring safety
We secured the coveted MSOSH Grand Award
2007 from the Malaysian Society for Occupational
Safety and Health (MSOSH) in 2008 – an apt
recognition of our exemplary standards in
occupational safety and health best practices.
Safety and health is a core focus at our
workplace. Workers and visitors at the refinery
are required to adhere to strict regulations. This
reflects our priority on safety within our premises
and also ensures optimum reliability and
efficiency in our operations.
In 2008, our commitment to safety saw us
enhancing our repute for managing a safe
working environment with zero lost time injury.
34
financial calendar
(financial year 2008)
‘08
14 May
Unaudited consolidated results for the 1st quarter ended 31 March 2008
14 August
Unaudited consolidated results for the 2nd quarter ended 30 June 2008
14 August
An interim dividend of Twenty sen (RM0.20) per unit of share of RM1.00 each,
less 26% Malaysian Income Tax in respect of the financial year ending
31 December 2008
5 September
Interim dividend entitlement date
22 September
Interim dividend payment date
12 November
Unaudited consolidated results for the 3rd quarter ended 30 September 2008
‘09
17 February
Unaudited consolidated results for the 4th quarter ended 31 December 2008
17 February
Final dividend of Thirty sen (RM0.30) per unit of share of RM1.00 each,
less 25% Malaysian Income Tax in respect of the financial year ending
31 December 2008
10 April
Notice of 50th Annual General Meeting
7 May
50th Annual General Meeting
4 June
Final dividend entitlement date
18 June
Final dividend payment date
35
Annual Report 2008
performance at a glance
2008
2007
Growth
Rate
2006
2005
2004
13,086.1
11,415.1
15%
10,886.8
9,695.1
7,510.5
Profit/(Loss) Before Taxation
(440.4)
808.2
-154%
325.4
681.9
741.9
Profit/(Loss) After Taxation
(330.0)
593.2
-156%
258.2
522.1
670.3
99.2
112.0
-11%
111.9
113.7
116.4
Total Assets
3,089.7
4,014.0
-23%
3,409.0
3,642.0
3,038.0
Trade and Other Receivables
1,071.4
1,308.6
-18%
1,286.6
989.1
903.6
Financial Highlights
Revenue (RM Million)
Revenue
Sales Volume (Thousand Barrels Per Day)
Balance Sheet (RM Million)
Assets
569.0
1,363.0
-58%
807.6
649.0
603.8
3,518.0
4,173.0
-16%
3,446.0
3,017.2
3,882.1
571.7
904.2
-37%
662.0
923.2
622.8
1,920.6
2,406.0
-20%
1,939.8
1,919.2
1,563.4
Cash Generated From Operations
663.7
695.9
5%
-141.7
965.0
437.0
Purchase of Property, Plant and Equipment
109.8
26.7
311%
42.8
105.6
33.8
(110.01)
197.74
-156%
86.07
174.04
223.45
640.20
802.00
-20%
646.60
639.70
521.13
50.00
70.00
-29%
90.00
100.00
65.00
Oil Inventories
Oil Inventories Volume (Thousand Barrels)
Liability and Shareholders’ Funds
Trade and Other Payables
Shareholders’ Funds
Cash Flow (RM Million)
Per RM1 Unit Of Stock (Sen)
Earnings/(Loss)
Net Assets
Gross Dividends
36
SHELL
in Malaysia
We are part of Shell, a global group of energy
and petrochemical companies. With 104,000
employees in more than110 countries, we play
a key role in helping to meet the world’s growing
demand for energy in economically,
environmentally and socially responsible ways.
37
Annual Report 2008
The Shell business strategy is “more upstream and profitable downstream”.
This simply means searching for, and recovering, more oil and gas in our
upstream operations, and refining and delivering products to our customers
in a profitable and sustainable way in downstream.
Chemical Products
Used for:
• Plastics
• Coatings
• Detergents
Upgrader
Plant
Chemical
Plant
Mining
Oil Sands
Refinery
Biofuels
Plant
Gas to
Liquids
Plant
Refined Oil Products
• (Bio) Fuels
• Lubricants
• Bitumen
• Liquefied Petroleum Gas
On and
Offshore
Oil And Gas
Gas and Electricity
• Industrial Use
• Domestic Use
Power
Station
LNG
Liquefaction
Plant
LNG
Regasification
Terminal
Wind
Turbines
38
shell in malaysia
(continued)
Meeting the growing world demand for energy in ways that
minimise environmental and social impact is a major challenge
for the global energy industry. Shell is committed to improving
energy efficiency in its own operations and supporting
customers in managing their energy demands.
Shell Refining Company (Federation of Malaya) Berhad
is the sole public listed company within Shell in Malaysia. It
operates the country’s largest refinery on a single site at Port
Dickson, supplying key petroleum products to Shell’s
Downstream business in Malaysia.
Shell Malaysia engages in three main revenue generating
business sectors, namely Exploration and Production, Gas and
Power and Downstream Oil Products. We aspire to be the “Top
performer of first choice” by operating our businesses
efficiently, responsibly and profitably.
Your refinery aspires to be the “Top performing and most
admired refinery in Asia”. While we continue our path to grow
profitably, we also have a commitment to contribute to
Sustainable Development. This commitment underscores our
involvement in corporate social responsibility activities and
practices.
Shell’s Exploration and Production business commenced in
Malaysia in 1910. We search for, find and produce crude oil
and natural gas. We also build and operate the infrastructure
needed to deliver hydrocarbons to market. Today, under
production sharing contracts with PETRONAS, we are the
largest natural gas producer in Malaysia.
Shell’s Gas and Power business converts natural gas to liquid
hydrocarbon products via Shell Middle Distillate Synthesis
technology and markets the products globally. We operate the
world’s first commercial Gas to Liquids (“GTL”) plant of its kind in
Bintulu, Sarawak, exporting GTL products to over 40 countries.
Shell’s Downstream Oil Products business refines crude oil
and markets lubricants and other petroleum products, and has
over 900 stations nationwide in Malaysia. Shell is the only
petroleum retailer in the country to offer a premium fuel, Shell
V-Power Racing, and a fuel-efficient diesel product, Shell Diesel
with Fuel Economy formula.
Shell has also established several regional and global hubs,
which provide services and expertise on technology, consulting
and engineering solutions, IT applications development and
SAP support services, as well as finding HR professional
services, among others.
In Shell, this means we are committed to finding and delivering
energy products that help meet the growing need for
affordable, convenient and cleaner energy. It is also a
commitment to responsible operations: building our projects,
running our facilities and managing our supply chain safely and
in ways that reduce negative impacts and create positive
benefits.
This commitment corresponds directly to our involvement in the
social development of the communities where we operate.
Apart from hiring and building the skills of local staff, we also
actively encourage and support social investment projects, with
a focus on capacity building, environmental conservation and
community development.
Shell aspires to establish a long-term presence among the
communities we operate in. In this regard, we are committed to
helping our stakeholders improve their quality of life, while
simultaneously contributing to Malaysia’s advancement and its
Vision 2020 goals.
39
Shell and the energy challenge
The world will need vast amounts of extra energy in the coming
decades to support economic growth and reduce poverty.
Countries’ supplies will have to be kept safe from disruption.
This energy will need to be produced in environmentally and
socially responsible ways, including dealing with greenhouse
gas (“GHG”) emissions. This is the energy challenge. Meeting
it is fast becoming one of the defining tests facing society and
our industry this century.
Three hard truths make this challenge tougher:
1. Demand for energy is growing rapidly as several large
countries enter the most energy-intensive phase of
economic development.
2. Supplies of easily accessible oil and natural gas will
probably no longer keep up with demand after 2015.
3. Carbon dioxide (“CO 2”) emissions from energy,
responsible for more than half of man-made GHG
emissions, are set to rise, even as concerns about climate
change grow.
So, how will the world respond to the challenge? Shell’s
Strategic Energy Scenarios describe two routes the energy
system could take between now and 2050.
The Scramble scenario is a world of intense competition
between individual countries, which rush to secure more energy
for themselves. Political responses to the twin crises of the
energy squeeze and climate change are often knee-jerk and
severe, leading to price spikes, periods of economic slowdown
and increasing turbulence.
Our Blueprints scenario is disorderly at first, as local initiatives
result in a patchwork of different policies and approaches to
deal with the challenges of economic development, energy
security and climate change. These efforts become harmonised
relatively quickly, as individual initiatives succeed and others
adopt them more widely. A global policy framework – and with
it a global cost of emitting CO2 – emerges that spurs innovation,
increases energy efficiency, limits the impact of rising energy
demand and global warming, and helps maintain steady
economic growth.
With its far reaching policy response and global costs for
emitting GHGs, “Blueprints” results in significantly lower GHG
emissions than “Scramble” and shows the direction that efforts
to meet the energy challenge need to take. We also believe
that, in the long term, “Blueprints” offers a better world for Shell
to do business in. We are advocating the policies the
“Blueprints” scenario describes and working on a number of the
technology improvements needed.
Landmark discussion
In September 2007, we organised the first Malaysian Energy and
Climate Change Dialogue. The event brought together various
experts and over 200 delegates from corporations,
non-governmental organisations, academics and government
agencies. The agenda was to discuss the world’s growing need for
energy and the resulting impact of energy-related CO2 emissions
on climate change, from a Malaysian perspective. The dialogue
covered government policy, the resulting impact of climate change
as well as innovative energy solutions.
At the event, we stressed the importance of creating the ‘climate
for change,’ collaboration and action. The Government must
take the lead in providing direction through a regulatory
framework on a national and international basis. Industries must
fast-track climate-conscious approaches to operations and
promote energy efficiency as a first option.
40
chairman’s
statement
41
Annual Report 2008
Dear Shareholders,
In 2008, we witnessed a severe global financial crisis affecting the local and
international economies. In addition, we also saw the oil prices soaring to an
unprecedented high in July only to plummet down 75% by December as a
consequence of the deepening crisis. These events marked a turbulent year, and
amidst such uncertainty and instability, your Company continued to drive growth
through a focus on high reliability, cost efficiencies and margin optimisation as
well as a continued emphasis on health, safety, security and environment
initiatives. Against this economic environment, I would like to report on behalf of
your Board of Directors, your Company’s performance for the past year.
Figure 1 – Sales of Petroleum Products in Malaysia (million bbls)
120
2005
104
98
100
97
2004
98
2006
2007
80
2008
43
39
42
40
38
60
38
0
Retail
Commercial
13
13
12
14
20
12
LPG
Source:
The figures for 2008 and 2007 are from Metrix Research Sdn Bhd while the
figures for 2004 – 2006 are from AC Nielsen Quarterly Petroleum Sales Report.
Figure 2 – SRC 2008 Financial Performance against Tapis
200
150
100
50
US$/bbl
The resilience of the Malaysian economy in the first half of
2008 was affected by the global financial crisis, evidenced by
Malaysia’s economic indicators. The gross domestic product
(“GDP”) fell to 0.1% in Q4 after a strong 7.1% gain in the first
half of 2008, bringing growth to an average of 4.6% for 2008,
as compared to a 6.3% growth in 2007. The Manufacturing
sector reported negative growth of 7% in Q4 from a positive
growth of 1.8% in Q3, and overall capacity utilisation of the
sector fell from 77% in Q3 to 67% by year-end due to the
contraction in global demand. Growth in private consumption
moderated to 5.3% in Q4 compared to 8.1% in Q3 as
spending activity was constrained by concerns over rising
retrenchments, reductions in smallholders’ income arising from
the significant decline in commodity prices as well as lower
consumer confidence.
Whilst global demand decreased, the effect on domestic
demand was not felt till late 2008, and the full impact will
probably emerge in 2009. As shown in Figure 1, demand of
oil products grew by 2% in Malaysia with a shift in demand
from commercial to retail consumers.
97
In 2008, the collapse of large financial institutions in the United
States rapidly evolved into a global economic crisis,
subsequently affecting Europe followed by Asia and became
more severe and far-reaching than anticipated. The significant
reduction in global demand for energy as well as the increase
in US stockpiles caused the sharp decline in oil prices from
US$156 to US$40 per barrel towards the second half of 2008.
I will further detail the effect of this sharp decline and its impact
on your Company’s earnings.
Headline inflation moderated to 5.9% in Q4 from a high of
8.4% in Q3, resulting in a full year inflation of 5.4% . The
downward trend in inflation is expected to continue in 2009 as
confirmed by the drop to 3.9% in Jan 2009.
RM Million
A Challenging Business Environment
150
140
130
120
98
97
2005
104 104
98
98
98
100
80
97
97
2004
2004
2006
2005
2007
2006
2008
2007
80
60
39
13
13
LPG
13
13
Commercial
12
Retail
14
Commercial
12
14
0
Retail
12
20
0
12
43
43
39
38
38
38
40
20
38
(continued)
42
60
40
42
2008
LPG
Financial Performance
Refining Margins
Average crude prices (measured by Means of Platts Singapore
or “MOPS”) for Tapis (Malaysia), Minas (Far East) and Dubai
(Middle East) rose to US$105, US$101 and US$94 per barrel
respectively against US$78, US$73 and US$68 per barrel in
2007 as shown in Figure 3. Product prices in MOPS for U97
gasoline and gasoil averaged US$107 and US$120 per barrel
respectively against US$86 and US$85 per barrel in 2007 as,
shown in Figure 4.
The decline in oil prices, from July to December 2008,
impacted the carrying values of inventories resulting in
significant stockholding losses in 2008. Earnings when restated
to exclude the uncontrollable stockholding impact are measured
on a current cost of supplies (”CCS“) basis, a global reporting
benchmark used by oil majors.
200
150
200
100
150
50
100
US$/bbl
US$/bbl
Your Company incurred losses for the year under review
registering an after tax loss of RM330 million compared to a
profit after tax of RM593 million in 2007. This is due to
stockholding losses from the sharp decline in oil prices as
illustrated in Figure 2. The stockholding gains in the first half of
the year of RM308 million was beset by stockholding losses of
RM952 million in the second half of 2008. This resulted in a full
year stockholding loss of RM644 million compared with a gain
of RM295 million in 2007 when oil prices were on an
increasing trend. Stockholding gains or losses are a
consequence of the accounting method and oil price trends and
volatility.
RM Million
RM Million
42
Figure 1 – Sales of Petroleum Products in Malaysia (million bbls)
120
100
97
120
0
50
-50
0
-100
-50
-150
-100
NIAT (Net Income After Tax)
(RM Million)
Stockholding Loss/Gains (Net of Tax)
(RM
NIATMillion)
(Net Income After Tax)
(RM Million)
Tapis (US$/bbl)
(RM Million)
-200
-150
-250
-200
-300
-250
Jan
‘08
-300
Tapis
(US$/bbl)
Feb
Mar
Jan
‘08
‘08
‘08
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Dec
‘08
Feb
‘08
Mar
‘08
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Dec
‘08
150
140
150
130
140
120
130
110
120
100
110
90
100
80
90
70
80
60
70
50
60
40
50
30
40
30
Figure 3 – Crude Marker Prices (US$/bbl)
150
140
130
150
120
140
110
130
100
120
90
110
80
100
70
90
60
80
50
70
40
60
30
50
Figure 3 – Crude Marker Prices (US$/bbl)
40 Jan
‘08
30
Feb
‘08
Mar
‘08
Apr
‘08
Jan
Feb
‘08 TAPIS ‘08
Mar
MINAS
‘08
Apr
‘08
TAPIS
MINAS
May
‘08
Jun
‘08
May
Jun
Jul
‘08 TAPIS AVG
‘08
Aug
Sep
‘08 MINAS
‘08AVG
Oct
Nov
AVG
‘08 Dubai
‘08
TAPIS AVG
MINAS AVG
Dubai AVG
Dubai
‘08
Dubai
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Dec
‘08
Dec
‘08
Figure 4 – Product Prices (US$/bbl)
180
170 Figure 4 –
160
180
150
170
140
160
130
150
120
140
110
130
100
120
90
110
80
100
70
90
60
80
50
70
40
60
30
50 Jan
Feb
40 ‘08
‘08
30
Jan
Feb
‘08 Gasoil‘08
Gasoil
Product Prices (US$/bbl)
Mar
‘08
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Mar
ULG 97
‘08
Apr
May
AVG
‘08 Gasoil
‘08
Jun
Jul
AVG
‘08 ULG 97
‘08
ULG 97
Gasoil AVG
ULG 97 AVG
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Dec
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Dec
‘08
Figure 5 – SRC Refining Margins 2008 (US$/bbl)
15
13
15
11
13
9
11
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
Feb
‘08
Gasoil
Mar
‘08
Apr
‘08
May
‘08
Jun
‘08
Gasoil AVG
ULG 97
Jul
‘08
Aug
‘08
15
13
11
9
7
5
3
1
-1
-3
-5
Nov
‘08
Jan
‘08
Dec
‘08
Feb
‘08
Mar
‘08
on a CCS basis
remained strong. I am pleased to report that, your Company
posted an after tax CCS profit of RM314 million in 2008
against RM298 million in 2007 driven by refining margins of
US$6.73 per barrel in 2008 as compared to US$5.79 per
barrel in 2007 as illustrated in Figure 5. Your Company did
well to exceed the average Singapore complex (shown in
Figure 6) refining margin.
Your Company was able to maintain healthy refining margins
because of its investment in the Long Residue Catalytic Cracker
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Nov
Dec
(”LRCC”)
in
which
repositioned
usOct
a complex
‘08
‘08
‘08 1999,
‘08
‘08
‘08has ‘08
‘08
‘08
‘08 as ‘08
‘08
refinery, with the capacity to process a wide range of crudes and
AVG = USD6.73/bbl
Average Complex
Simple
theComplex
capability
to upgrade
the 2008
value
of products.
May
‘08
Jun
‘08
Gasoil AVG
ULG 97
Gasoil
ULG 97 AVG
Apr
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
(Excluding Malaysia) 34%
13
11
9
Figure 12 – SRC Sales Turnover (by product)
7
5
Tops 6%
3
1
Propylene 3%
-1
LPG 9%
-3
-5
Jan
‘08
Feb
‘08
Mar
‘08
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Gasoil 37%
LCO 6%
Jet Fuel 8%
0
-2
-4
-6
of 30 sen per
RM1 unit share in addition to the interim dividend of 20 sen
declared in August 2008, as your Board maintains its intention
to sustain an annual dividend level of at least 50 sen per share.
In the year under review, developments relating to your
Company’s share price as shown in Figure 8, were deemed
acceptable by the Board. Going forward, your Company will
strive to employ business growth strategies that will enhance its
performance and profit levels.
Figure 6 – Singapore Refining Margins 2008 (US$/bbl)
8
6
4
2
-4
-10
Complex
Apr
‘08
May
‘08
Jun
‘08
Average Complex
Simple
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
7
-6
-8
Mar
‘08
8
-2
-10
Feb
‘08
Figure 13 – Unplanned Downtime (%)
0
-8
Jan
‘08
6
Jan
‘08
Dec
‘08
5
Feb
‘08
Mar
‘08
Complex
2008 AVG = USD4.50/bbl
Apr
‘08
4
Simple
May
‘08
Jun
‘08
Average Complex
2
Final
Special Interim
2006
Nov
‘08
Dec
‘08
Interim
2003
2004
2005
110
2006
Final
2007
Special Interim
80
90
60
20
20
20
2008
60
Oct
‘08
100
2007
0
0
40
Interim
2005
20
40
50
2004
Sep
‘08
Figure
– SRC
Dividends
Per the
Share
(sen)
Figure
8 –7 SRC
Price and
Bursa
Malaysia
1 Share
Composite Index (normalised)
120
104
98
97
98
97
80
100
Aug
‘08
50
Figure 1 – Sales of Petroleum
in Malaysia
(million
bbls)
Figure 7 –Products
SRC Dividends
Per Share
(sen)
Jul
‘08
2.67
3
100
Motor Gasoline 31%
10
7.59
2
Dec
‘08
2.29
4
Nov
‘08
Average Complex
Simple
Complex
5.39
6
Dec
‘08
3.74
8
Nov
‘08
Far East, Australia & Africa
15
Figure
– Singapore
Refining Margins 2008
(US$/bbl)
Your 6Board
has recommended
a final
dividend
10
Malaysia 42%
ULG 97 AVG
Dividends
0
Figure 14 – Business Strategies
0
Retail
2004
2006
0
30
30
2004
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
20
20
Mar
‘08
12
Feb
‘08
Composite Index
12
Jan
‘08
10
20
2008
Product Quality
HSSE
20
50
13
LPG2007
38
38
35
30
30
12
12
13 20
43
Commercial
2005
12
14
10
0
12
20
0
70
40
60
39
38
42
0
38
40
35
38
38
80
0
Nov
‘08
Dec
‘08
SRC Share Price
2005
Margin
2006
2007
PEOPLE
2008
Reliability
Figure 9 – SRC Sales Volume and Refinery Intake (million bbls)
50
S$/bbl
Million
0
Oct
‘08
course
ofMargins
the year,
Over 5the
– SRC
Refining
2008refining
(US$/bbl)margins
Figure
0
0
Sep
‘08
43
Middle East 24%
2.90
Jan
‘08
Figure 11 – SRC Sources of Supply
Annual Report 2008
150
Sales Volume
140
Refinery Intake
2008
Jul
‘08
Aug
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
50
Oct
Sep
‘08
Dec
‘08
Nov
‘08
‘08
40
Dec
‘08
Dubai
MINAS AVG
TAPIS AVG
Dubai AVG
70
60 types of crude)
In 2008, 25 types of crude (inclusive of 6 new
50
were successfully
processed.
2004
2005
2006
2007
2008
(RM Million)
Stockholding Loss/Gains
0 (Net of Tax)
(RM Million)
30
The procurement of crude is driven by the relative
economic
Aug
Sep
Nov
Dec
attractiveness
of‘08each
type
ofOct
crude
to
ensure that we are able
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
180
170
to optimise on our refining margin. In 2008, your Company’s
160
Figure 10 – SRC Sales Proceeds (RM Million)
150
crude diet consisted of 42% Malaysian light crudes, 34% Far
140
15000
130
Figure 3 – CrudeEast,
MarkerAustralia
Prices (US$/bbl)
and Africa crudes and 24% Middle East heavy
120
0 110
crudes as illustrated in Figure 11.
100
0
6000
36.3
13,086
36.3
3000
10
0
0
2004
2004
2005
2005
2006
2006
2008
2007
2007
2008
Gasoil AVG
ULG 97
Gasoil
13,086
15000
12000
9000
ULG 97 AVG
6000
3000 Apr
Mar
‘08
‘08
Feb
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Middle East 24%
Malaysia 42%
Dec
‘08
3000
MINAS
TAPIS
Dubai
MINAS AVG
TAPIS AVG
Figure 5 – SRC0Refining Margins 2008 (US$/bbl)
2004
2005
Dubai AVG
2006
13,086
9,695
10,887
11,415
To reflect the current trend of demand, gasoil was the refinery’s
main product, making up 37% of the sales turnover, followed
9000
by gasoline at 31%. The other 32% consisted of jet fuel, Light
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Cycle
Oil (“LCO”),
Liquified
propylene
‘08
‘08
‘08
‘08
‘08
‘08 Petroleum
‘08
‘08 Gas
‘08 (“LPG”),
‘08
and Tops as shown in Figure 12.
6000
7,511
Feb
‘08
2007
2008
15
0
13
2004
2005
2006
2007
2008
11
9
Figure
4 – Product Prices (US$/bbl)
7
5
Middle East 24%
3
Tops 6%
Middle East 24%
Propylene 3%
1
-1
LPG 9%
-3
-5
Jan
‘08
Jan
‘08
Feb
‘08
Mar
‘08
Complex
Feb
Mar
‘08
‘08
Gasoil
Apr
‘08
Simple
ULG 97
Apr
‘08
May
‘08
Jun
‘08
Average Complex
May
Jun
‘08
‘08
Gasoil AVG
Jul
‘08
Aug
‘08
Sep
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov 42%
Dec
Malaysia
‘08
‘08
Gasoil 37%
Malaysia 42%
Oct
‘08
Nov
‘08
Dec
‘08
LCO 6%
Jet Fuel 8%
ULG 97 AVG
Motor Gasoline 31%
10
8
Figure
5 – SRC Refining Margins 2008 (US$/bbl)
5
6
3
4
1
2
35.0
36.5
40.9
40.9
20
‘08
12000
Jan
‘08
35.0
30
36.5
11,415
9000
40.9
40
Refinery Intake
– Mar
Product
Apr Prices
May (US$/bbl)
Jun
Jul
90
80
70
60
50
40
30
Jan
‘08
Sales Volume
40
Tapis (US$/bbl)
FigureFeb4
Jan
‘08
‘08
50
11,415
0
Nov 2008
Dec
‘08
‘08
12000
10,887
0
Sep2007Oct
‘08
‘08
15000
Figure 9 – SRC Sales Volume and Refinery Intake (million bbls)
42.4
36.3
35.0
36.5
40.9
US$/bbl
40.9
39.6
41.5
36.3
40.5
42.4
MINAS
Jul2006 Aug
‘08
‘08
Your Company maintained high operational availability
Sales Volume
processing 35 million barrels of crude in 2008 despite
the
Refinery Intake
150
40 days statutory shutdown of the LRCC for
38
inspection and
maintenance. Sales proceeds grew by 15% or140
RM1.7 billion to
130
RM13.1
billion in 2008 against RM11.4 billion in 2007 (as
30
120
shown in Figure 10) despite the drop in sales volume to
110
36.3 million barrels from 40.9 million barrels in 2007 as
100
20
illustrated in Figure 9. The annual proceeds in 2008 is the
90
Mar
Apr
May
Aug
Sep
Oct
Nov
highest
ever
in Jun
yourJul
Company’s
history
due Dec
to high product
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
80
10
prices
in the first half of the year.
TAPIS
2005 Jun
May
‘08
‘08
SRC Share Price
LPG
2 – SRC 2008 Financial Performance against Tapis
Feb
‘08
2004 Apr
Mar
‘08
‘08
Feb
‘08
Composite Index
9,695
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Jan
‘08
50
RM Million
0
0
0
0
0
0
0
0
0
0
0
0
0
50
Production and Sales Results
Jan
‘08
40.9
60
9 –Prices
SRC (US$/bbl)
Sales Volume and Refinery Intake (million bbls)
Marker
Figure 3 – CrudeFigure
150
140
Figure
130
120
110
100
90
80
70
60
50
40
30
39.6
10
(continued)
30
Commercial
Retail
70
39.6
10,887
Jul
‘08
70
20
41.5
Jun
‘08
80
13
May
‘08
80
36.3
9,695
43
39
38
Jun
‘08
13
Apr
‘08
May
‘08
12
Mar
‘08
Apr
‘08
41.5
90
60
SRC Share Price
14
Feb
‘08
Mar
‘08
‘08
Composite Index
36.3
100
12
Jan
‘08
‘08
42.4
100 30
Refinery Intake
7,511
0
110
38
42
Tapis (US$/bbl)
0
0
110
60
-250
0
-300
0
120
2006
2008
(RM Million)50
Jan
Feb
(RM Million)
0-200
0
2005
70
-150
0
90
0-100
0
130
2007
SRC Share Price and the Bursa Malaysia
Composite Index (normalised)
40
2004
80
-50
120
7,511
90
0
0
140
40.5
US$/
98
97
98
97
44
104
100
50
Figure 8
110
40.5
100
0
Sales of Petroleum Products in Malaysia (million bbls)
RM Milli
Figure 1
0150
6000
Feb
‘08
Jan
‘08
Mar
‘08
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
7,
40
30
Dec
‘08
3000
MINAS
TAPIS
Dubai
MINAS AVG
TAPIS AVG
0
45
Annual Report 2008
Dubai AVG
2004
2005
2006
2007
2008
80
70
60
50
40
30
20
10
00
90
80
70
60
50
40
30
Middle East 24%
Zero Lost Time Injury – Our Safety Achievement
Jan
‘08
Apr
‘08
May
‘08
Jun
‘08
Jul
‘08
Aug
‘08
Sep
‘08
Oct
‘08
Nov
‘08
Dec
‘08
I am pleased to report that in 2008, we maintained our record
of zero lost time injury (“LTI”) which means that there were no
Gasoil AVG
ULG 97
Gasoil
ULG 97 AVG
incidents of a work related injury that can affect operations and
plant availability. As a result, we have gained more than
9.7 million man hours LTI-free since 21 May 2001. This
reinforces our priority on safety, helping your Company to
achieve its vision to be the top performing and most admired
refinery in Asia.
11
Statutory Plant Maintenance
9
7
5
3
1
-1
-3
-5
Jan
‘08
Feb
‘08
Complex
In June and July 2008, your Company undertook a major
statutory turnaround which involved a complete shutdown of the
refinery for inspection, planned maintenance, repairs and
modifications. This procedure ensures that your Company’s
core manufacturing assets are properly maintained to enhance
Martheir
Aprlong-term
May
Junreliability
Jul
Aug
Oct
Nov
Dec
and Sep
achieve
peak
performance.
I am
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
‘08
pleased to report that this triennial event was completed in
AVG = USD6.73/bbl
Average Complex
Simple
38 days,
2 days2008
ahead
of schedule. The meticulous planning,
good teamwork and dedication of the entire team are to be
commended.
The flawless execution of the statutory turnaround contributed to
your Company maintaining a high level of operational
availability at 89%, compared with 85% for 2007.
10
8
6
In Recognition of Operational Excellence
Malaysia 42%
In 2008, your Company continued to win various awards and
accolades including the Grand Award from the Malaysian
Society for Occupational Safety and Health (“MSOSH”) for
2007. Receiving this award for the second consecutive year, it
is an apt recognition that your Company is consistently
demonstrating exemplary standards ofFar East,
safety
and
health
Australia
& Africa
Malaysia)
34% are
throughout our business activities and (Excluding
that our
people
passionate and committed practitioners of occupational safety
and health best practices.
Your Company also received the Best Practice Award (for public
listed companies) from the 2008 National
Awards for
Tops 6%
Management Accounting (“NAfMA”) and had the privilege of
receiving a Certificate of Merit in the
National
Annual
Propylene
3%
Corporate Report Awards (“NACRA”) 2008.
In
addition,
your
LPG 9%
Company secured the Merit Award in the Malaysian Business –
CIMA Enterprise Governance Awards.
Gasoil 37%
Your Company won the Shell 2008 Manufacturing
Executive
Vice President’s Award in the Cost Category, in recognition of
our exceptional execution of the statutory
having
LCO turnaround
6%
Jet Fuel 8%
achieved a best-in-class flawless turnaround
which was also
completed 2 days ahead of schedule.
Motor Gasoline 31%
Reliability Performance
-4
-6
-8
10
Feb
‘08
Complex
7
6
5
4
3
2
Figure 7 – SRC Dividends Per Share (sen)
1
50
00
Interim
40
Final
0
2003
2004
2005
2006
Special Interim
20
30
30
38
20
40
38
60
35
80
HSSE
12
12
10
20
20
20
Jan
‘08
8
2.90
-2
Plant availability is highly dependent on its reliability
performance, which means ensuring that the equipment is able
to run as planned. An improved reliability performance will
naturally lead to improved performance in the areas of safety,
cost, energy and margin. A measure of our plant’s reliability is
reflected
in ourJunUnplanned
Downtime
performance
and this was
Mar
Apr
May
Jul
Aug
Sep
Oct
Nov
Dec
‘08markedly
‘08
‘08
‘08
‘08
‘08
‘082.9%
‘08 as ‘08
‘08
improved
in 2008
at
compared
to 7.59% in
Average Complex
Simple
2007 as shown in Figure 13.
7.59
0
2.29
2
5.39
4
2.67
13
Mar
‘08
3.74
15
Feb
‘08
Product Quality
2007
2008
46
Tops 6%
Propylene 3%
LPG 9%
(continued)
Gasoil 37%
Business Improvement
Preserving the Environment
LCO 6%
Jet Fuel 8%
In response to the challenges we currently face, your Company
Motor Gasoline 31%
aims to maintain high levels of operational
performance while
achieving a higher level of efficiency and effectiveness. Since
2007, we focused on 6 priority areas, with specific emphasis
on process safety and reliability, in line with the Group’s
direction as illustrated in Figure 14.
3
2
1
0
7.59
Reliability: Employing world class reliability and maintenance
programmes to deliver high plant availability.
Cost: Managing costs by addressing primary components of
the cost structure and effective contract management.
2.90
4
2.29
5
Product Quality: Ensuring that fit-for-purpose products are
delivered to our customers every time.
5.39
6
2.67
7
HSSE: Improving health, safety, security and environment
performance
3.74
8
Energy/CO2: Developing long term plans to maximise energy
efficiency and reduce our carbon footprint.
2004
2005
2006
2007
2008
Margin2003
– Enhancing
margin
capture
to maximise
profits from
our assets.
Product Quality
HSSE
PEOPLE
Margin
Energy/CO2
Reliability
Cost
Your Company has a tangible plan to ensure the sustainability
of its activities and development, acknowledging the important
role we play in preserving the environment, for current and
future generations. We have active strategies in place to reduce
our carbon footprint, guided by Shell’s Business Principles that
include complying with the Shell Group’s Sustainable
Development Management Framework.
We have a systematic approach to the management of emission
to the atmosphere and effluent discharges. This includes the
reduction of greenhouse gas emissions, which saw a 13%
improvement over 2007, attributed mainly to a reduced total
flaring of 2%. In addition, your Company is also committed to
protecting and supporting biodiversity as a key part of our
sustainable development agenda. Our concern to protect and
preserve the environment is demonstrated at every level.
Human Capital Development
Our people are our greatest asset. We continue to maintain a
highly competent and motivated workforce to ensure that our
business plans are delivered effectively. This is achieved via the
recruitment and continuous training of highly talented
personnel. We also continue to enhance business processes by
adopting best practices and benchmarking against our peers in
the industry.
Your Company has created a learning environment that enables
employees and the organisation to build the capabilities vital to
a winning performance. The number of training hours per
employee, focusing on both technical competence and soft
skills, increased by 36% over the previous year. Your Company
also offers the Continuing Education Scheme to provide
assistance for employees to pursue higher education in their
chosen profession.
As an equal opportunity employer, your Company subscribes to
workplace diversity, which mirrors the communities in which we
operate, enabling us to better understand and build
relationships with our stakeholders, optimising the positive
impact of our presence.
Annual Report 2008
Look Ahead
A Big ‘Thank You’
We witnessed in the second half of 2008, the global financial
crisis deepening, as stock markets world-wide tumbled and
entered a period of high volatility, with a considerable number
of banks, mortgage lenders and insurance companies declaring
financial distress.
On behalf of your Company, I would like to record my utmost
appreciation to our shareholders, the Board of Directors, the
management, our employees, contractors and all other
stakeholders for their continued support, perseverance and
dedication in the face of the year’s volatile economic situation
and our challenging business environment. I look forward to
your continued loyalty as we move forward into a new year.
Please join me in welcoming Tan Sri Datuk Clifford Francis
Herbert to the Board. We look forward to his advice and
guidance in steering your Company forward. I would like to
extend my heartfelt gratitude to Tan Sri Saw Huat Lye who
retired in May 2008. His contributions to your Company
were invaluable.
This loss of confidence by investors prompted a substantial
injection of capital into financial markets by Governments
around the world. Although governing bodies continue to offer
fiscal and monetary stimulus packages, analysts expect the
crisis to continue in 2009. Growth in East Asia is also expected
to decline notably this year, as exports decelerate significantly.
Reflecting the worsening external conditions as well as flagging
domestic demand, the Malaysia government revised 2009’s
real GDP growth estimate for the second time to between -1.0%
and 1.0% from 3.5% previously. As the global recession
continues to impact the Malaysian economy, job security
becomes an issue and domestic demand may decrease
resulting in sluggishness in most business sectors. Domestic and
external demands as well as exports are projected to post a
weaker growth in 2009.
Energy demand is anticipated to weaken and refining margins
are still expected to remain volatile. Concerns over oil prices,
crude oil availability, volatility in oil producing areas and
heightened geopolitical tensions, are expected to linger.
On behalf of the Board, I would also like to extend my gratitude
to Yang Mulia Raja Ahmad Murad, who served your Company
as the Managing Director for the last five years. His dedication
and expertise were key to your Company’s continued success.
Please also join me in extending a warm welcome to our new
Managing Director, Tuan Haji Rozano Bin Saad who joins us
with a wealth of experience essential to lead your Company
going forward. I look forward to shareholders approving his reelection to your Board in the forthcoming Annual General
Meeting.
Thank you.
Going Forward
Your Company is committed to maintaining our competitive
edge by a continued focus on operational excellence and
realigning our business strategies to meet changing market
needs. High reliability as well as strong people excellence and
health, safety, security and environmental performance will
continue to be our major priorities. In ensuring astute financial
management throughout our operations, we will proactively
pursue cost optimisation and continuous improvement
initiatives.
I am pleased to advise that Shell supports the implementation of
Euro2M specification as announced by the Government in the
Ninth Malaysian Plan and your Company is ready to comply.
Dato’ Saw Choo Boon
Chairman
47

an unwavering commitment

Transcription

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