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PETRONAS Response to Media Enquiries Received from The Vancouver Sun

9 September 2015

No. Q&A

1.

What in fact was the context of this report? Why was it commissioned?

The report was a conscious effort initiated by PETRONAS to assess the integrity of

our assets.

The i-AIR is the bigger part of the PETRONAS Technical Integrity and Process Safety

(TIPS) program developed to focus on the prevention of incidents and introduce

new steps to enhance safety standards on all our facilities globally.

TIPS was introduced as a program to support the HSE assurance framework

covering our asset integrity, processes and systems. It is a long-term commitment

that entails identification of gaps, remedial actions, rejuvenation and maintenance

of assets across their entire life cycle.

The 740-page i-AIR report you refer to is a conscious effort by PETRONAS to

intensify an improve process safety and asset integrity.

2.

What is going on at PETRONAS that would result in such serious safety and

structural integrity issues to develop, obviously over many years?

TIPS is a program which compliments our overall HSE management systems that

addresses our assets (including maturing assets) through independent evaluation.

3.

Since that presentation to your VP, what specific actions have been taken?

The PETRONAS Technical Integrity and Process Safety (TIPS) programme has since

been developed to focus on the prevention of major process safety related

incidents. These include risk events that have a low probability of occurring yet

have major consequences.

TIPS is a structured programme designed for the management of asset integrity to

ensure its ability to perform the required function effectively and efficiently while

safeguarding life and the environment.

Plans are in place to address the identified gaps. Serious and high findings in the

report, have been resolved.

4.

How much money has been committed to rectify these concerns and

especially the more serious ones?

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A significant amount (USD10billion – we would like to disclose) has been allocated

for the purpose of TIPS.

Resources which includes capital and human resources have been allocated to this

program.

5.

If major remedial steps have been taken, can you send me some photos

showing improvements, such as updated photos of some of the structures

in the report’s photos showing severe corrosion?

I would specifically request you do that for the problem shown on page

545.

Page 545 demonstrates the findings gathered from our facility in the Samarang

field.

These anomalies identified on Samarang platform were classified as ‘High’:

- Localized external corrosion noted on piping external, welds, fittings and

bolts/ nuts

- Localized/ crevice corrosion noted on piping external at support area sighted

- Damaged piping insulation noted at SMG-A

The below recommendations were made and the identified anomalies have been

resolved as per the before and after photos.

Recommendation:

- Plan and assess condition of externally corroded piping and rectify/ mitigate

accordingly

- Include (i) “Inspection of Corrosion at Support” utilizing specialized Non

Destructive Testing (NDT) techniques, (ii) “Corrosion Under Insulation (CUI)”

inspection, (iii) “Small Bore Pipe” inspection, and (iv) “Vibrating Piping”

inspection in the MCI Inspection Master Plan.

Before and after photo of anomalies identified and resolved in Samarang.

BEFORE AFTER

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6. PETRONAS has had other serious safety and integrity issues, including

huge explosion involving a brand new pipeline this year.

Has this pipeline been reactivated?

The incident which involved our Sabah Sarawak Gas Pipeline (SSGP) occurred at

2AM on 10 June 2014 at KP135, 20KM from Lawas, Sarawak in Malaysia.

There was an explosion followed by a fire from our pipeline which was buried at a

depth of 3 meters. There was no casualties.

An investigation was conducted following the incident by an independent

international inspector and the assessment concluded that soil movement at KP135

led to the failure of the joint of the pipeline.

While PETRONAS ensures that safety is top priority and conducts regular pipeline

integrity assessments for all our pipelines, due to natural force or force majeure,

the soil movement at KP135 was sudden and unpredictable.

PETRONAS has since executed Continuous Operations & Maintenance (O&M) works

and employed measures to ensure the safety of the surrounding community and

environment.

Remedial steps taken include rerouting of the pipeline at critical points, burying the

pipeline even deeper, increasing the pipeline thickness more than required,

expanding the buffer safety zone along the pipeline as well as installing multiple

sensors throughout the SSGP.

Additionally, inspections are intensified involving ground and aerial surveillance.

PETRONAS will not resume SSGP operations until it is certified fit for service by our

independent certified inspector.

7.

Does the company have an explanation regarding why this pipeline was

built on unstable land?

The land was deemed safe. The area grew unstable within 2 years of construction

(prior to the incident) due to significant loss of vegetation from unrelated activities

nearby.

8.

And finally and most importantly, given all this, should British Columbians

be concerned about how your company will run its LNG project in Canada?

PETRONAS ensures that the facilities it designs, builds and operates are in

accordance with company standards and legal requirements.

With over 30 years of experience in an integrated end-to-end gas portfolio,

PETRONAS has established itself as a reliable and preferred player in LNG.

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The Canadian federal and provincial British Columbia government work very closely

with PETRONAS to ensure its accountability as a responsible corporate citizen in

Canada, and has since provided us with valuable support and assistance to take the

project forward.

For the PNW project, the pipeline will be designed, constructed and operated by an

experienced major pipeline company. The tender for the construction of the plant

has attracted bids from the world’s top-ranked integrated LNG service contractors,

including from Canada and North America.

End of document

Follow up enquiries from The Vancouver Sun

Received on 10 September 2015

No. Q&A

1.

You refer to TIPS as an ongoing thing. When exactly did it start?

TIPS was introduced in 2012 as a program to support the HSE assurance

framework.

2.

You also said, in response to my question about the specific issues

raised in the audit, that $10B US has been allocated to TIPS. But

obviously that budget allocation was made prior to the report being

issued.

Can you say how much of that fund was specifically dedicated to

resolving those problems.

PETRONAS abides to the agreement between partners and contractors on the

confidentiality of information which is in strict compliance with the company’s

Code of Conduct and Business Ethics (CoBE).

Nevertheless, PETRONAS has allocated USD10 billion and the necessary

resources to intensify and improve process safety and asset integrity under the

TIPS program. This is our long-term commitment to ensure the sustained

lifecycle of our assets in Malaysia and globally.

3.

I appreciate you sending me the before and after photos, but it is very

difficult to assess given that the photos are shot from different angles

and from different distances.

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I have shared the photos with two engineers, and both expressed doubt

that the photos are of the same structure. And that was my

impression.

Could you please go to an engineer at head office familiar with these

structures to double-check re. whether you are sending me separate

photos of the same structure?

Your concerns are noted, however we would like to clarify that the photo sent in

our first response is accurate but taken from a different angle.

Nevertheless, please find below the before and after photos of anomalies

identified and resolved in Samarang as per page 545.

BEFORE

AFTER

End of document