RETAIL - MalaysiaStock.Biz Existing partners and merchants are AirAsia BIG, Automobile Association of Malaysia, Astute Xperience (Travel Services), Pryxious.com (travel channel management),

RETAILNETWORK EFFICIENCY

T H E F O C U S F O R 2 0 1 5 W A S T O I N C R E A S E T H E C A P A B I L I T I E S O F T H E E X I S T I N G

N E T W O R K A N D T O S W E A T T H E A S S E T S T H A T A R E A L R E A D Y I N H A N D

088PETRONAS DAGANGAN BERHAD

KEY MESSAGES

CORPORATE DISCLOSURES

BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL

BUSINESS OPERATIONS

The Retail Business Division has always been at the forefront

of the Company’s businesses and is the touch point that is

constantly engaging the customers in delivering our

products and services.

The PETRONAS stations network remains the largest

throughout the nation, standing true to our brand essence

of being a trusted retailer with a passion for customers’

convenience.

The Retail Business drives the sales of fuel and non-fuel

products for the Company, providing a one-stop centre

convenience that delivers exceptional customer experience

at its stations.

FINANCIAL PERFORMANCE

In the wake of the fall in global crude oil prices, the Retail

Business remained stable despite shrinking margins and

lower revenue. For the year under review, Retail Business

contributed close to 50.0% of the Company’s overall margin

and about 40.0% of the Company’s net profit.

Facing tremendous challenges, the Retail Business continued

its pursuit of PDB’s goal to become Malaysia’s “Brand of 1st

Choice”. Adapting to the volatile market with determined

focus, the Retail Business posted a revenue of 16.0% lower

than the corresponding year under review. The lower

selling prices as a result of falling crude oil prices and

significant lower volume of Retail Diesel due to competitive

prices with commercial sector were the main factors

contributing to the lower revenue performance.

The non-fuel business segment continued to make

tremendous strides, growing from strength to strength and

holding its own, contributing more than 10.0% of Retail

Business’ total margin.

For the year under review, despite the weaker consumer

spending patterns, the Retail Business’ non fuel segment

still managed to record a 4.0% growth.

KEY PRODUCTS & SERVICES

PETRONAS Stations

The focus for 2015 was to increase the capabilities of the

existing network and to sweat the assets that are already in

hand. For the year under review, Retail Business operates

more than 1,000 stations.

Retail Business continues to shape and develop the future

of new Malaysian entrepreneurs that join the PETRONAS

Retail fraternity, either as an appointed station dealer or a

trusted business partner. In addition to this, SME businesses

are also given the opportunity to market their products

through the chain of Kedai Mesra convenience stores.

10.0% OF RETAIL BUSINESS TOTAL MARGINMORE THAN

NON-FUEL BUSINESS

Despite cautious consumer spending, the Retail Business’ non-fuel segment still managed to record a 4.0% growth.

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SUSTAINABILITY REPORT

ACCOUNTABILITY

FINANCIAL STATEMENTS

SHAREHOLDERS’ INFORMATION

INSPIRING CHANGE

THE RETAIL BUSINESS DRIVES THE SALES OF FUEL AND NON-FUEL PRODUCTS FOR THE COMPANY, PROVIDING A ONE-STOP CENTRE CONVENIENCE THAT DELIVERS EXCEPTIONAL CUSTOMER EXPERIENCE AT ITS STATIONS.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL (continued)

Complementary Business

As convenience is the primary goal for customers that frequent PETRONAS

stations, the Retail Business believes in providing customers with solutions

to their needs, all under one roof. PETRONAS stations have been further

enhanced through complementary business offerings ranging from food-

to-go items to various business partner facilities that include QSR, banking

facilities, courier services and other conveniences.

During the year under review, the Company had in place 95 QSR outlets and

more than 70 other business partners to enhance the customer experience

at the stations. This year, Kenny Rogers Roasters and Roti Boy were amongst

the latest additions to the growing list of renowned business partners.

Kedai Mesra

The PETRONAS Kedai Mesra remains the

market leader in Petrol Station Convenience

Stores with the largest network of

convenience stores at petrol stations in

Malaysia. Kedai Mesra’s total network

currently stands at more than 760

nationwide. With convenience in mind, the

PETRONAS Kedai Mesra are fully equipped

with ATMs (1,549 ATM terminals), Touch ‘n

Go facilities (871 reload terminals) and

e-Pay terminals (1,025 terminals).

>1,000OPERATING STATIONS

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MORE THAN 70 OTHER BUSINESS PARTNERS TO ENHANCE THE CUSTOMER EXPERIENCE AT THE STATIONS

Card Business

PETRONAS Mesra Loyalty Programme (Kad Mesra)

Loyalty is important in the Retail Business. Without loyal

customers that continue to patronise PETRONAS stations

for the products and services, PETRONAS would not be

where it is today. As the business continues to evolve, so

does the customer who is always looking for that

something extra.

95 QSR OUTLETS


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL (continued)

These customers are recognised and rewarded through the

PETRONAS Mesra Loyalty Programme. This programme

allows members to earn Mesra points using their PETRONAS

Mesra Cards when fuelling up at PETRONAS stations

nationwide or when purchasing products from the Kedai

Mesra. Accumulated points can be used to redeem either

fuel or selected items from the Kedai Mesra by simply

swiping the Kad Mesra. The PETRONAS Mesra Loyalty

Programme brings further value to customers as Kad Mesra

holders are able to enjoy a wide variety of special offerings

or discounts through the ever growing stable of partners

and merchants.

For the year under review, the Company extended the

Card’s benefits and privileges through new strategic

partnerships. Recently it just established a partnership with

ANGKASA, working on the strength of their network and

members base. Existing partners and merchants are AirAsia

BIG, Automobile Association of Malaysia, Astute Xperience

(Travel Services), Pryxious.com (travel channel management),

PETRONAS Twin Towers Gift Shop, Twin Towers Fitness

Centre, PETROSAINS, San Francisco Coffee, Sunway Lost

World of Tambun, 11th Street and Zalora.

PETRONAS SmartPay

The PETRONAS SmartPay is a corporate card which offers

convenience and efficiency for companies to facilitate

greater control over their fleet management in terms of

monitoring movement and expenditure of their fleet’s fuel

utilisation. Fleet management has become even more

convenient since the introduction of our Smartpay Online

system which allows the customers to review and monitor

all transactions for all their cards and also allows for the

Fleet Manager to block or increase credit limits for any

particular card when necessary.

THE PETRONAS MESRA LOYALTY PROGRAMME BRINGS FURTHER VALUE TO CUSTOMERS AS KAD MESRA HOLDERS ARE ABLE TO ENJOY A WIDE VARIETY OF SPECIAL OFFERINGS OR DISCOUNTS THROUGH THE EVER GROWING STABLE OF PARTNERS AND MERCHANTS.

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KEY INITIATIVES

Launch of the new PETRONAS Primax 97 with Advanced

Energy Formula

On 19 August 2015, PDB introduced its new PETRONAS

Primax 97 with Advanced Energy Formula that is engineered

for superior acceleration two weeks ahead of the gazetted

implementation date. The new fuel is also the first RON97

fuel to meet the Euro 4M specification and it complements

our PETRONAS Primax 95 that gives superior efficiency. The

launch, held at PETRONAS station in Technology Park

Malaysia, was officiated by YB Dato’ Seri Hamzah Zainuddin,

Minister of MDTCC and attended by Encik Md Arif Mahmood,

Chairman of PDB, Encik Mohd Ibrahimnuddin Mohd Yunus,

MD/CEO of PDB, Ministry officials, PDB Management and

members of the media.

At present, about 60.0% of PETRONAS stations offer the

new PETRONAS Primax 97 with Advanced Energy Formula

with more to be made available in 2016.

of PETRONAS stations offer the new PETRONAS Primax 97 with Advanced Energy Formula with more to be made available in 2016.

60.0%

For the year under review, the Company continuously

engaged with potential and current customers

through various programmes such as product

showcases, fraud mitigation sessions, festive

celebrations, sporting and leisure activities.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

RETAIL (continued)

Marketing and Promotion

Promotions are an important aspect in Retail Business, especially in promoting PETRONAS Primax, PETRONAS Dynamic Diesel and Kedai Mesra offerings. To attract customers to the stations, the following promotional activities

were conducted throughout 2015:• PETRONAS Ways2Win (13 April – 14 June 2015) – with every RM40

purchased at PETRONAS stations, customers have two ways to win.

Customers can either choose a voucher for instant redemption or

to participate in the contest for a chance to win the grand prize of

three years worth of fuel.

• Bank Islam Swipe & Drive Further Campaign (15 June –

15 September 2015) – with minimum RM30 spent using their Bank

Islam card at PETRONAS stations, customers can stand a chance to

win daily prizes of RM1,000 worth of fuel and the Grand Prize of an

Umrah Package or one year worth of fuel.

• Kombo RM5 Untuk Cuti Idaman (1 July – 31 August 2015) –

Purchase any RM5 Combo in the Kedai Mesra and stand a chance

to win a dream vacation.

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• Home of Champions Merchandise Redemption

(15 September – 31 January 2016) – specially

designed merchandise with F1 theme was made

available at all PETRONAS stations for redemption.

• Spend at PETRONAS with Maybank Cards

(15 October – 15 December 2015) – customers

stood a chance to win a Mercedes Benz and

Cash Back.

Customer Relationship Management

Maintaining customer relations is without question a

primary importance in ensuring the sustainability of our

business. In our effort to improve customer experience

at our station, the Retail Business had conducted

series of CIA programmes throughout 2015. Apart

from conducting marketing activities on PETRONAS

products and services as well as acquisition of new

PETRONAS Kad Mesra members, the programme was

also used as a platform for Retail Business to engage

with customers in getting a better understanding of

their needs.

PROSPECTS

The Retail Business remains committed in growing

the business to become the domestic retail market

leader, leveraging on its extensive PETRONAS station

network nationwide. To achieve this target, the Retail

Business will continue to provide innovative products

and differentiated services, supported by improved

marketing initiatives that not only reach out to

customers, but also reward existing and potential

customers throughout Malaysia.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIALVALUE DRIVEN GROWTH

C O M M E R C I A L B U S I N E S S I S F U L L Y C O M M I T T E D T O S E R V E T H E N E E D S O F T H E

V A R I O U S I N D U S T R I E S T H R O U G H I T S D Y N A M I C S A L E S F O R C E A N D

D I F F E R E N T I A T E D S E R V I C E S


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIAL

BUSINESS OPERATIONS

The Commercial Business markets petroleum products in bulk to

various industries and market segments including manufacturing,

aviation, power, oil and gas exploration, agriculture, fisheries and

transportation. Fully ISO 9001:2008 certified since 2008, the

Commercial Business is fully integrated with a strong supply base,

logistics and extensive distribution network throughout Malaysia.

The main petroleum products marketed by Commercial Business

are Diesel, Aviation Fuel, Bitumen, Fuel Oil, Kerosene and Mogas.

In 2015, Commercial Business expanded its product range to

include Petroleum Coke and Sulphur, marketed mainly in the

domestic market. The Commercial Business is fully committed to

serve the needs of the various industries through its dynamic

sales force and differentiated services.

FOCUSED AND CONCERTED EFFORTS, SUPPORTED BY EFFECTIVE COST MANAGEMENT INITIATIVE GREATLY CONTRIBUTED TO THE COMPETITIVENESS AND GROWTH OF THIS PORTFOLIO.

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Despite the challenging external environment in 2015,

cloaked by the drastic fall of crude prices, which started in

June 2014, the weakening Ringgit and uncertainties in

economic environment, the Commercial Business overcame

these adversities and produced a commendable bottom

line. The Commercial Business initiated various initiatives

and plans to remain robust and as a result, recorded its

best performance in the last ten years in terms of profitability.

For the year in review, the Commercial Business contributed

about 40.0% of PDB’s net profit. As compared to the

previous year, the Commercial Business registered stronger

financial performance in 2015, as its sales volume increased

by about 1.0% and net profit contributed by 17.0% whilst its

revenue dipped about 29.0% against the same corresponding

year under review.

KEY PRODUCTS AND SERVICES

Diesel experienced a significant volume growth of 4.3% from 2014, despite the modest overall industry demand

growth of only 1.0% to 2.0%. Focused and concerted

efforts, supported by effective cost management initiatives

greatly contributed to the competitiveness and growth of

this portfolio. Highest growth was recorded in the dealership

segment, bunker and construction sectors whilst demand

from subsidised sectors such as fisheries and transportation

showed contractions during the year under review, a direct

result from the ongoing subsidy rationalisation efforts by

the Government. The overall industry demand for Diesel in

the power sector and natural gas connected industries also

showed contractions as a result of more stable natural gas

supply during the year. Demand from oil and gas exploration

sectors also experienced a slowdown in 2015 due to lower

exploration activities stemming from the bearish crude oil

price environment.

AWARDED

BEST REGIONALJET FUELMarketer in Asia Pacific for 2 consecutive years


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIAL (continued)

Jet A-1 fuel demand declined as a result of softening demand for air travel in Malaysia as well as the ongoing

route rationalisation by Malaysia Airlines Berhad despite

some growth in the low cost sector. The result is also

attributed to the negative perception of the Malaysian

aviation industry, a consequence from the three aviation

tragedies involving Malaysia Airlines Berhad and AirAsia,

Malaysia’s two biggest home carriers and the largest

domestic customers of Jet A-1. Despite these challenges,

the Commercial Business minimised the impact through

better cost control and by securing contracts with other

domestic and foreign carriers such as Turkish Airlines,

British Airways and Lufthansa. Despite the generally

mundane performance of the aviation sector in 2015, the

industry is projected to rebound in the coming years, in line

with the expected recovery of the economy, regional boost

in tourism and cargo demands in Asia.

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Fuel Oil remains a significant portfolio for the Commercial Business. For the inland market, closure of the

Port Klang WEBS terminal since October 2014 provided the

Commercial Business with the logistics advantage to supply

key customers from PDB’s Prai depot in Penang. However,

demand for Fuel Oil from the Power Sector was significantly

reduced as a result of sufficient piped gas supply and

cheaper coal. Despite this challenge, the Commercial

Business successfully sustained its margin performance for

Fuel Oil by optimising its inventory and reducing unit cost,

whilst ensuring continuous supply to the key sectors in

bunker and other inland industries.

Bitumen enjoyed a good year, despite operating in a highly competitive market, during the year under review.

This segment recorded outstanding performance with sales

volume up by 33.0% in 2015 from 2014. This strong

performance was supported by the effective supply

optimisation and competitive pricing strategies implemented

at all depots throughout Peninsular Malaysia, Sabah and

Sarawak.

The Commercial Business is committed to further develop

its capabilities and resources to strengthen its position in

the domestic Bitumen market. Moving forward, the

Commercial Business will continue to aggressively

strengthen the Company’s markets position, whilst taking

advantage of several major infrastructure projects slated for

development in 2016.

From 1 January 2015, the Commercial Business started

introducing new product portfolios into its range of

offerings, namely Petroleum Coke and Sulphur. Petroleum

Coke is mainly used by industries for heating, or blending

with coal to enhance its calorific value. Sulphur, on the

other hand, is used as feedstock to produce various

chemical products including sulfuric acid and solvents. The

first year sales performance of these special products have

been very encouraging, with volume amounting to

390,000MT for Petroleum Coke and 57,000MT for Sulphur

sold. Moving forward, Commercial Business will continue to

capture the tremendous growth potential in further

developing our marketing capabilities in these products, not

just as a value added portfolio to our current product

range, but also as diversified offerings to our customers.

33.0 %This segment recorded an outstanding performance in sales volume for 2015 against corresponding year under review

BITUMENSEGMENT


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

COMMERCIAL (continued)

Providing fuel is essential for Malaysia’s growth and

development. We are involved in major infrastructure and

development projects in Malaysia. Several key projects that

were initiated in 2015, such as RAPID Pengerang, received

direct and indirect involvement from PDB.

The Commercial Business takes seriously its responsibility to

ensure customers’ satisfaction. We truly understand the

importance of ensuring continuous supply of our products

and its contribution to the bottom line of our customer’s

business. High quality products and services as well as

supply continuity to these sectors are crucial in ensuring

the sustainability and continuity of the sectors in Malaysia.

The year 2015 also marked a milestone for Commercial

Business with the commencement of operations of its first

Commercial Fuel Station in Pengerang on 1 October 2015.

The station with a capacity of 360,000 litres serves myriad

of vehicles, lorries and buses used in the RAPID project in

Pengerang.

Apart from supporting the RAPID Project development in

terms of ensuring consistent fuel supply, the Commercial

Business also provided ample business opportunities for

local entrepreneurs to venture into Commercial retailing

through various commercial dealership appointments.

KEY INITIATIVES

Aviation Technical Services Assistance

Our expertise in the aviation industry and the adoption of

PETRONAS Aviation Technical Standards are recognised and

adopted in all of PETRONAS aviation refuelling locations

worldwide. Our proven technical capabilities spearheaded

by our subsidiary, PAVSB, has allowed the Commercial

Business to extend the services wider to our valued

customers and partners in the domestic market. The

Commercial Business provides aviation technical services

which includes inspection, training as well as areas covering

HSE. In 2015, we extended our services to other small

domestic into plane service providers and individual

customers handling their own aviation fuel for their private

aircrafts and helicopters. This further reinforced the

recognition and trust towards PETRONAS as the “Brand of

1st Choice” and the preferred partner in the aviation industry.

RAPID Pengerang

The Commercial Business works to help meet the country’s

growing demand in a responsible way. This means operating

safely, reducing our impact on the environment and sharing

benefits with the communities.

For many decades, we have actively participated in the

national development agenda. PDB has a significant role to

play in the development and implementation phase.

THE YEAR 2015 ALSO MARKED A MILESTONE FOR COMMERCIAL BUSINESS WITH THE COMMENCEMENT OF OPERATIONS OF ITS FIRST COMMERCIAL FUEL STATION IN PENGERANG ON 1 OCTOBER 2015.

PROSPECTS

To sustain its market leadership in

Malaysia, the Commercial Business

will continue to provide personalised

services and differentiated offerings,

leveraging on PDB’s extensive, fully

integrated supply and logistics

strength. We believe that we are in

a strong position to add value to

the Company, further supported by

a n i n n o v a t i v e a n d d y n a m i c

workforce that is able to capitalise

on market opportunities. Despite

the prospects of a more challenging

year in 2016, maturing commercial

demand, market volatilities and

moderate economic growth, the

Commercial Business is expected

to push beyond our boundaries

and remain the key value driver to

PDB’s core strategies. At the

product portfolio level, Bitumen,

Petroleum Coke and Sulphur are

expected to maintain its growth

momentum and increase their

cont r ibu t ion to the ove ra l l

Commercial Business performance

in 2016.

LPGDELIVERING VALUE

L P G B U S I N E S S P U R S U E D A V A L U E D R I V E N G R O W T H S T R A T E G Y B Y F O C U S I N G O N C O S T O P T I M I S A T I O N A N D I M P R O V I N G E F F I C I E N C Y A C R O S S I T S V A S T D I S T R I B U T I O N N E T W O R K


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LPG

The LPG Business has successfully reinforced its position as

Malaysia’s No. 1 Cooking Gas through its value driven

growth strategy by focusing on cost optimisation and

improving efficiency across its vast distribution network

despite a very challenging market environment in 2015. The

LPG Business continued to maximise value for the household

segment and further improved its competitive edge in the

commercial segment through superior customer services.

BUSINESS OPERATIONS

The LPG Domestic Business drives the marketing and sales

of cooking gas under the brand name of Gas PETRONAS,

currently available in four different cylinder sizes – 12kg and

14kg suitable for household use, while the 50kg and bulk

LPG (ranging from 200kg to 32,000kg tank sizes) are

suitable for both SMIs and industrial customers.

Through its ‘value driven growth’ strategy, the LPG Domestic

Business has commendably strengthened Gas PETRONAS’

position as Malaysia’s No. 1 Cooking Gas.


In its pursuit to deliver maximum value, LPG Domestic

Business successfully contributed about 20.0% to the

Company’s bottom line in 2015 compared to about 16.0%

contribution in corresponding year under review.

KEY PRODUCTS AND SERVICES

12kg and 14kg Cylinders

During the year under review, the subsidised household

segment comprising of 12kg and 14kg cylinders continued

to be the key contributor to the LPG Business. The LPG

Business leveraged on Gas PETRONAS’ vast network of

authorised dealers to sustain its market leadership while

enhancing value. Further enhancements were made through

value driven initiatives that included sweating of assets and

focusing on high cylinder turnaround areas to drive the

business to a new level of performance.

50kg Cylinders and Bulk Sales

The commercial segment recorded a slight decrease in

volume for the year under review as compared to the

corresponding year under review due to aggressive

expansion of natural gas distribution, particularly in the

Northern and Southern regions. The impact was cushioned

through the increase in C50kg sales via intensified marketing

efforts coupled with stronger enforcement by MDTCC on

illegal subsidy leakage linked to decanting activities and low

Saudi Contract Price environment in 2015.

KEY BUSINESS INITIATIVES

Cost Optimisation

The LPG Business initiated various cost optimisation

initiatives in its pursuit of achieving greater cost efficiencies

that is centred on improving contract management

performance and enhancing operational excellence, in a bid

to unlock value across its business chain.

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Governance and Internal Control

Internal and external audits were

undertaken throughout the year under

review to ensure Governance and Internal

Control was duly exercised. The LPG

Business has been ISO 9001:2008

certified since 2007, with implementation

of Quality Management System which

fulfils the requirements from processes,

procedures, compliance to governance

on marketing and sales of LPG products

to customers.

During the year under review, the LPG

Business has successfully demonstrated

its ability to maintain the ISO certification

through an audit conducted by SIRIM in

December 2015.

“12kg & 14kgCONTINUED TO BE THE KEY CONTRIBUTOR TO LPG BUSINESS”


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LPG (continued)

INTERNATIONAL BUSINESS

The LPG Business is a key segment

of the Philippines downstream oil

industry. As a widely used fuel

commodity in the country, the LPG

Business sector is highly competitive

in a deregulated market condition.

In the Philippines, PEPI’s customer

base in Mindanao, Visayas and

Luzon is served via an established

l o g i s t i c s s u p p o r t s y s t e m ,

infrastructure and continuously

expanding network of distributors.

PEPI has the second largest market

share in the Visayas and Mindanao

regions, covering household,

THROUGH ITS ‘VALUE DRIVEN GROWTH’ STRATEGY, THE LPG DOMESTIC BUSINESS HAS COMMENDABLY STRENGTHENED GAS PETRONAS’ POSITION AS MALAYSIA’S NO.1 COOKING GAS.

NO.1COOKING GAS

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commercial, autogas and bulk industrial LPG

segments. PEPI is focused on strengthening its

growth trajectory in the high margin household

segment through prudent inventory management,

risk management and provision of differentiated

services to industrial customers.

PEPI is firmly committed towards offering quality

and safe LPG cylinders. In realising this, it has

introduced initiatives that improved operations

and supply logistic costs. Other continuous

initiatives include the enhancement of processes

and frameworks on corporate governance,

guided by the Group’s stringent policies and

guidelines.

PROSPECTS

Backed by solid foundation and dedicated

workforce, the LPG Business remains steadfast

in reinforcing its position, not only as Malaysia’s

No. 1 Cooking Gas but also as the overall leader

in the nation’s LPG industry, whilst delivering

value and continuously enhancing its services to

its loyal customers.

LUBRICANTSINNOVATING CHANGE

O U R R A N G E O F P R E M I U M A U T O M O T I V E L U B R I C A N T S P R O D U C T S C O N T I N U E T O

E V O L V E A N D I S T O D A Y R E C O G N I S E D A N D A C C R E D I T E D B Y M A J O R A U T O M O T I V E

M A N U F A C T U R E R S


KEY MESSAGES


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LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LUBRICANTS

BUSINESS OPERATIONS

The Lubricants Business retained its market position despite a challenging and competitive industry

outlook. Driven by the Company’s aspiration to achieve market leadership in the near future, the

Lubricants Business underwent a transformation journey with the consolidation of lubricants

business into one entity that is PDB’s subsidiary, LDSB, which was then renamed as PLM(M)SB, to

undertake the sales and marketing activities of PETRONAS Lubricants Business in Malaysia.

Leveraging on the extensive range of lubricant products, the Business caters to wide markets

covering Passenger Vehicles, Motorcycles, Commercial Vehicles, Industrial and Marine segments

and specialises in the lubricant functional fluids and technical services.

2NDLARGESTlubricants market in Southeast Asia

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THE PETRONAS SYNTIUM RANGE WAS UPGRADED TO INCLUDE °COOLTECH™, A UNIQUE FORMULATION OF BASE OILS AND ADDITIVES THAT FIGHT EXCESSIVE ENGINE HEAT


In view of Malaysia’s weak economic condition during the

year under review, the Lubricants Business recorded a lower

volume against corresponding year under review due to the

cautious consumer spending.

KEY PRODUCTS & SERVICES

Passenger Car Motor Oils cater to the lubricants needs of

the Passenger Vehicle segment in the automotive industry.

PETRONAS Syntium is our flagship product which fully

complements the semi synthetic to full synthetic range.

During the year under review, the PETRONAS Syntium

range was upgraded to include °CoolTech™, a unique

formulation of base oil and additive that fights excessive

engine heat.

Key accounts using our PETRONAS Syntium range are

Perodua, PROTON, Naza KIA, Peugeot, Citroen, Mercedes

Benz, BMW and more. Our product offerings also include

PETRONAS Mach 5 premium mineral grade, PETRONAS

NGV Lube and PETRONAS M-Plus.

Motorcycle Oils cater to the requirements of the

motorcycle segment. We have two brands under this

segment, namely PETRONAS Syntium Moto and PETRONAS

Sprinta. PETRONAS Syntium Moto offers products from the

semi-synthetic to full synthetic grades while PETRONAS

Sprinta offers mineral grades.

Commercial Vehicle Lubricants cater to lubricant usage

for commercial vehicles (i.e. trucks, bus, prime-movers and

the like) that run on heavy duty diesel engines. PETRONAS

Urania is our brand for this segment and it offers products

from the mineral to the full synthetic range. To further

complement this segment, we also offer automotive gear

oil, automatic transmission fluid and specialty products such

as brake fluid and coolants.

Industrial and Marine Lubricants offer products targeted

to industrial and marine segments. We have a full range of

lubricants to meet consumer requirements from compressor,

circulation, hydraulic, turbine, gear oil and marine products.

PETRONAS LubeXperts are fully branded PETRONAS

workshops for passenger cars and motorcycles, offering a

complete range of PETRONAS Lubricants products. Initiated in

2013, it is aimed at expanding market penetration and

increasing PETRONAS Lubricants brand exposure in hightstreet

segment as well as at PETRONAS stations. The first LubeXpert

was launched at Auto Deutsch, Desa Pandan on April 2013. In

2015, 16 more new LubeXpert outlets opened, making it to

the total of 67 LubeXpert outlets currently operating nationwide

KEY INITIATIVES

Formation of PETRONAS LUBRICANTS MARKETING

(MALAYSIA) SDN BHD

Transformation Initiatives

During the year under review, the Lubricants Business went

through a transformation journey with the formation of a

single entity to undertake the sales and marketing activities of

PETRONAS Lubricants Business in Malaysia. The strategic

formation of this new entity will be a strong platform for the

Business to achieve its market leadership aspirations, due to

the enhancement of its business focus and talent management.

The transformation journey started in late August 2014, involving

the leadership teams of the Lubricants Business entities

(Lubricants Business Division in PDB and LDSB) as well as those

from PLISB. The key objective of the transformation initiatives

was to look into the redesign of PETRONAS Lubricants Business

model in Malaysia to create a unified commercial setup that will

enhance our capacity, deliver aggressive growth rates and attain

market leadership aspirations.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

LUBRICANTS (continued)

Business operations for the unified entity began on 1 January 2015 with

a series of initiatives implemented to stabilise and streamline operational

processes to cater to the compatibility integration with existing PDB and

PLISB operations as well as to ensure a seamless level of service for

customers. On 11 May 2015, the entity was officially named PLM(M)SB.

Route-To-Market in East Malaysia

The Lubricants Business cited positive growth in East Malaysia (Sabah and

Sarawak) due to the implementation of end-to-end transformation called

RTM. Initiated in Peninsular Malaysia in 2013, RTM showed double digit

volume growth in 2013 and 2014.

The objectives of extending this programme to East Malaysia was to

drive growth and establish our position as a market leader. In May 2015,

nine Market Execution Partners for East Malaysia were signed on to

extend PLM(M)SB’s reach in East Malaysia for the implementation of the

RTM programme.

The transformation journey of PLM(M)SB was continued with the

establishment of a stronger financial enterprise system, SAP ECC6, that

streamlined and integrated the supply chain practices with PLISB for

better efficiency as well as address capability development within the

new organisation.

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PROSPECTS

With stiff competition and emergence of new players in the

industry, the Lubricants Business will continue its aggressive

growth strategy and strive towards establishing its market

leadership.

As part of an overall initiative to grow PLM(M)SB business,

the transformation initiatives implemented addressed key

areas of RTM for the high street indirect business in

Peninsular Malaysia and the deployment of sales teams

managing Direct Key Accounts in their respective regions.

This has enhanced our reach and improved our level of

customer service to both customers and consumers alike.

The transformation journey continues to focus on

consolidating the indirect and direct Lubricants Businesses

of PDB into a single entity to garner synergies to achieve

an improved speed to market, focused execution and talent

development.

INTERNATIONAL SUBSIDIARIES

The lubricants market in Thailand has strived despite having

aggressive competition throughout the year. During the

year under review, the revenue for Lubricants Business in

Thailand had decreased by 5.6% as a result of lower unit

selling price.

Throughout the year under review, PIM(T)CL decided to

focus on business growth, which involved engaging their

OEMs and conducting intensive marketing and promotional

programmes. Due to the high competition experienced in

the region, PIM(T)CL focused on increasing brand awareness

via the use of digital media. Programmes for both internal

and external parties were done in order to have fully trained

distributors of the product. In pursuit of this, PIM(T)CL has

also taken the necessary steps to increase the number of

sales personnel and dealers in the region.

DELIVERING EXCELLENCE

S T R A T E G I E S H A V E A L W A Y S B E E N D R I V E N A N D I N S P I R E D B Y T H E F O U R C O R E V A L U E S ,

N A M E L Y S T A K E H O L D E R V A L U E , C U S T O M E R S A T I S F A C T I O N , O P E R A T I O N A L E X C E L L E N C E

A N D O R G A N I S A T I O N A L E F F E C T I V E N E S S

SUPPLY ANDDISTRIBUTION


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SUPPLY ANDDISTRIBUTION

BUSINESS OPERATIONS

During the year under review, SDD focused on cost optimisation

and supply reliability. With its extensive supply chain network of

primary and secondary distribution, SDD appraised and

transformed existing processes to provide the most economical

and reliable delivery to the customers supporting other enablers

and business lines. This was done by ensuring uninterrupted

end-to-end supply chain from product sourcing right up to

delivery of the Company’s products to customers and dealers.

KEY ROLES AND RESPONSIBILITIES

SDD’s main roles and responsibilities include product sourcing,

distribution, infrastructure planning and engineering services.

These functions ensured adequate and reliable operational

facilities for business sustainability.

SDD’s strategies have always been driven and inspired by its four

core values, namely Stakeholder Value, Customer Satisfaction,

Operational Excellence and Organisational Effectiveness.

OVERALL EQUIPMENT EFFICIENCY

81.0% 89.0%through continuous operational monitoring, SDD improved its LPG bottling operations’ Overall Equipment Efficiency by reducing operational interruptions while maximising on delivery.

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KEY BUSINESS INITIATIVES

Stakeholder Value

SDD remained committed towards creating value for its

customers and business partners by improving the efficiency

of product sourcing, primary and secondary distribution as

this ensured better control and undisrupted supply. SDD

also focused on optimising its terminals’ inventory and

operating expenditure to continuously provide competitive

advantages and cost optimisation. The realignment and

optimisation of TC vessels resulted in the cost reduction of

approximately 5.0% of the total annual freight cost.

SDD also actively looked for new ventures to add more

value to the services provided. As such, SDD worked with

other oil companies on throughput arrangements, leveraging

on existing facilities and capabilities without jeopardising its

market share. This initiative not only contributed towards

additional income to the organisation and further improved

asset utilisation but also reduced the terminal’s operational

unit cost. More value added initiatives are being planned to

support business growth and sustainability.

Customer Satisfaction

SDD focused on enhancing customer satisfaction through

the delivery of quality products and differentiated services

in a timely and cost effective manner. A new process to

manage customer complaints online was developed to

ensure it adhered to the standard operating procedures to

deliver on the Company’s brand promise. Moving forward,

ongoing efforts are being carried out to ensure that these

practices becomes a norm for SDD to carry out its business.

Operational Excellence

A key factor at SDD is to ensure that products are delivered

to customers at the most competitive cost and without

operational interruptions. In pursuit of this, SDD strategised

and initiated the Integrated Inventory Management system

that minimised the intermonth price exposure variance due

to the prolonged downward trend in oil prices. Through

continuous monitoring and proactive actions taken, this

initiative resulted in a more current unit cost that reflected

current market prices. In essence, this initiative promoted

competitive pricing that allowed business lines to realise the

Company’s sales agenda.

The initiative started with daily oil prices analysis and

monitoring of variance between the Company’s product

costs vis-à-vis market price. The continuous price downward

trend triggered all parties to successively implement pre-

determined mitigation actions such as frequent and smaller

parcel products delivery to the Company’s terminals and

managed product intake from refineries to ensure better

pricing strategy. This resulted in competitive product pricing

and performance improvement.

In addition, with continuous operational monitoring, SDD

improved its LPG bottling operations Overall Equipment

Efficiency rate from 81.0% to 89.0%, reducing operational

interruptions while maximising on delivery.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SUPPLY ANDDISTRIBUTION (continued)

BUSINESS ACHIEVEMENTS

MSOSH 2014 Award

Following the success of the Company in the MSOSH 2013

Awards in the corresponding year under review, the

Company achieved yet another success story during the

year under review by sweeping six Gold Awards for

commendable occupational safety and health performance

in the MSOSH 2014 Awards. The award recognises

companies from various sectors who have performed

exceptionally well in occupational safety and health aspects.

The award strengthened the Company’s commitment

towards occupational safety and health, while at the same

time boosting the morale and confidence of employees

towards building a safe working environment.

…THE COMPANY ACHIEVED YET ANOTHER SUCCESS STORY DURING THE YEAR UNDER REVIEW BY SWEEPING SIX GOLD AWARDS FOR COMMENDABLE OCCUPATIONAL SAFETY AND HEALTH PERFORMANCE IN THE MSOSH 2014 AWARDS.

Organisational Effectiveness

To support the Company’s business growth and sustainability,

SDD continuously conducts various studies to improve the

Company’s efficiency. To further improve organisational

effectiveness, SDD conducted several major short and long

term studies, including a study on unmanned terminal

rationalisation and terminal optimisation review which

included the implementation of Drag Reducing Agent on

Multi Product Pipeline to improve its capacity. The studies

focused on detailed review of the Company’s options for

business continuation pre-and post-2020 as well as the long

term operational requirements beyond 2020, with due

consideration given to operational limitations and advantages.

Following this, specific strategies were developed and

assessed for business growth and sustainability. In essence,

these studies have provided PDB and SDD with a firm

direction on future plans with regard to its operations, for

the benefit of all stakeholders.

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has been equipped with a new bottom loading facility, a fire

fighting system consisting of fire tank and fire pumps and

one new administration building. The facilities are able to

support long term volume growth and demand surge

during peak seasons. Low inventories have also given

significant improvement in vessel replenishment turnaround

time due to lesser load port congestion and predicted

season which affected vessel travel times.

Biodiesel Project in East Malaysia

Following the Government’s mandate of Biodiesel

implementation, SDD completed all B7 Biodiesel facilities in

Sabah and Sarawak. With this, the whole country is now

being supplied with B7 Biodiesel. The implementation of the

government initiative in East Malaysia involved the use of

additional PME by 138,000MT annually, which resulted in an

annual saving of 159.4 million litres of fossil diesel. SDD

also ensured an uninterrupted supply of PME to support the

initiatives through efficient procurement to all PS in East

Malaysia.

PROSPECTS

Moving forward, SDD will continue to focus on cost

optimisation, supply reliability and sustainability, customer

satisfaction, HSE assurance and operational excellence

towards supporting the Company’s overall aspiration of

becoming the ”Brand of 1st Choice”.

KEY PROJECTS AND INITIATIVES

LPG Flexspeed System at Prai LPG Terminal

SDD successfully commissioned the Prai LPG Flexspeed

System ahead of schedule in December 2015 as it was

completed within a duration of 12 months. The objective of

the project was to increase the Prai LPG Terminal production

capacity with a high speed production bottling capability to

a total of 5,400 cylinders per hour via two Flexspeed

lines dedicated for C12 and C14 cylinders to meet the

Company’s growth.

The project resulted in operational improvements and cost

savings via manpower optimisation with the use of the

automated processes that came with the Flexspeed system.

PDB Miri Fuel Terminal

SDD successfully commissioned its biggest fully owned fuel

terminal in Sarawak, the PDB Miri Fuel Terminal, on 15

October 2015. The project was completed two weeks

ahead of time and obtained its Certificate of Fitness to

Operate, well ahead of its contractual period of 13 months.

Due to this, the project achieved cost savings as the capital

investment was 7.0% lower than the initial budgeted amount.

The terminal, currently operating with bigger storage

capacity of 3.0 million litres in total against its initial capacity

of 1.4 million litres, comprises two new vertical tanks to

support the business growth. Apart from that, the terminal


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

CRUDE OIL AND PETROLEUMPRODUCTS PRICE TRENDS

After the drastic drop of global crude benchmark, Dated Brent, in the second half of 2014, peaking at USD115.30/bbl in June 2014 to a low of USD56.00/bbl at the end of 2014; crude oil continued its downward trend throughout the year under review. Dated Brent touched the highest point at USD66.65/bbl on 13 May 2015 before gradually sliding down to a low of USD36.00/bbl towards the end of 2015.

For the year under review, Dated Brent price averaged at USD52.80/bbl, lower by about half from 2014’s average of USD99.00/bbl. For petroleum products, the MOPS prices are the key benchmark prices in this region. Throughout 2015, RON97 ULG, RON95 ULG and Diesel 0.05% averaged at USD71.00/bbl, USD69.00/bbl and USD65.00/bbl, respectively.

The unending bearish market for both crude oil and petroleum products is attributed to the oversupply situation

Note: Average monthly prices are based on MOPS.

as OPEC persistently held on to a “no output cut” policy to claim market share leadership. Furthermore, the strong supply growth from US tight oil, and the potential lifting of sanctions on Iran led to expectations of higher oil exports from Iran. On the demand side, expectation of interest rate hike by the U.S. Federal Reserve reduced investors’ appetite for commodities including oil, coupled with lingering concerns about lower economic growth in China and emerging markets.

Moving forward, global oil market is projected to remain in an oversupply position in 2016, although the pace of global stock builds could decrease to 0.6 mil bpd from 1.7 mil bpd, as OPEC supply remains robust despite lower non-OPEC output. Demand is expected to give support as the US economy is on the road of recovery and other emerging markets including China and India are expected to continue growing, albeit at a moderate level.

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

Jan2005

Jan2006

Jan2007

Jan2008

Jan2009

Jan2010

Jan2011

Jan2012

Jan2013

Jan2014

Jan2015

Dec2015

CRUDE: Tapis CRUDE: Brent RON97 ULG RON95 ULG

JET A-1 DIESEL 0.05% DIESEL 0.25%

USD/BBL

Year

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INSPIRING CHANGE

ECONOMIC OUTLOOKAND PROSPECTS

Global economic growth was estimated at 3.1% in 2015, a

slower growth compared to 2014. Expansion in the

advanced economies continued at a modest pace, while

growth in emerging markets and developing economies

decelerated, led by the imminent slowdown in China.

Downside risks to the outlook has escalated, particularly in

emerging markets and developing economies, influenced

by low commodity prices, increase in capital outflows from

the emerging markets, combined with downward pressure

on their currencies and increasing financial market volatility.

These risks pose downward pressure on the global economy,

with their effects to be felt throughout 2016. Global

economy is expected to be fragile, with modest growth

projected to be at 3.4%.

In the Southeast Asia region, estimated growth remains

steady at 4.6% in 2015 and projected at 4.9% in 2016. For

the ASEAN-5 economies (Indonesia, Malaysia, Philippines,

Thailand, Vietnam), weaker terms of trade as a result of

currency depreciation against major currencies is expected

to contribute to a bearish growth for both Malaysia and

Indonesia in 2015. The weaker commodity prices will

further drag the growth of the commodity-exporting

economies.

For Malaysia, GDP growth for 2015 was recorded at a

moderate pace of 5.0%, largely driven by the private sector,

both consumption and investments. Net exports remained

strong on the back of weaker imports due to weakening

Malaysian Ringgit. In 2016, the uncertainty of global

economy will continue to put more downward risks. GDP

growth is forecasted to moderate at between 4.0% and

4.5% as the economy continues to experience external and

internal uncertainties.

To address the challenging economic environment, the

Company will be aligning its business strategies to sustain

its overall market leadership and shareholders’ value. PDB

remains committed towards reinforcing its market leadership

and adding value to its businesses by strengthening its

brand, building on its innovative customer-centric mindset

and focusing on its cost competitiveness – in its journey

towards becoming the ”Brand of 1st Choice”.

PDB REMAINS COMMITTED TOWARDS REINFORCING ITS MARKET LEADERSHIP AND ADDING VALUE TO ITS BUSINESSES BY STRENGTHENING ITS BRAND, BUILDING ON ITS INNOVATIVE CUSTOMER-CENTRIC MINDSET AND FOCUSING ON ITS COST COMPETITIVENESS – IN ITS JOURNEY TOWARDS BECOMING THE BRAND OF 1ST CHOICE.

SUSTAINABILITYREPORT

RESPONSIBLE CORPORATE CITIZEN

P D B C O N T I N U E S T O E M B R A C E P O L I C I E S , P R A C T I C E S A N D P R O C E D U R E S T H A T

C L E A R L Y O U T L I N E O U R C O M M I T M E N T T O D E L I V E R S U S T A I N A B L E A N D L O N G T E R M

V A L U E T O O U R S T A K E H O L D E R S


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

SUSTAINABILITYREPORT

Our approach to sustainability is guided by PETRONAS Corporate Sustainability Framework which recognise the value of sustainable growth, giving back to the community, minimising the impact to the environment, as well as maintaining safe and reliable operations.

Sustaining the Company’s profitability

through value creation, e�cient

extraction and manufacturing

processes.

Limiting emissions of greenhouse

gases into the atmosphere.

Preventing and eliminating

injuries, health hazards and damage to

property and communities,

including conserving the environment.

Promoting e�cient use of hydrocarbons and water, and supporting the

use of renewable energy.

Shar

ehol

der

Valu

e

Natu

ral R

esou

rce

Use

Clim

ate

Chan

ge

Heal

th, S

afet

y &

Envi

ronm

ent

Soci

etal

Nee

ds

Biod

iver

sity

Ensuring projects and operations

do not have significant eect on the diversity of animals and

plants.

Prod

uct S

tew

ards

hip Ensuring that

products conform to

quality and HSE standards

throughout the product lifecycle

and meet the needs of society.

PETRONAS CORPORATE SUSTAINABILITY FRAMEWORK

Safeguarding human rights

within our sphere of influence,

contributing to community

needs, investing in training

and education, promoting arts and sports and conducting our

business in a transparent

manner.

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The Company holds our partners, contractors and suppliers

to similar standard of conduct.

The year under review saw continued volatility in the capital

markets with the Malaysian economy facing financial

vulnerability. As a responsible corporate citizen, PDB

continues to embed sustainability in our business operations.

We engage with our stakeholders comprising our own

employees, business partners, shareholders, customers,

regulatory authorities, local communities, contractors and

suppliers.

PDB is currently refining the tools, processes and

sustainabil ity reporting mechanisms internally. By

strengthening our business practices concurrently, this will

only help propel us into the future.

On 12 December 2015, Bursa Malaysia announced that PDB

has met the globally recognised sustainability standards for

inclusion in the FTSE4Good Bursa Malaysia Index. PDB is

very pleased with the recognition and inclusion in the

FTSE4Good Bursa Malaysia Index, and as such the Company

will strengthen and continue in its efforts to integrate

sustainability into its business strategy.

PART III WORKPLACE CULTUREAND ENVIRONMENT3. SUSTAINABLE DEVELOPMENT

3.1 PETRONAS is committed to sustainable development in order to help meet the world’s growing energy needs through economical, environmental and socially responsible efforts.

3.2 You should aim to create lasting social benefits; safeguard the health and safety of employees, contractors and neighbours; minimise disruptions to the community; lower emissions; minimise impact on ecosystems and biodiversity; and use energy, water and other resources more efficiently.

Sustainability to PDB means meeting the world’s growing energy needs in a responsible and holistic manner, by balancing the

economic, environmental and social needs of our stakeholders, steered by solid governance and ethical business practices.

In addition, PETRONAS CoBE expresses our commitment to sustainable development as follows:

Source: PETRONAS CoBE.

FTSE Russell (the trading name of FTSE International

Limited and Frank Russell Company) confirms that PDB

has been independently assessed according to the

FTSE4Good criteria, and has satisfied the requirements

to become a constituent of the FTSE4Good Index

Series. Created by the global index provider FTSE

Russell, FTSE4Good is an equity index series that is

designed to facilitate investment in companies that

meet globally recognised corporate responsibility

standards. Companies in the FTSE4Good Index Series

have met stringent environmental, social and governance

criteria, and are positioned to capitalise on the benefits

of responsible business practice.

SUSTAINABILITYREPORT (continued)


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

HEALTH, SAFETY AND ENVIRONMENT

PDB is committed to safeguard the health and safety of its people, business partners, customers, surrounding communities, public and all stakeholders; and puts protecting the environment as one of its priorities in driving a sustainable business and operational excellence.

The Company views the inculcation of HSE practices as a

prerequisite in this journey, aiming at making HSE a culture

that is embedded in all aspects of its business. In exercising

this aspiration, PDB holds on to the governance of HSE

Management System, a system that has been established

and rolled out to all of the Company’s operations since its

early days.

LEADERSHIP COMMITMENT

PDB’s management demonstrates visible HSE leadership

and commitment through a set of exemplary roles in

safeguarding the health and safety of our employees. The

roles include integrating and balancing HSE aspects in

business decisions and leading the development of HSE

strategic objectives and targets. In operationalising the

commitment, PDB management drives HSE initiatives at all

levels with clear expectations, targets and objectives; with

each member of the management carrying the highest

portion of HSE KPIs. The show of accountability and

responsibility is emulated at all levels; spreading the message

that HSE is critical to each and every one of its employees.

The management’s commitment is carved in the Company’s

HSE Policy Statement; a written pledge signed off by the

Company’s highest executive officer, MD/CEO. It mandates

strict adherence to HSE regulations and requirements

across the Company, by our employees, contractors,

suppliers and joint venture partners.

HSE governance at PDB is strengthened with commitment

to adhere to PETRONAS HSE Mandatory Control Framework

and PETRONAS Technical Standards. Adopting demonstration

of As Low As Reasonably Practicable (ALARP) as the

Company’s risk appetite in managing HSE risks, PDB

establishes its HSE strategic objectives and targets to

rationalise and operationalise the intent of its HSE aspiration.

The HSE strategic objectives are incorporated into HSE

Plan, and cascaded to the respective Divisions and closely

monitored to ensure everything that has been planned is

materialised effectively and in a timely manner.

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No. of Staff Trained in HSE

2014 80

2015 375

for year in 2015375

No. of Man Hour Training Hours Days

2014 3,512 439

2015 7,680 960

hours7,680 days960

BUILDING HSE FOUNDATION

In ensuring that a HSE plan is executable and effective, PDB

provides a firm foundation that includes competent

employees, a relevant structure, practical deliberation and

decision making platforms, monetary budget and access to

critical documents of standards, legislation and other

requirements. At all levels, HSE roles and responsibilities are

clearly defined in job or position descriptions and are

documented, communicated and reviewed periodically.

HSE Committees

HSE committees focus on relevant HSE issues and provide a

platform for communication amongst and between

management and employees. The committees are utilised to:

• Stimulate effective two way communication on HSE

issues between management and employees

• Engage all staff in the implementation of HSEMS

• Provide avenue for employees’ feedback on HSE matters

• Provide HSE advisory to the management for informed

decision

• Provide a platform to monitor adequacy and effectiveness

of controls put in place to manage HSE risks.

PDB Corporate HSE Committee is chaired by the MD/CEO,

who is also a Director of the Company. Heads of Divisions

were appointed as committee members to ensure commitment

from senior management team. HSE risks, incidents and

performance are also deliberated by the PDB MC and

presented to the Board for oversight on a quarterly basis.

HSE Capability

An intent is only as good as the person executing it. PDB

gives significant emphasis in ensuring its employees and

servicing contractors are capable in implementing assigned

tasks. Appropriate training programmes are identified and

provided to ensure necessary skills and knowledge are

acquired prior to performing a job in a safe manner. Basis

of identification includes job function requirement, legislative

and standards requirements, discipline pre-set training

requirement, as well as other best practices by the industry

with similar operations and activities. Compliance to training

requirements are monitored through the implementation of

HSE Competence Assurance, a system that is able to

provide the management an effective oversight over the

status of competency of the workforce.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

HSE Communications

For the year under review, we undertook initiatives to

engage our business partners, customers as well as

contractors to strengthen HSE management in our day to

day operations. Engagement with local communities and

public is also embedded in various programmes

implemented. Our initiatives were focused on factors that

could cause incidents and how to mitigate HSE risks.

We engaged authorities such as MDTCC, DOSH, DOE and

APMM to obtain updates on the latest legal requirements

that apply to PDB facilities. Such information is disseminated

to all relevant asset owners for compliance.

RISK-BASED PLANNING AND IMPLEMENTATION

With the HSEMS, supplemented by PETRONAS Enterprise

Risk Management Framework, provides risk oversight to

PDB Board, looking into various focus risk areas including

HSE risks. With a solid foundation set by the management,

operationalisation begins with HEMP, which calls for

identification of hazards, assessment of risks, and

implementation of controls. The process not only provides

detail contents of risks but also allow intelligent risk-based

prioritisation; a crucial approach in ensuring that plans are

structurally and systematically implemented. Several risk

assessment tools and techniques are used in HEMP, each

examining different aspects of an operation or activity;

suitable for specific areas or stages of operations. Examples

include Job Hazard Analysis, Process Hazard Analysis,

Chemical Health Risk Assessment, and Environmental

Impact Assessment.

Efforts towards enhancing HEMP implementation in 2015

included a Company-wide review of the Hazards and

Effects Register, involving Subject Matter Experts from the

Fuel, LPG and Aviation Terminals, Retail and NGV Stations,

as well as LPG and Commercial storage facilities; driven by

findings from past incidents and near-misses, audit findings,

newly-introduced hazard, facility or process and any change

that may introduce new or different level of HSE risks.

Notwithstanding all efforts in preventing incidents, the

Company realises that fate do find its ways; and normally at

the least expected of situation and time. Hence, it is also one

of the Company’s priority to keep everyone on their toes,

ready for any emergency situation. PDB Crisis and Disaster

Management Manual stipulates the requirements to take

proactive steps to ensure that we are prepared for unexpected

events. The manual also specifies the emergency response

structure along with clear roles and responsibilities. The

Company conducts periodic assessments to ensure adequacy

and effectiveness of controls to manage emergency

scenarios. This includes testing of response equipment’s

adequacy and readiness; as well as response capabilities

through emergency exercises at our operating facilities.

Regardless of how unwanted an incident is, the Company

strives to find remedies through the process of learning from

incidents. All incidents are investigated in a timely manner.

Recommendations resulting from investigations which

include both corrective and preventive actions are monitored,

and their progress is reported to the management. Lessons

learnt from incidents are shared across the Company

including relevant contractors and business partners to

prevent recurrence of similar incidents; in the form of specific

action items that are monitored and tracked for closure. At

all times, lessons are not only made learnt at similar

operations, but also being extended throughout the Company.

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TIER 3 EMERGENCY RESPONSE EXERCISE FOR KERTIH FUEL AND LPG TERMINAL (EX-PETIR II)

One of the biggest scales of emergency response exercise conducted

was Tier 3 Emergency Response (Ex-Petir II) which was jointly organised

by PDB, PETRONAS Carigali Sdn Bhd Peninsular Malaysia Operations and

PP(T)SB which was successfully conducted on 21 April 2015.

The exercise was conducted to assess the capability and readiness of

our ERT, Eastern Region Emergency Management Team, PDB

Headquarters Support and Unification of Command between PP(T)SB,

Central Emergency and Fire Services and various response agencies

towards mitigation of the crisis. The exercise included full movement of

ERT and deployment of firefighting equipment during emergency with

external assistance from Kertih and Kemaman response agencies

(BOMBA, police, and hospital).

CONTINUAL IMPROVEMENT

Built around the Plan-Do-Check-Act

cycle, HSEMS requires an effective built-in

improvement system, to stay relevant,

updated and continually improving.

Internal and independent HSE Assurance

exercises are carried out, with analysis of

findings being presented to the PDB MC,

PDB Board and PETRONAS Downstream

Executive Committee. For the year under

review, PDB was subjected to HSE

Assurance by PETRONAS Group HSE. The

findings and recommended corrective

actions of this assurance exercise was

consolidated with those of the HSE

assurance conducted in previous years by

several stakeholders. Correction Action

Plans were consolidated for Company-

wide implementation and tracked for

closure; providing not only a holistic

approach in gap closures; but also ensures

sustainability of implementation.

Analysis from these Assurances; together

with other inputs from incidents, near

misses and external lessons are put

together against each sub-elements of

HSEMS, allowing identification of areas

w i t h i n t h e s y s t e m t h a t r e q u i r e

improvement. This is a formal process in

place for PDB management to review the

effectiveness of the HSEMS implementation

and ensuring continual improvement of

the system; and subsequently the

Company’s sustainability in managing HSE.


KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE


TOTAL EMPLOYEES

>1,900

2015

Total Training Mandays: 4,027 days

Average Training Mandays: 2.52 days

2014

Total Training Mandays: 4,380 days

Average Training Mandays: 2.74 days

LEADERSHIP DEVELOPMENT

In line with PETRONAS Leadership Vision, PDB strives to

develop leaders at all levels to uphold the PETRONAS

Shared Values and demonstrate the leadership competencies

in a high performance culture.

To build the right leaders to meet the Company’s needs

and aspirations, the PDB leadership development activities

and initiatives for employees at all levels are guided by

PETRONAS Learning and Development Framework, and Top

Talent Development Framework.

Leadership Development Programmes offered by the

PETRONAS Leadership Centre

Selected PDB executives, managers and higher management

employees participated in the wide array of high impact

leadership development programmes which were available

at PLC. The programmes held include the Senior

Management Development Programme, Management

BUILDING A HIGH PERFORMANCE CULTURE

Creating a high performance culture requires a systematic approach to managing the performance of organisations, teams and individuals. The Company is guided by PETRONAS Learning and Development Framework and Top Talent Development Framework which is grounded on the principle of continuous learning in nurturing competent workforce by strategic learning, leadership, technical knowledge and capabilities.

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INSPIRING CHANGE

Development Programme, Leadership Excellence at

PETRONAS for Senior Managers and General Managers,

Maximising Your Leadership Success, Emerging Leaders

Programme, and Foundation of Leadership.

Through these programmes, participants were equipped

with the required competencies to affect positive change in

the organisation, business acumen as well as management

and leadership skills.

PDB Managerial Development Programme

To enhance managers’ leadership competencies in leading

change, innovation and maximising business opportunities,

the PDB MDP was introduced as an in-house training

intervention. A total of 18 managers graduated from this

programme on 24 February 2015.

Throughout the seven month programme, participants

attended individual and group coaching sessions, sharing

sessions by internal and external leaders, and also a visit to

the 3M Innovation Centre. Participants also implemented

group projects that centred on innovative solutions, which

led to cost savings and improved the Company’s competitive

advantage.

Leadership that Empowers Programme

The programme was conducted with the objective of

enabling managers to acquire various leadership styles in

managing their subordinates. A total of 12 managers

attended the programme on 7 and 8 May 2015. This

programme was proven to be useful and effective through

the behavioural effectiveness survey which was conducted

several months after the training.

Succession Management

The PETRONAS Top Talent Management Value Chain was

implemented to identify top talents within the organisation,

review talent on an overall basis to determine their strengths,

areas of development, career plans and finally match them

against the critical positions within the organisation. In the

context of PDB, rigorous talent identification exercises

resulted in a 13.0% increase of its top talent pool. As for its

31 critical positions, plans were made to identify successors

for the positions to ensure uninterrupted business operations

upon employee mobility or attritions.

The increase number of experienced top talents that

resulted in a bigger pool of potential successors also

contributed towards the Ready Now Successors to PBD

critical positions ratio of 2.4:1. Annual reviews were

conducted on the succession plans to ensure its feasibility

for implementation, as and when the critical positions are

vacated.

In addition, PDB conducted succession plan reviews for its

Senior Management positions to identify suitable leaders

within PETRONAS to take over leadership positions whenever

required. The deliverables achieved served as valuable

information for PETRONAS Downstream Business in

deliberating and endorsing plans for future implementation.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

As part of the ‘Dagang Challenge’, the PDB UYP Batch 2015 launched the #FUELLINGCOMMUNITIES campaign on 28

November 2015 at Pusat Rukun Tetangga Taman Segar, Cheras.

The campaign‘s objective was to demonstrate that PETRONAS cares about the community, their wellbeing and

environment while creating a purpose for customers to spend at PETRONAS station.

The initiative was rolled out to a localised community area. Each customer who spent a minimum of RM30 on fuel

purchase at the selected PETRONAS station, will collect 1 Community Point. All accumulated points will be used for the

collective good of the entire community through charity activities.

+28,888 CPPainting and Gotong-Royong at

Pusat Rukun Tetangga Taman Segar

+88,888 CPPETRONAS StreetSmart Programmeat Sekolah Kebangsaan Taman Segar

+58,888 CPPark amenities for Pusat Rukun

Tetangga Taman Segar

PDB Unleash Your Potential Programme

The PDB UYP is a six-month programme, which kicked off on 11 August 2015 and participated by 13 PDB executives. The

objective of this programme was to develop employees’ potential on conceptual thinking, judgement and empathy. The

learning modules included a business project dubbed as the ‘Dagang Challenge’, leadership journey sharing session by the MD/

CEO, coaching sessions and an external visit to Genovasi, the only design thinking school in Malaysia.

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INSPIRING CHANGE

EXECUTIVE AND NON-EXECUTIVE CAPABILITY DEVELOPMENT

Technical Managers Capability Assessment

TMCA was rolled out to evaluate the functional capability of

Technical Managers in managing operating assets using a

set of functional skills in discharging their roles and

responsibilities effectively.

For the rollout, the functional skill set was developed in

collaboration with Technical Capability Management

PETRONAS and PDB’s discipline resource persons. The

assessment commenced from September to October 2015,

whereby 10 Terminal Managers were assessed and

development plans identified for gap closure purposes.

PDB Downstream Grounding Programme

The PDB DGP is a structured and systematic training

approach for Technical Executives under the Process

Technology/Operations Skill Group with the objective of

capitalising tacit knowledge and developing their skills in

preparing them for bigger roles in the organisation. DGP is

expected to contribute higher value creation towards

operational excellence.

PDB adopted the DGP to replace the former Management

Trainee Programme that was implemented in 2013. The

programme was adopted from Downstream Business,

PETRONAS and further customised to suit PDB’s Terminal and

Depot Operations.

In developing the modules, a working committee was

formed comprising discipline resource individuals from the

business lines, in collaboration with Downstream Capability

Unit. The team spent five months reviewing the current

DGP logbook and Competency Level and Evaluation. The

revised PDB DGP was approved on 24 September 2015. A

handing over ceremony was conducted on 8 October 2015

between Head of HR Downstream and the MD/CEO. The

programme is also seen to be able to “jumpstart” the

participants’ learning journey as evidenced from the previous

programme participants from the Downstream Business

who yielded commendable Accelerated Capabil ity

Development baseline results which thereon accelerated

their capability development in PETRONAS. The programme

is scheduled to begin in January 2016.

PDB Sales and Marketing Career Paths

Career Path is a tool which can be used by employees to

chart their career development within an organisation. At

PETRONAS, career paths are available based on the respective

skills segment with clear demarcation between enabler,

business technical and technical professional career paths.

In PDB, executives include those from technical to non-technical background, with majority coming from the non-technical pool. In view of the nature of its business, PDB-specific career paths were developed for the Sales and Marketing Executives to help them acquire the necessary skills for career progression through structured mobility.



KEY MESSAGES


BUSINESS STRATEGIES

LEADERSHIP

FINANCIAL REVIEW

ACHIEVEMENTS

INSPIRING CHANGE

Career path defined seven career opportunities within PDB and relevant functions were identified for employees to acquire functional experiences to progress along the identified career ladders.

Non-Executive Non-Technical Capability

Non-Executives Learning and Development Framework

focuses on NENT employees’ functional and behavioural

capabilities.

Eligible NENT employees are required to undergo NENT

Assessments to evaluate their competencies and readiness

for their next career progression. In preparing them for the

assessment, three Microsoft Solution Programme sessions

involving participants were conducted in March, April and

October 2015. All participants passed and were considered

for promotions.

Non-Executive Technical Capability

PETRONAS Competency based Assessment System is a

structured skill assessment system introduced to PETRONAS

group wide in 2006 for NET employees.

The purpose of PECAS is to confirm the competency of our

NET (Technicians and Operators) through a structured

assessment process covering elements of knowledge, skills

and attitude against PETRONAS Occupational Skills Standard.

Three external verification sessions for the PECAS portfolio

were conducted in the year under review to certify and

recommend the competency levels of the identified

technicians through portfolio verifications. As a result, 95

technicians were certified as competent which is 82.0% of

the total eligible NET employees for the assessment.

PDB Internship Programme

The PDB Internship Programme is designed to provide

undergraduate students with practical experiences which

are related to their academic backgrounds for a duration as

specified by their academic institutions.

For the year under review, a total of 190 students underwent

the internship programme with PDB.

Skim Latihan 1Malaysia/Graduate Employability

Enhancement Scheme

The Graduate Employability Enhancement Scheme or better known as the SL1M-GEES-PETRONAS, is a soft skills training programme, developed by PETRONAS in collaboration with the Government of Malaysia to enhance the marketability and employability of Malaysian graduates under the Skim

Latihan 1Malaysia initiative.

The training programme is focused on helping unemployed

graduates acquire critical soft skills and provide them with

an experiential learning experience that equips them with a

diverse set of personal attributes in preparing them to work

in business/corporate environment. For the year under

review, 10 trainees from GEES/SL1M programme were

placed in PDB.

PDB Executives Action Team

Established in 2014, the PDBeat was designed to create

additional value to the Company. This was carried out via

operational improvements as well as activities that

strengthened the brand and improved organisational culture.

P

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