TRANSFORMATION - MalaysiaStock.Biz

ANNUAL REPORT 2014PETRONAS GAS BERHAD (101671-H)

DRIVINGTRANSFORMATION

Driving transformation in an organisation requires vision and

aspirations as well as the ability to generate energy and new

ideas. As a corporation that is constantly challenging itself to

forge ahead, PETRONAS Gas Berhad (PGB) is transforming

itself into a high performance organisation through various

actions considering elements like cultivating high

performance culture, managing a sustainable growth,

conveying trust and stewardship, delivering sustainable profit

and of course defining our culture via performance in

collaboration to implement its next phase of growth amidst a

changing industry environment.

A new restructuring exercise has been revitalised PGB into a

more streamlined organisation with an intention to achieve

superior performing assets, improved Health, Safety and

Environment (HSE) performance and breakthrough operational

results. This new structure also reflects PGB’s desire to return

to its fundamentals which is to focus on its core business of

gas processing, gas transportation, utilities and regasification.

In line with this, PGB looks forward to driving the future and

meeting the challenges of an ever changing business, social

and economic landscape.

DRIVING TRANSFORMATION

VISION

MISSION

SHARED VALUES

• We are business entity

• Gas is our core business

• Our primary responsibility is to add value

to this natural resource

• Loyalty

• Integrity

• Professionalism

• Cohesiveness

TO BE A LEADINGGAS INFRASTRUCTUREAND UTILITIESCOMPANY

32ANNUAL GENERAL MEETING OF THE COMPANY

Emerald Room

Mandarin Oriental Hotel

Kuala Lumpur City Centre

50088 Kuala Lumpur

Thursday, 30 April 2015 at 10.00 a.m.

nd

SECTION 1: AT A GLANCE

2 Facts at a Glance4 Highlights of FY2014 4 Key Highlights 6 Five-Year Financial Summary

SECTION 2: MESSAGE TO SHAREHOLDERS

10 Chairman’s Statement14 CEO’s Business Review

SECTION 3: ABOUT US

24 Our Profile26 Our Presence28 Our Operations and Services 30 Group Corporate Structure30 Group Organisational Structure31 Corporate Management Directory32 Board of Directors34 Profile of Board of Directors42 Management Committee43 Profile of Management Committee

SECTION 4: STRATEGY AND ACHIEVEMENTS

50 Business Strategy54 PGB Transformation56 Key Performance58 Investor Relations60 Performance of Shares61 Financial Calendar62 Corporate Milestones: Our Journey 1983-201464 2014 Media Milestones66 2014 Calendar of Events72 2014 Awards and Achievements74 Past Awards76 Simplified Group Statement of Financial Position

and Segmental Analysis80 Group Quarterly Financial Performance81 Statement of Value Added82 Distribution of Value Added83 Group Financial Review

SECTION 5: CORPORATE GOVERNANCE

94 Corporate Governance Statement104 Training Programmes Attended by Directors106 Code of Conduct and Business Ethics107 Nomination and Remuneration Committee Report111 Nomination and Remuneration Committee’s

Terms of Reference113 Statement on Risk Management and Internal Control123 Business Continuity Management Report124 Board Audit Committee Report128 Independent Financial Advisor’s Report130 Board Audit Committee’s Terms of Reference132 Additional Compliance Information

SECTION 6: BUSINESS REVIEW

136 Business Review 136 Gas Processing 140 Gas Transportation 144 Utilities 148 Regasification

SECTION 7: SUSTAINABILITY

154 Health, Safety and Environment156 Innovation158 Human Capital Development160 Corporate Responsibility 162 Marketplace 168 Workplace 174 Environment 178 Community

SECTION 8: FINANCIAL STATEMENTS

184 Financial Statements

SECTION 9: OTHER INFORMATION

262 Analysis of Shareholdings263 Authorised and Issued Share Capital264 List of Top 30 Shareholders266 Summary of Landed Property,

Plant and Equipment274 Top 10 Landed Property, Plant and Equipment 275 Corporate Directory276 Notice of Annual General Meeting278 Administrative Details for the

32nd Annual General Meeting

• Proxy Form

What’s Inside...

MALAYSIA’S LEADING GAS INFRASTRUCTURE AND UTILITIES COMPANY

pg 2PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com

FACTS AT A GLANCE

OFFERS MORE THAN

2,000 mmscfd processing capacity through six gas processing plants

OPERATING MORE THAN

2,500 km of gas transmission pipeline across Peninsular Malaysia, Sabah and Sarawak

MALAYSIA’S FIRST LNG REGASIFICATION TERMINAL with

530 mmscfd capacity

ESTABLISHED

300 MW Kimanis Power Plant which is the Company’s first power business venture

pg 3

KIMANIS POWER PLANT ACHIEVED COMMERCIAL OPERATIONS

ON ALL THREE BLOCKS

FULL YEAR CONTRIBUTION FROMLiquefied Natural Gas

(LNG) Regasification

Terminal in Sungai Udang, Melaka

SIGNING OF HEADS OF AGREEMENT

for Air Separation Unit Project, Pengerang

RENEWAL OF 20 CONTRACT YEARS of Gas Processing and Gas

Transportation Agreements with

PETRONAS

FINAL INVESTMENT DECISIONfor Malaysia’s Second LNG Regasification

Terminal Project in Pengerang, Johor



HIGHLIGHTS OF FY2014

KEY HIGHLIGHTS

DIVIDENDS

55 sen PER ORDINARY SHARE

REVENUE

RM4,391.7 million 13%

HIGHEST SINCE THE ESTABLISHMENT OF THE COMPANY IN 1983.

EBITDA

RM3,217.6 million HIGHEST EVER

IN HISTORY

SOLID TOTAL ASSETS

RM13,260.5 million

20%

pg 5

Year

Revenue (RM million)

Profit After Tax (RM million)

Dividends Per Share (sen)

Earnings Per Share (EPS) (sen)

Total Assets (RM million)

Total Equity (RM million)

Market Capitalisation (RM billion)

Share Price (RM)

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.1 For the nine months period ended 31 December 2011.2 Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million).

2014‘13‘12‘111‘11

4,3

91

.7

3,8

92

.1

3,5

76

.8

2,7

65

.1

3,5

25

.0


‘12‘111‘111

,84

2.1

1,6

87

.62

2,0

78

.9

1,4

52

.52

1,4

04

.9

1,0

80

.8

1,4

39

.1

‘13 2014


Total Assets (RM million)

2014‘13‘12‘111‘11

13

,26

0.5

13

,22

2.4

12

,43

8.3

10

,74

6.5

10

,50

9.9

Total Equity (RM million)

10

,56

9.0

10

,26

5.5

9,1

67

.3

8,6

43

.9

8,5

15

.2

2014‘13‘12‘111‘11



HIGHLIGHTS OF FY2014

FIVE-YEAR FINANCIAL SUMMARY

FY2011 PE20111 FY2012 FY2013 FY2014

3,525.0 2,765.1 3,576.8 3,892.1 4,391.7

1,439.1 1,080.8 1,404.9 2,078.9 1,842.1

50 40 50 55 55

72.7 54.6 71.0 105.1 93.1

10,509.9 10,746.5 12,438.3 13,222.4 13,260.5

8,515.2 8,643.9 9,167.3 10,265.5 10,569.0

22.6 30.1 38.6 48.0 43.8

11.44 15.20 19.52 24.28 22.16

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.1 For the nine months period ended 31 December 2011.2 Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million).3 Price as at financial year end.

2014‘13‘12‘111‘11

55

55

50

40

50

Dividends Per Share (sen)

93

.1

10

5.1

71.0

54

.6

72

.7

85

.32

‘13 2014

73

.42

‘12‘111‘11

Earnings Per Share (EPS) (sen)

Market Capitalisation (RM billion)

43

.8

48

.0

38

.6

30

.1

22

.6

2014‘13‘12‘111‘11

Share Price (RM)3

2014‘13‘12‘111‘11

22

.16

24

.28

19

.52

15

.20

11.4

4

pg 7

HIGH PERFORMANCE CULTUREIn efforts to develop our talent pool, we place strong

emphasis on talent management and competency

building amongst our staff. Empowering our people

with the right knowledge, skills and capabilities allows

them to grow in their career paths and sustain the

Company’s long-term growth by embedding a high

performance culture.

2014 was a strong year for the Group, with record revenue of RM4.4 billion and profit before tax of RM2.4 billion. Market capitalisation closed at RM44 billion at year end, making PGB one of the largest corporations on the Bursa Malaysia.

DATUK MANHARLAL RATILALCHAIRMAN

CHAIRMAN’SSTATEMENT

MARKET CAPITALISATION

RM44 BILLION

EPS*

PER ORDINARY SHARE85.3 SEN

DIVIDENDS

PER ORDINARY SHARE55 SEN

* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group



The financial year 2014 (FY2014) was

tough for the Malaysian economy.

Following a considerable period of high

petroleum prices, towards the second

half of the year, benchmark crude prices

began to fall. Tracking the slide in oil

prices, the Ringgit also weakened against

the US Dollar. Although impacted by

these headwinds, Malaysia’s gross

domestic product (GDP) maintained a

steady 5.9% growth bolstered by robust

domestic demand.

Despite these challenges, PETRONAS

Gas Berhad (PGB) registered steady

growth on the back of landmark gas

infrastructure agreements that safeguard

our sustainability as well greater

operational efficiencies, the commitment

of our people and support of our

stakeholders. These have led to a further

s t rengthen ing o f our bus iness

fundamentals, enabling us to continue

to deliver value to our stakeholders.

Overall, it has been a very encouraging

year for the Company and, as the newly

appointed Chairman of PGB, it gives

me great pleasure to present our

financial and operational results to you.

HIGHLIGHTS OF THE YEAR

A definite highlight was implementation

of the new Gas Processing Agreement

( G P A ) a n d G a s T r a n s p o r t a t i o n

Agreements (GTA) with PETRONAS

which effectively serve to strengthen

our revenue base through higher

reservation charge and capacity booking.

Both contracts are valid for 20 years as

of 1 April 2014 and will ensure steady

income for the Company.

We also benefitted from the first

full-year of operations of our new

liquefied natural gas (LNG) Regasification

Terminal in Sungai Udang, Melaka

( R G T S U ) . T h e f a c i l i t i e s w e r e

commissioned in May 2013 and were

ful ly operational throughout the

financial year under review. Not only

does the facilities add considerably to

our annual revenue, it also further

enhances the security and reliability of

gas supply to the nation.

Further contributing to power supply,

and in line with Malaysia’s Economic

Transformation Programme (ETP), PGB

and our joint venture partner Yayasan

Sabah were proud to see all three

blocks of our Kimanis Power Plant

(KPP) begin full commercial operations

in the fourth quarter of 2014.

DELIVERING BUSINESSEXCELLENCE

PROFIT BEFORE TAX

RM2.4 BILLION

PROFIT AFTER TAX

RM1.7 BILLION*

* Normalised profit after tax is after excluding recognition of DTA arising from ITA granted for the Group

pg 11

Finally, in November, PGB signed a series

of agreements towards developing

Malaysia’s Second LNG Regasification

Terminal in Pengerang, Johor (RGTP),

which will supply the gas requirements

of the Refinery and Petrochemical

Integrated Development (RAPID) in the

Pengerang Integrated Complex (PIC). We

also signed a heads of agreement with

an international technology partner to

develop an Air Separation Unit (ASU)

plant to produce industrial gases for

operations within PIC. Both projects are

expected to be completed in time to

support the commissioning of RAPID in

2019.

PERFORMANCE

PGB experienced another record

year in te rms of per formance ,

generating RM4,391.7 million in revenue,

an increase of RM499.6 million or 13%

from FY2013. This was attributed to the

full-year’s revenue from RGTSU as well

as higher revenue from Utilities and

Gas Transportation segments, due to

additional capacity bookings and more

positive terms under the GTA.

Profit stood at RM1,842.1 million, a

decrease by 11% due to recognition of

deferred tax assets (DTA) amounting to

RM626.4 million in relation to the

RGTSU in the previous year. Excluding

the impact of RGTSU‘s DTA and DTA

recognised during the year from the

investment tax allowance (ITA) granted

for the KPP, our profit would have

increased by RM235.1 million or 16%.

We were unfortunately beset by certain

incidents which marred our safety

performance. Notwithstanding existing

safety measures and initiatives, there

were three fatalities from two separate

incidents during the year. In response,

the Board has requested for more

s t r ingent sa fe ty measures and

procedures. We have also recommended

that safety be elevated as a key focus

area in PGB’s ongoing transformation.

On a more positive note, our team and

contractors made good progress in the

Plant Rejuvenation and Revamp 4

project (PRR4) at the Gas Processing

Plant 4 in Kertih, which is currently in

its final phase of commissioning.

RETURN TO SHAREHOLDERS

Thanks to the Group’s performance

and our shareholders’ support, the

Company achieved market capitalisation

of RM44 billion last year, strengthening

our position as one of the largest

corporations on the Malaysian stock

market. As due reward, the Board

has approved dividends of 55 sen

per ordinary share for the year. This

represents a normalised dividend

payout ratio of 64% which is at par

with, if not better than, the industry

average.

OUTLOOK

We are confident of the future,

given a number of factors. Our GPA

and GTA assure us with a steady

revenue base, augmented by improved

margins through greater efficiencies

throughout our operations. Income

from utilities will be driven by demand

from petrochemical customers, while

our regasification revenue is also

expected to contribute positively to the

Group on the back of capacity

reservation from PETRONAS.

For as long as gas forms an essential

component in power generation and

industrial feedstock, PGB will continue

to play an essential role in safeguarding

PETRONAS’ position as Malaysia’s

primary gas supplier. Our continued

growth is further underlined by a

pipeline of projects that support

PETRONAS’ expansion of its refining

and pe t rochemica l bus inesses ,

especially at PIC. We will continue to

seek further growth opportunities from

the development of RAPID and PIC,

focusing on projects that have a

strategic fit with our core competencies

in gas processing, gas transportation,

industrial utilities, regasification and

power generation.

I am confident that with the current

drive by the Management to effect a

complete t ransformat ion of the

Company’s work culture and strategies,

supported by robust performance

targets presented to the Board, PGB is

well positioned to realise our expansion

goals and set new performance

benchmarks in years to come.

APPRECIATION

I would like to take this opportunity to

express my appreciat ion of my

predecessor and colleague, Datuk

Anuar bin Ahmad, whose many years’

contribution to PGB and PETRONAS

will be recorded in the pages of this

Company’s history. I would also like to

acknowledge our Management for their

leadership in steering PGB through

another challenging year. As to my

fellow Board members, thank you for

guiding this Company with your

experience and wisdom. Finally, on

behalf of the Board, I would like to

acknowledge the various Federal and

State Government agencies, authorities

and regulators for their support; and

our valued shareholders for their

continued trust in PGB.

Thank You

Datuk Manharlal RatilalChairman



CHAIRMAN’SSTATEMENT

CHIEFEXECUTIVEOFFICER‘SBUSINESS REVIEWPETRONAS Gas Berhad (PGB) delivered another year of strong achievements in financial year 2014 (FY2014) and

continues to thrive as Malaysia’s leading gas infrastructure and utilities company as well as PETRONAS’ flagship in

this specialised business sector.

During the year, the Company secured a number of growth projects that will pave the way for our business

expansion in the immediate future in areas related to our core businesses.

In addition, FY2014 was marked by a number of successes in terms conferment of awards and market recognition

on the high standards of our reporting, investor relations and corporate governance.

The Company also continues to focus on upgrading the systems and processes, as well as ensuring the integrity of

our plants and facilities to ensure the sustainability of our operations.

Notwithstanding this, FY2014 came

with its set of unique challenges that

have tested the skills and ability of the

Management Team.

On that note, I am pleased to update our

shareholders on our financial and

operational performance for FY2014. To

put it briefly, FY2014 exceeded our

expectations, despite the many external

and internal challenges that came our way.



YUSA‘ BIN HASSANMANAGING DIRECTOR/

CHIEF EXECUTIVE OFFICER

OPERATIONAL PERFORMANCE

During the year, our Gas Processing

Plants (GPP) processed an average of

2,011 million standard cubic feet per

day (mmscfd) of feed gas. Our

Peninsular Gas Utilisation (PGU) pipeline

network also received 315 mmscfd of

gas from the Malaysia-Thailand Joint

Development Area, as well as an

additional volume of around 232

mmscfd from our liquefied natural gas

(LNG) Regasification Terminal in Sungai

Udang, Melaka (RGTSU) making a total

of some 2,322 mmscfd of sales gas

transported to PETRONAS’ customers.

In our Gas Processing segment, our

GPPs continued to exhibit reliability

performance, with very marginal

performance fluctuation. Our sales gas

reliability recorded at 99.4% while our

liquid reliability were at 95.1%, 95.6%

and 95.6% for ethane, propane and

b u t a n e r e s p e c t i v e l y . O u r G a s

Transportation segment also recorded

a high reliability of 99.92% during the

year, already a world-class standard.

Similarly, our Utilities segment maintained

its reliability for electricity, steam and

industrial gases at 97.8%, 97.9% and

99.0% respectively, thanks to the

continuing efforts to sustain plant

operational performance during the year.

Our Regasification segment continues

to sustain posit ive performance,

delivering gas consistently meeting

demand requirement.

While we have succeeded in improving

our performance in a number of

key operat ional parameters, our

Occupational Safety and Health (OSH)

performance were marred with three

fatalities in two separate incidents

involving a contractor at our plant,

while two of our staff were involved in

a road accident.

Despite our stringent procedure, we

truly regret these two untoward fatal

accidents. Focus on Health, Safety and

Environment (HSE) has always been our

priority and we shall strive to achieve

zero incidents moving forward.

FINANCIAL PERFORMANCE

During FY2014, PGB continued to

deliver our services consistently meeting

the requirement of the Gas Processing

Agreement (GPA) and Gas Transportation

Agreements (GTA) with PETRONAS

s igned in 2014. Under the new

arrangement, PGB is rewarded a

sustainable income for delivering our

baseline gas processing performance,

plus opportunity to secure Performance

Based Structure (PBS) income if

exceeding the baseline performance

and making available the capacity for

gas transportation.

Thanks to our unrelenting efforts, PGB

delivered a commendable revenue of

RM4,391.7 million, a 13% increase from

RM3,892.1 million recorded last year,

contributed largely by the first full-year

operation of the RGTSU, as well as

higher revenues from our Utilities and

Gas Transportation segments on the

back of higher offtake by utilities

customers and revision of electricity

tariff and higher capacity reservation

under the new GTA respectively.

pg 15

Resulting from this, PGB achieved a

profit before tax of RM2,354.4 million,

which is an increase of RM458.0 million

from 2013.

Normalised profit after tax for the year

under review increased by 16% to

RM1,687.6 million* from the RM1,452.5

million achieved in FY2013. As a result,

earnings per share increased to 85.3

sen from 73.4 sen previously.

Measured from an operational point of

view, our Earnings Before Interest, Taxes,

Depreciation and Amortisation (EBITDA)

of RM3,217.6 million, is the highest since

the Company’s inception, an increase of

20% as compared to last year

* Excluding recognition of deferred tax assets

(DTA) arising from investment tax allowance

(ITA) granted for the Group.

PROJECT PROGRESS UPDATE

During the year, we achieved a

major milestone for our business in

Sabah when our Kimanis Power Plant

(KPP), a joint-venture with Yayasan

Sabah achieved ful l commercial

operations in November 2014.

With the 300MW plant, which receives

gas from the PETRONAS-owned Sabah

Oil and Gas Terminal (SOGT), will be

part of a new wave of infrastructure

that will improve the reliability of

electricity supply in Sabah, bolstering

the state’s socio-economic development

and industrialisation process.

The KPP stands as a notable example

of the strong partnership that exists

between PGB, the Sabah State

G o v e r n m e n t a n d t h e F e d e r a l

Government towards realising what is

considered a key initiative under

Malaysia’s Economic Transformation

Programme.

Our Plant Rejuvenation and Revamp 4

project (PRR4) being carried out at Gas

Processing Plant 4, Dew Point Control

Unit 2 and Kertih Compressor Station B,

all located in our Gas Processing Kertih

(GPK) complex is progressing well and is

current ly a t the f ina l s tage of

commissioning. The completion of this

extremely important project will ensure

the continued reliability of our gas

processing installations which are the

very lifeline of gas supply for Malaysia.

I am also pleased to update our

members that we have been entrusted

by the PETRONAS Group to undertake

the development of two key ancillary

facilities to support the Pengerang

Integrated Complex (PIC) in southern

Johor, namely the development of

Malaysia’s Second LNG Regasification

Terminal (RGTP) and the Air Separation

Unit (ASU) in Pengerang, Johor.

The RGTP project will consist of an

LNG regasification unit and two units of

200,000 m3 LNG storage tanks with

a send out capacity of 3.5 MTPA

(490 mmscfd) of natural gas. It also has

a reloading export facility.



CEO’SBUSINESS REVIEW

The RGTP project is expected to

provide primary gas supply to Refinery

a n d P e t r o c h e m i c a l I n t e g r a t e d

Development (RAPID), the Pengerang

Co-generation Plant as well as the

Peninsular Gas Utilisation (PGU) grid to

mitigate the tight gas supply situation.

Meanwhile, the ASU will play an integral

role of supplying industrial gases to

Operating Units in PIC with a target of

meeting the PIC’s Refinery First Start-

Up by the fourth quarter of 2018.

The shareholders’ agreement, as well as

related documents for the development

of RGTP and the heads of agreement

(HOA) for the development of the ASU

were signed between PGB and our

partners in November 2014.

CORPORATE RESPONSIBILITY

As a business, we are constantly

aware of the fact that our whole

operations and value chain does not

exist in a vacuum. Our success is very

much a resul t of our constant

interaction with our stakeholders and

constituents who have supported our

business in both direct and indirect

ways. As part of this virtuous cycle, we

are also committed to sharing the fruits

of our success with these stakeholders

through our numerous corporate

responsibility initiatives that span the

key areas of Marketplace, Workplace,

Environment and Community.

pg 17

CORPORATE RESPONSIBILITY IN THE MARKETPLACE

As responsible corporate citizen,

PGB pursued a deliberate agenda in

FY2014 to strengthen our relationship

with key stakeholders in the Marketplace

to build upon the already strong levels

of interaction, understanding and

cooperation.

During the year, PGB organised a series

of targeted engagements to enhance

this relationship and bring it to the next

level.

As always, our Annual General Meeting

in May served as an effective platform

for our Board and Management to

interact with our shareholders, giving

them an opportunity to learn more

about our bus iness model , our

performance and business plans moving

forward. This was followed by two

familiarisation visits for shareholders to

our operations in Kertih and Segamat

to allow them to have a close look at

the key business activities which

contribute to the profitability and

growth of the Company.

In keeping with the times, we have also

enhanced of our key communications

channel which is our corporate website

to improve the way we engage and

disseminate information to the public.

Among others, we have introduced a

comprehensive investor relations page

which carries a database of reports and

market disclosures aimed at analysts

and investors.

PGB also took an important step

forward to strengthen investor relations

practices in the company by organising

regular quarterly briefings via webcast

as well as continued interactions and

meetings with market analyst covering

our centre. This new initiative has

allowed our Management to present a

c l e a r p i c t u r e o f o u r b u s i n e s s

performance during each quarter, as

well as to update the analysts on key

developments and information that will

help them assess the Company’s true

valuation.




CORPORATE RESPONSIBILITY IN THE WORKPLACE

In the workplace, we continued to

put a lot of emphasis on leadership

development, capability building and

gap closure at all levels of staff. We

hope our special focus on this area will

strengthen their abilities to facilitate the

transformation of PGB into an entity

that is truly a leading corporation in

Malaysia and the region.

During the year, we have invested a lot

of time and effort to work on enhancing

some of the hard and soft skill sets

expected of our leadership coalition.

As a listed entity, we are aware of the

need to ensure that our leaders are up

to date on the corporate governance

and regulatory framework that must be

adhered to by listed companies in

Malays ia . For th is purpose, our

Management Committee members

attended a Directors Workshop to

expose them on the Malaysia’s current

listing requirements, as well as the

improvements to the disclosure and

reporting framework aimed at elevating

the corporate governance standards in

this country.

In addition to this, as a Company

handling what can be considered as

M a l a y s i a ’ s c r i t i c a l a s s e t s a n d

hydrocarbons, we must always be

p r e p a r e d w i t h k n o w l e d g e a n d

competencies in order to deal with

crises that might arise from incidents at

our operations. Taking a page from the

experience of other companies in

dealing with the media and larger

public during a crisis, we are keenly

aware that half the battle will be won if

we are able to effectively communicate

and manage perception in order to

safeguard our brand and reputation. In

order to equip our leaders and middle

management with the foundational

media handling skills, we collaborated

with Malaysia’s national news agency

BERNAMA to conduct a series of media

management workshops for our key

personnel. The workshops provided

both theoretical guidance and practical

exposure to our leaders and was

conducted by seasoned journalists with

experience covering some of the major

events in Malaysia’s recent history.

We also spent a lot of time engaging

our s ta f f to communica te the

Company’s targets and aspirations. We

also provided the feedback loop for

staff to communicate their needs and

concerns directly to Management for

further action and improvement. For

this purpose, PGB organised two

sessions of its annual PGB Leaders

Forum, assembling almost all of its top

and middle Management in a two-day

workshop to strengthen their bonding,

discussing the current realities and

operational challenges faced by the

organisation, and proposing solutions

that would help us to deliver the

performance to higher levels as we

move forward.

I admit that the engagements have

been an eye-opener for me and my

leadership team, and we are committed

to improve the manner and method of

our communication with our staff to

support them in their endeavours to

deliver breakthrough performance.

CORPORATE RESPONSIBILITY IN THE ENVIRONMENT

We continue to strengthen our focus

on conserving the environment by

enhancing our reporting framework,

especially in key reporting areas of special

concern to the oil and gas industry.

During the year, we continued to track

our operational performance in terms

of greenhouse gas (GHG) emissions,

energy and water use, aligning ourselves

with the measurement and reporting

best-practices adhered to by PETRONAS

and other major oil and gas corporations.

For GHG, we experienced a slight

increase in our emissions release due

to certain operational issues experienced

by our plant in the area of energy used.

We were successful in reducing our

energy consumption, thanks to the

aggressive efforts undertaken at our

operations to improve the efficiency of

our turbines and installations. For water

use, our operations registered an

increase in water consumption last

year, due to increased demand for

steam required by our customers to

support their shutdown activities.

PGB has also put in place a waste

minimisation roadmap which focuses

on creating efficiencies at every point

along the waste chain. The Company

adopts a holistic approach to waste

management that sees it conducting

the Environmental Impact Assessments

(EIA) prior to embarking on any project.

As a result, the Company is able to

minimise waste generation, while also

hav ing mechan isms to recover

hazardous wastes.

We continued to monitor the growth of

mangrove seedling planted in 2013 at

our adopted mangrove areas in Kuala

Selangor National Park and Kampung

Merchang, Marang. We are confident

that in a few years time, these seedling

will achieve their full growth potential

and provide the necessary buffer zone

and habitat for fish and wildlife species

inhabiting Malaysia’s fragile riverine

estuary systems.

pg 19

CORPORATE RESPONSIBILITY IN COMMUNITY

As a responsible corporate citizen,

PGB is always ready to provide a

helping hand in the areas of educational

empowerment and community uplift.

During the year, we continued to

strengthen the implementation of our

school adoption programme, Program

Sentuhan Ilmu PETRONAS (PSIP) at our

adopted schools, Sekolah Kebangsaan

Cherana Puteh in Melaka, Sekolah

Kebangsaan Simpang Ampat in Johor,

Sekolah Kebangsaan Sungai Baging in

Pahang and Sekolah Kebangsaan

Santong in Terengganu.

Collectively, our staff volunteers

conducted more than 24 fun learning

sessions with the adopted school

students to cultivate their interest in

Science & Technology, English and

Mathematics subjects (STEM) in a fun

manner. The students were also treated

to a motivational camp under the

banner of the ‘School of Champions’

programme, as well as day trips to

Petrosains and Aquaria KLCC in Kuala

Lumpur to open up their horizons and

stir their interest in learning.

A series of community outreach efforts

were also organised throughout the

year to help the less fortunate living

around our operations in Terengganu.

We distributed essential Raya and food

items to the poor villagers around

Kertih and Paka to help ease their

burdens for Hari Raya celebration.

In Kuala Lumpur, PGB focused its aid

efforts on the urban lower income

groups, work ing c losely wi th a

non-governmental organisation (NGO)

to distribute food items, school bags,

uniforms and stationery to families

requir ing assistance to start the

schooling years.

These activities were funded primarily

through voluntary staff contributions

topped up with matching grants from

PGB. Over the years, these programmes

have managed to instil a sense of

generosity and selflessness among our

people, which has made them more

empathic and sensitive to the needs

and requirements of the communities

within which we operate.




RECOGNITION

A s a Corporation that strives to

be a best-in-class entity, PGB’s

transformation and continuous pursuit

for excellence did not go unnoticed.

During the year, we clinched a number

of awards and recognitions which

attested to the levels of excellence

attained by the Company in the

corporate sphere.

During the year, PGB was recognised

by The Edge Billion Ringgit Club as the

Best Performing Industrial Stock in

2014, picked from amongst the listed

companies in Bursa Malaysia. For the

record, since the establishment of The

Edge Billion Ringgit Club, PGB has

always been selected as a finalist,

thanks to its robust market capitalisation

which stood above RM10 bil l ion

threshold.

PGB also clinched the coveted National

Annual Corporate Reports Awards

(NACRA) in the industry excellence

category, attesting to the excellence in

the concept, thematic and visual

presentation, as well as the level of

transparency and disclosure reflected in

its annual report.

PGB was also the winner in the Oil &

Gas Category for the MSWG ASEAN

Corporate Governance Index award,

which is a testament to the high-

standards of corporate governance

conduct and disclosures practices by

the Company over the years.

These awards have spurred us to strive

for greater achievements in the future,

e l e v a t i n g P G B ’ s c o n t i n u o u s

transformation into a corporate player

of choice.

PREPARING FOR THE NEXT WAVE OF TRANSFORMATION

As I have explained to our members

in our previous annual reports, PGB has

e m b a r k e d o n a n a m b i t i o u s

transformation effort under the Strategic

PGB Organisat ional Rev iew and

Alignment (SPORA) initiative, which

focuses on reorganising the Company’s

structure and systems to deliver

stronger operational excellence and

safety performance, I am pleased to

in form that bu i ld ing upon th is

foundation, PGB’s Management has

embarked on a long-term transformation

efforts aimed at elevating PGB’s

performance to the next level and

preparing the whole organisation for

the next wave of growth. Through this

transformation, we are determined to

reach a zero non-compliance, zero

HSE incidents and zero interruptions to

assets as well as achieve 100% product

delivery reliability for all our assets.

These targets are encapsulated in the

3ZERO100 tagline introduced during a

number of key townhall sessions

organised at our headquarters and

operating assets throughout Malaysia.

In the long run, we are determined to

see a transformation of our people,

systems and work processes towards

attaining sustainable world-class

standards expected of a leading gas

infrastructure and utilities company.

This is timely, given that PGB has been

further entrusted by PETRONAS to

undertake two key projects to support

the development of the large-scale

(RAPID) located in Southern Johor.

By undertaking this transformation

today, we are laying the groundwork

for PGB’s future growth and success.

We hope our members will remain

supportive of our transformational

efforts as this will in turn ensure our

future profitability and our returns to

your shareholding in this Company.

pg 21



CEO’S BUSINESS REVIEW

CONCLUSION

A ll of our achievements this year

would not have been made possible

without the contribution of many

individuals who have left an indelible

mark on this Company, entrusting us

with a legacy that we will continue to

honour as we move forward.

On that note, I would like to convey

our thanks, primarily to Yang Berbahagia

Datuk Anuar bin Ahmad, our former

chairman who helmed the PGB Board

of Directors from 2010 until his

retirement in 2014.

Having devoted his whole career to the

PETRONAS Group, we salute Datuk

Anuar for his honesty, forthrightness

and tenacity in ensuring PGB remains a

strong business entity and ensuring that

the Company remains on the right path

as it moves into the future. We wish

him every success in his future

endeavour.

On the same token, I would like to take

this opportunity to welcome our new

cha i rman and non- independent

director, Datuk Manharlal Ratilal, who

was appointed to the Board in June

2014.

Datuk Manharlal brings with him a

wealth of experience, as a seasoned

former banker and is PETRONAS’

Executive Vice President of Finance. I

am confident that Datuk Manharlal has

a wealth of knowledge and experience

that would strengthen the governance

aspects of PGB as we move forward.

I would also like to thank our former

Head of Planning and Risk Management,

Encik Abdul Rashid bin Mukri, who has

since been appointed to a new position

at PETRONAS’ operations in Indonesia

and welcome En Fairos Bin Roslan, his

replacement and Encik Irwan bin A

Latiff, the Head of Health, Safety and

Environment and Operational Excellence

to the Management Committee. I am

confident that the new members in the

Management Committee line up will be

able to contribute their vast operational

experience towards strengthening PGB.

My sincere thanks also goes to our

majority shareholder the PETRONAS

Group, for its continuous support of

PGB, the various Federal and State

Government authorities and agencies,

our partners, clients and customers, as

well as our staff and shareholders who

have each contributed to PGB’s success

in their own unique way.

Established on a foundation of trust

and excellence, PGB continues to

remain a dynamic organisation that is

able to deliver the best results on the

corporate and operational fronts. While

the road ahead is long and still full of

challenges, we hope our members will

continue to be with us as fellow

travellers on this transformative journey.

We thank you for your support.

Yusa’ bin Hassan

pg 23

PETRONAS Gas Berhad (PGB) was incorporated in 1983 as a wholly-owned subsidiary of Malaysia’s national oil corporation PETRONAS and listed on the main market of the Bursa Malaysia Securities Berhad on 4 September 1995.

Currently, PGB is 60.63% owned by PETRONAS while the remaining shares are

held by financial institutions and retail shareholders. Today, it is one of the largest

companies on the local bourse in terms of market capitalisation.

PGB is now Malaysia’s leading gas

infrastructure and utilities company

with core businesses in Gas Processing

and Utilities (GPU) and Gas Transmission

and Regasification (GTR). The Company

processes PETRONAS’ natural gas piped

from offshore fields; transports the

processed gas via the Peninsular Gas

Utilisation (PGU) pipeline network to

PETRONAS’ customers in Malaysia and

Singapore as well as supplies steam

and industrial gases to customers in the

Kert ih Integrated Petrochemical

Complex in Terengganu and Gebeng

Industrial Area in Pahang.

The Company employs a to ta l

work force o f 2 ,077 employees

nationwide with the majority of the

staff based at its plant operation in

Kertih and Santong, in Terengganu as

well as Gebeng in Kuantan, Pahang.

Headquartered at the PETRONAS Twin

Towers in Kuala Lumpur, PGB also

operates eight regional offices in

Peninsular Malaysia and three in East

Malaysia.

Over the years, the Company has

broadened its business portfolio with

the commissioning of the liquefied

natural gas (LNG) Regasif icat ion

Terminal, Malaysia’s First Regasification

Facility, in Sungai Udang, Melaka in

2013.

In 2011, PGB further expanded its

business by venturing into power

generation in Sabah through its 60% joint

venture company Kimanis Power Sdn

Bhd. The power plant, commenced its

full commercial production of electricity

by end of 2014.



OUR PROFILE

MAIN PIPELINE GAS - IN

PGU I 32 km

Kertih - Teluk Kalong 1984

PGU II 685 km

Sector I : 233 kmTeluk Kalong - Segamat 1991

Sector II : 241 kmSegamat - Kapar 1991

Sector III : 211 km Segamat - Singapore 1991

MAIN PIPELINE GAS - IN

PGU III 450 km

Sector I : 184 kmMeru - Lumut 1996

Sector II : 176 kmLumut - Gurun 1998

Sector III : 90 kmGurun - Pauh 1998

Loop 1 265 km

Kertih - Segamat 1999

Loop 2 226 km

Segamat - Meru 2001

Pipeline

Power Station

Industry

Kimanis Power Plant

Gas Processing Plant (GPP)

Utilities Plant

Compressor Station

Tenaga Nasional Berhad Power Station

Independent Power Producer Power Station

LNG Regasification Terminal

RGT Pipeline

PULAUPINANG

20

19

18

17

16

15

GPS

Utilities Kertih

Utilities Gebeng

GPK

STRAITS

OF MELAKA

SOUTH

CHINA

SEA

PERAK

SELANGOR

PAHANG

KEDAH

KELANTANTERENGGANU

MELAKA

JOHOR

SINGAPORE

14

12

11

109

8

7

6 5 3

4

2

1

NEGERISEMBILAN

PERLIS

13

SALES GAS CUSTOMERS(Peninsular Malaysia)

1. TNB Paka

2. YTL Paka

3. TNB Pasir Gudang

4. YTL Pasir Gudang

5. Senoko Energy

6. Keppel Energy

7. Pahlawan Power, Tg. Kling

8. Panglima Power, Teluk Gong

9. Powertek, Teluk Gong

10. TNB Tuanku Jaafar

11. Port Dickson Power

12. Genting Sanyen Power

13. TNB Serdang

14. TNB Connaught Bridge

15. TNB Kapar

16. GB3 Lumut

17. Segari Energy Ventures

18. Prai Power

19. TNB Gelugor

20. Technology Tenaga

Perlis Consortium



OUR PRESENCE

PGB TOTAL PIPELINE LENGTH(In Operation)

Main 1,658 kmLateral 374 kmC2, C3 and C4 357 kmGPP Interconnect 116 kmSarawak 45 kmRGTSU 33 km

Total 2,583 km

SALES GAS CUSTOMERS(East Malaysia)

1. SESCO Miri Power Station

2. Sarawak Gas Distribution System

3. Bintulu Edible Oils Sdn Bhd

4. Syarikat Sebangun Sdn Bhd

5. Sime Darby Austral Sdn Bhd

6. Biport Bulkers Sdn Bhd

3

6

4

5

SARAWAK

Miri

Bintulu

SABAH

SOUTH

CHINA

SEA

Kimanis

MIRI TOWN

LUAK

Teacher Training CollegeTaman Tunku

1

2

N

LUTONG

PIASAUPUJUT

CAPACITYMMSCFD

GPK

GPS

GPPCOMPLEX

1 310

2 250

3 250

4 250

5 500

6 500

Total 2,060

pg 27

PETRONAS Gas Berhad (PGB) portfolio is divided into four business segments: Gas Processing, Gas Transportation, Regasification and Utilities.

GAS PROCESSINGPGB owns six gas processing plants in

Kertih and Santong, both in Terengganu

which process over 2000 mil l ion

standard cubic feet per day (mmscfd) of

raw gas on behalf of PETRONAS. In

return for the gas processing services,

PGB receives gas processing fees

comprising mainly fixed reservation

charges under a 20-year long term

agreement with PETRONAS. Beside raw

gas, these plants also produce ethane,

propane and butane for petrochemical

feedstock.

GAS TRANSPORTATIONThe Company transports sales

gas to PETRONAS’ customers

v ia more than 2 ,500km

Peninsular Gas Utilisation (PGU)

pipeline network which is

operated by a Control Centre in

Segamat, Johor. PGB receives

gas transportation fees based

on capacity booking via a 20-

year Gas Transporta t ion

Agreements with PETRONAS.



OUR OPERATIONS & SERVICES

REGASIFICATIONThe Company’s liquefied natural gas (LNG)

Regasification Terminal in Sungai Udang,

Melaka (RGTSU) receives LNG cargo from

global suppliers via vessels and regasifies the

LNG before being injected into the PGU

pipeline network.

UTILITIESIts uti l ity plants supply

power, steam and industrial

g a s e s t o v a r i o u s

p e t r o c h e m i c a l p l a n t s

operating in the Kertih

Integrated Petrochemical

Complex in Terengganu

and Gebeng Industrial Area

in Pahang.

pg 29

BOARD OF DIRECTORS

MANAGING DIRECTOR/

CHIEF EXECUTIVE OFFICER

INTERNAL AUDIT*

BOARD AUDIT

COMMITTEE

NOMINATION

AND

REMUNERATION

COMMITTEE

SUBSIDIARIES

ASSOCIATE

JOINT

VENTURES

PETRONAS GAS

BERHAD

REGAS TERMINAL (SG. UDANG) SDN BHD

100% PGB

PENGERANG LNG (TWO) SDN BHD

72% PGB*

28% DIALOG

INDUSTRIAL GASES SOLUTIONS SDN BHD

50% PGB

50% LINDE MALAYSIA

SDN BHD

GAS MALAYSIA BERHAD

37% MMC-SHAPADU HOLDINGS

29% PUBLIC SHAREHOLDERS

19% TOKYO GAS-MITSUI HOLDINGS

15% PGB

REGAS TERMINAL (PENGERANG) SDN BHD

100% PGB

KIMANIS POWER SDN BHD

60% PGB

40% NRG CONSORTIUM

(SABAH) SDN BHD

KIMANIS O&M SDN BHD

60% PGB

40% NRG CONSORTIUM

(SABAH) SDN BHD

REGAS TERMINAL (LAHAD DATU) SDN BHD

99% PGB 1% SABAH ENERGY CO

* The intended equity shareholding in Pengerang LNG (Two) Sdn Bhd of 65% will be achieved upon further subscription of

ordinary shares by the Company and other non-controlling parties in 2015.

* Internal Audit and Legal and Corporate Secretariat functions are undertaken by Group Internal Audit, PETRONAS and Group Legal, PETRONAS respectively.

GAS TRANSMISSION AND

REGASIFICATION

FINANCE

COMMERCIAL AND CORPORATE

SERVICES

PLANNING AND RISK

MANAGEMENTGAS PROCESSING

AND UTILITIES

HSE AND OPERATIONAL EXCELLENCE

HUMAN RESOURCE MANAGEMENT

LEGAL AND CORPORATE

SECRETARIAT*

MANAGEMENT COMMITTEE



GROUP CORPORATE STRUCTURE

GROUP ORGANISATIONAL STRUCTURE

DIRECTORSDATUK MANHARLAL RATILAL

YUSA’ BIN HASSAN

DATO’ N. SADASIVAN N.N. PILLAY

DATUK ROSLI BIN BONI

IR. PRAMOD KUMAR KARUNAKARAN

DATO’ AB. HALIM BIN MOHYIDDIN

LIM BENG CHOON

HABIBAH BINTI ABDUL

BOARD AUDIT COMMITTEEDATO’ N. SADASIVAN N.N. PILLAY



NOMINATION AND REMUNERATIONCOMMITTEE

LIM BENG CHOON


HABIBAH BINTI ABDUL

COMPANY SECRETARIESINTAN SHAFINAS (TUTY) BINTI HUSSAIN

(LS 0009774)

YEAP KOK LEONG

(MAICSA 0862549)

REGISTRARSYMPHONY SHARE REGISTRARS SDN BHD

(378993-D)

LEVEL 6, SYMPHONY HOUSE

PUSAT DAGANGAN DANA 1

JALAN PJU 1A/46

47301 PETALING JAYA

SELANGOR DARUL EHSAN

TEL: (+603) 7841 8000

FAX: (+603) 7841 8151

AUDITORSMESSRS KPMG

STOCK EXCHANGE LISTINGMAIN MARKET OF BURSA MALAYSIA

SECURITIES BERHAD

CORPORATEMANAGEMENT DIRECTORY

REGISTERED OFFICE AND BUSINESSADDRESSTOWER 1

PETRONAS TWIN TOWERS

KUALA LUMPUR CITY CENTRE

50088 KUALA LUMPUR

TEL: (+603) 2051 5000

FAX: (+603) 2051 6555

PRINCIPAL BANKERCIMB BANK BERHAD

WEBSITEwww.petronasgas.com

pg 31

BOARDDIRECTORS

OF

1. Datuk Manharlal RatilalChairman

Non-Independent Non-Executive Director

2. Yusa’ bin HassanManaging Director/Chief Executive Officer

Non-Independent Executive Director

3. Dato’ N. Sadasivan N.N. PillaySenior Independent Non-Executive Director

4. Datuk Rosli bin BoniNon-Independent Non-Executive Director

5. Ir. Pramod Kumar KarunakaranNon-Independent Non-Executive Director

6. Dato’ Ab. Halim bin MohyiddinIndependent Non-Executive Director

7. Lim Beng ChoonIndependent Non-Executive Director

8. Habibah binti AbdulIndependent Non-Executive Director

9. Intan Shafinas (Tuty) binti HussainCompany Secretary

10. Yeap Kok LeongCompany Secretary

1

87



2 3

4

6 9 105

pg 33

Chairman, Malaysian (age 55)Appointed as Chairman and Non-Independent Non-Executive Director of

PETRONAS Gas Berhad (PGB) on 15 May 2014.

Qualification, Skills and Experience: Datuk Manharlal Ratilal holds a Bachelor of Arts (Honours) in Accountancy from

the City of Birmingham Polytechnic, United Kingdom and a Masters in Business

Administration from the University of Aston in Birmingham, United Kingdom.

He joined PETRONAS in 2003 and is currently the Corporation’s Executive Vice

President & Group Chief Financial Officer, and a member of its Executive

Committee and Management Committee.

Prior to joining PETRONAS in 2003, he was attached to a local investment bank

for 18 years, concentrating on corporate finance including advisory work in

mergers and acquisitions, equity and debt capital markets. From 1997 to 2002,

he served as the Managing Director of the investment bank.

External Appointments:• Director, MISC Berhad

• Director, KLCC Property Holdings Berhad

• Director, Cagamas Holdings Berhad

He also sits on the Boards of other subsidiaries of PETRONAS Group.

Datuk Manharlal Ratilal has no family relationship with any director and/or major

shareholder of PGB. He has no conflict of interest with PGB and has never been

charged for an offence.

DATUK MANHARLAL RATILAL



PROFILE OF BOARD OF DIRECTORS

Managing Director/Chief Executive Officer, Malaysian (age 52)Appointed to the Board of PETRONAS Gas Berhad (PGB) as Managing Director/

Chief Executive Officer on 1 July 2013.

Qualification, Skills and Experience: Yusa’ graduated with a Bachelor of Science in Mechanical Engineering from

West Virginia University, United States of America in 1984.

His career spans over 29 years in PETRONAS’ Refining and Petrochemical

Businesses, covering plant technical and operations areas. He joined the

pioneering team of PETRONAS Chemicals Group Berhad (PCG)’s maiden plant,

ASEAN Bintulu Fertilizer Sdn Bhd, in 1985 as an Engineer in the Technical

Department. From 1998 to 2011, he has held various plant senior and top

management positions in PETRONAS Ammonia Sdn Bhd (now known as

PETRONAS Chemicals Ammonia Sdn Bhd), PETRONAS Penapisan (Terengganu)

Sdn Bhd, MTBE Malaysia Sdn Bhd (now known as PETRONAS Chemicals MTBE

Sdn Bhd) and Polypropylene Malaysia Sdn Bhd.

Yusa’ joined PCG in July 2010 as Head of Fertiliser and Methanol Business Division,

and in June 2011 he assumed the position of Head of Olefins and Derivatives

Business Division of PCG.

Yusa’ is the Chairman of Kimanis Power Sdn Bhd, Regas Terminal (Sg. Udang)

Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn

Bhd and Pengerang LNG (Two) Sdn Bhd. He also sits on the Boards of several

companies within the PETRONAS Group.

External Appointment:• Director, Gas Malaysia Berhad

Yusa’ has no family relationship with any director and/or major shareholder of PGB.

He has no conflict of interest with PGB and has never been charged for an offence.

YUSA’ BIN HASSAN

pg 35

Senior Independent Non-Executive Director, Malaysian (age 75)Appointed to the Board of PETRONAS Gas Berhad on 29 August 1995.

Qualification, Skills and Experience: Dato’ Sadasivan graduated in Economics from the University of Malaya in 1963.

Upon graduation, he began his career at the Economic Development Board

Singapore where he stayed until 1967. In 1968, he joined the Malaysian Industrial

Development Authority (MIDA) and was appointed as its Director-General in

1984, a position that he served until his retirement in 1995.

External Appointments: • Director, APM Automotive Holdings Berhad

• Director, Bank Negara Malaysia

• Director of seven private companies

Committee Memberships:• Chairman, Board Audit Committee

• Member, Nomination and Remuneration Committee

Dato’ Sadasivan has no family relationship with any director and/or major shareholder

of PGB. He has no conflict of interest with PGB and has never been charged for an

offence.






Non-Independent Non-Executive Director, Malaysian (age 58)Appointed to the Board of PETRONAS Gas Berhad on 1 November 2010.

Qualification, Skills and Experience: Datuk Rosli graduated with a Bachelor of Science in Petroleum Engineering from

the University of Wyoming, United States of America in 1979.

He has 34 years of experience in the petroleum industry, and began career with

PETRONAS in 1980 as a Petroleum Engineer. He served as a field asset manager for

five years from 1996 to 2000. From July 2000 to March 2004, he was involved in

several overseas assignments at managerial level with Premier Oil in the United

Kingdom, an oil development project in Chad, and exploration project in Bahrain.

From April 2004 to February 2010, he served as General Manager of the Petroleum

Management Unit in the Exploration and Production Division; Senior General

Manager of Operations Division in charge of all production operations in Malaysia

and overseas; and Senior General Manager of the Corporate Human Resource

Shared Services.

External Appointment: • Chief Executive Officer, Malaysia-Thailand Joint Authority (MTJA)

Committee Membership:• Member, Board Audit Committee

Datuk Rosli has no family relationship with any director and/or major shareholder of

PGB. He has no conflict of interest with PGB and has never been charged for an

offence.

pg 37

Non-Independent Non-Executive Director, Malaysian (age 55)Appointed to the Board of PETRONAS Gas Berhad on 25 July 2011.

Qualification, Skills and Experience: Ir. Pramod holds a Bachelor of Science in Communication (Electronics)

Engineering from Leeds Polytechnic, United Kingdom.

He joined PETRONAS in 1984 and is currently the Vice President of Infrastructure

and Utilities, Downstream Business. Prior to assuming this position, he has held

various senior positions including as the Managing Director/Chief Executive

Officer of PETRONAS Chemicals Ethylene Sdn Bhd, Senior General Manager and

Head of Group Plant Performance Management, Group Technology Solution and

General Manager (Plant) of ASEAN Bintulu Fertilizer Sdn Bhd.

Ir. Pramod sits on the Boards of several companies within the PETRONAS Group.

Ir. Pramod has no family relationship with any director and/or major shareholder

of PGB. He has no conflict of interest with PGB and has never been charged for

an offence.

IR. PRAMOD KUMAR KARUNAKARAN




Independent Non-Executive Director, Malaysian (age 69)Appointed to the Board of PETRONAS Gas Berhad on 4 August 2011.

Qualification, Skills and Experience: Dato’ Ab. Halim graduated with a Bachelor of Economics in Accounting from the

University of Malaya in 1971, following which he joined the Faculty of Economics of

Universiti Kebangsaan Malaysia. He obtained his Master of Business Administration

from the University of Alberta, Edmonton, Alberta, Canada in 1973 and subsequently

a Diploma in Accountancy from the University of Malaya in 1975.

He is a Council member of the Malaysian Institute of Certified Public Accountants

(MICPA) and a member of the Malaysian Institute of Accountants (MIA). Dato’ Ab.

Halim also sits as the Chairman of the Education and Training Committee of the

Institute of MICPA. He is a past member of the Education Committee of the

International Federation of Accountants (IFAC) and represented Malaysia in the

Committee from 2001-2005.

He joined KPMG/KPMG Desa Megat & Co in 1977 and had his early accounting

training in both Malaysia and United States of America. He was made a Partner of

KPMG in 1985. During his 17-year tenure as a partner, he has held various designations

in KPMG and acted as a receiver and manager and liquidator for several companies.

At the time of his retirement on 1 October 2001, he was the Partner in Charge of the

Assurance and Financial Advisory Services Divisions and was also looking after the

firm’s Secured e-Commerce Practice.

External Appointments: • Chairman/Director, MISC Berhad

• Director, Amway (Malaysia) Holdings Berhad

• Director, KNM Group Berhad

• Director, DiGi.Com Berhad

Committee Membership:• Member, Board Audit Committee

Dato’ Ab. Halim has no family relationship with any director and/or major shareholder of

PGB. He has no conflict of interest with PGB and has never been charged for an offence.


pg 39

Independent Non-Executive Director, Malaysian (age 55)Appointed to the Board of PETRONAS Gas Berhad on 4 August 2011.

Qualification, Skills and Experience: Lim holds a Bachelor of Science (First Class Honours) in Mathematics and

Computer Science from the Australian National University, Canberra, Australia

and has attended numerous Accenture Management Training Programs in United

States of America and the IMD Leadership Program in Switzerland.

He was the Country Managing Director of Accenture, the global consulting,

technology and outsourcing giant before he retired in 2009. He has held various

positions during his 28-year tenure in Accenture, including that of Managing

Partner for Accenture’s Resources Industry Group (Oil & Gas, Chemicals, Utilities,

Natural Resources) in South Asia. He also had oversight of the Management

Consulting practice across industries in ASEAN.

He has extensive experience in management consulting which spans strategy

formulation, operational consulting and mergers, and has led complex projects

to deliver transformational change for multinationals as well as top Malaysian

companies. Prior to moving into management consulting, he was in technology

consulting covering IT Strategies and System Integration work.

External Appointments: • Trustee, ECM Libra Foundation

• Director, PETRONAS Dagangan Berhad

• Director, MISC Berhad

Committee Membership:• Chairman, Nomination and Remuneration Committee

Lim has no family relationship with any director and/or major shareholder of PGB.

He has no conflict of interest with PGB and has never been charged for an offence.

LIM BENG CHOON

PETRONAS GAS BERHAD (101671-H)

ANNUAL REPORT 2014www.petronasgas.com pg 40


Independent Non-Executive Director, Malaysia (age 59)Appointed to the Board of PETRONAS Gas Berhad on 13 September 2013.

Qualification, Skills and Experience: Habibah graduated with a Bachelor of Economics (Accounting) from the

University of Malaya. She is a member of the Institute of Chartered Accountants

in England and Wales, the Malaysian Association of Certified Public Accountants

and Malaysian Institute of Accountants.

She has 35 years of experience in providing audit and business advisory services

to several large public listed, multinational and local corporations. Habibah was

a formerly the Group Partner of The Audit & Business Advisory Division in Ernst

& Young, and a member of the Securities Commission from 1999 to 2002.

External Appointments: • Director, CIMB Islamic Bank Berhad

• Director, CIMB Investment Bank Berhad

• Director, KLCC Property Holdings Berhad

Committee Membership:• Member, Nomination and Remuneration Committee

Habibah has no family relationship with any director and/or major shareholder

of PGB. She has no conflict of interest with PGB and has never been charged

for an offence.

HABIBAH BINTI ABDUL

pg 41

3

4

5

2

1

9

8

67



MANAGEMENT COMMITTEE

1. Yusa’ bin Hassan

Managing Director/Chief Executive Officer

2. Azlimi bin Mohd Lazim Head of Gas Processing and Utilities Division

3. Norarnizar bin Ali Amran Head of Gas Transmission and Regasification Division

4. Barishah binti Md Hanipah Head of Human Resource Management Division

5. Irwan bin Abdul Latif Head of Health, Safety and Environment & Operational Excellence Division

6. Aida Aziza binti Mohd Jamaludin

Head of Finance Division

7. Abdul Razak bin Saim Head of Commercial and Corporate Services Division

8. Mohd Fairos bin Roslan

Head of Planning and Risk Management Division

9. Intan Shafinas (Tuty) binti Hussain Head of Legal and Corporate Secretariat Division

Yusa’ bin HassanManaging Director/Chief Executive Officer,

Malaysian (age 52)

Yusa’ assumed his current position on Board of PETRONAS

Gas Berhad as Managing Director/Chief Executive Officer on

1 July 2013.

Qualification, Skills and Experience:

Yusa’ graduated with a Bachelor of Science in Mechanical

Engineering from West Virginia University, United States of

America in 1984.

His career spans over 29 years in PETRONAS Refining and

Petrochemical Businesses, covering plant technical and

operations areas. He joined the pioneering team of PETRONAS

Chemicals Group Berhad’s (PCG) maiden plant, ASEAN

Bintulu Fertilizer Sdn Bhd, in 1985 as an Engineer in the

Technical Department. From 1998 to 2011, he has held

various plant senior and top management positions in

PETRONAS Ammonia Sdn Bhd (now known as PETRONAS

Chemicals Ammonia Sdn Bhd), PETRONAS Penapisan

(Terengganu) Sdn Bhd, MTBE Malaysia Sdn Bhd (now known

as PETRONAS Chemicals MTBE Malaysia Sdn Bhd) and

Polypropylene Malaysia Sdn Bhd.

Yusa’ joined PCG in July 2010 as the Head of Fertilizer and

Methanol Business Division. In June 2011, he assumed the

position of Head of Olefins and Derivatives Business Division

for PCG.

Yusa’ is the Chairman of Kimanis Power Sdn Bhd, Regas

Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang)

Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd and Pengerang

LNG (Two) Sdn Bhd. He also sits on the Board of several

companies within the PETRONAS Group.

External Appointment:

• Director, Gas Malaysia Berhad

pg 43

PROFILE OF MANAGEMENT COMMITTEE

Aida Aziza binti Mohd JamaludinHead of Finance Division,

Malaysian (age 41)

Aida Aziza assumed her current position in September 2012.


Aida Aziza holds a Bachelor of Accounting and Finance from

the University of Lancaster, United Kingdom. She is a Fellow

of the Association of Chartered Certified Accountant of

United Kingdom.

Aida Aziza began her career with PETRONAS in October

1996 as an Executive in the Budget Department of PETRONAS

and in the ensuing years, has held various positions in the

PETRONAS Group, including serving as General Manager for

the Finance and Accounts Services Department, PETRONAS.

Aida Aziza has more than 18 years of experience in accounting

and finance-related assignments. She has led several Financial

Reporting Standard (FRS) and Malaysian Financial Reporting

Standard (MFRS) for PETRONAS Group of Companies as well

as the implementation of the SAP ECC6.0 for PETRONAS.

She is responsible for the management of all financial and

fiscal aspects of the Group, as well as investor relations and

procurement. In addition, Aida Aziza is also a Director of

Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd, Gas District

Cooling (UTP) Sdn Bhd and Pengerang LNG (Two) Sdn Bhd.


• Alternate Director, Gas Malaysia Berhad

Azlimi bin Mohd LazimHead of Gas Processing and Utilities Division,

Malaysian (age 49)

Azlimi assumed his current position in April 2012.


Azlimi holds a degree in Chemical Engineering from Lamar

University, Texas, United States of America. He had also

attended the Advance Management Program at the Wharton

School, University of Pennsylvania, Philadelphia, United States

of America in 2007.

He began his career as a Trainee Engineer in 1990 at Sabah

Gas Industries in the methanol plant division and later joined

PETRONAS in March 1991 as Shift Operations Supervisor,

Dehydro Section at MTBE Malaysia Sdn Bhd (now known as

PETRONAS Chemicals MTBE Malaysia Sdn Bhd).

His experience of six years in the Dehydro Section provided

platform for him to emerge as Section Head at the Export

Terminal section in 1996. In 1998, he was appointed as a

Senior Process Engineer and subsequently returned to the

Dehydro Section, as Operations Manager within the same

year. Azlimi was later promoted to Asset Senior Manager in

April 2003 in the same operating unit.

After 13 years at PETRONAS Chemicals MTBE Malaysia Sdn

Bhd, Azlimi was appointed in December 2004 as General

Manager of Gas Processing Kertih, PETRONAS Gas Berhad

and thereafter at Gas Processing Santong until March 2011.

Subsequently, he was appointed as President/CEO of Trans

Thai-Malaysia (Thailand) Ltd in Songkhla, Thailand from April

2011 until March 2012.

He is currently responsible for the gas processing and utilities

operations of the Company. Azlimi is also a Director of

Industrial Gases Solutions Sdn Bhd.




Norarnizar bin Ali AmranHead of Gas Transmission and Regasification Division,

Malaysian (age 53)

Norarnizar assumed his current position in November 2011.


Norarnizar holds a Bachelor Degree in Chemical Engineering

from University Technology Malaysia and Diploma in

Mechanical Engineering from Mara Institute of Technology.

He has been in the gas industry for more than 29 years since

he began his career as a Project Engineer in Gas Processing

Plant (GPP) Project in 1984. He was involved in the design

and project implementation of gas processing facilities.

Norarnizar has acquired vast experience in the gas

transmission operation from his assignment in PETRONAS

Gas Berhad taking position as Pipeline Executive, Regional

Manager and finally as Senior Manager Operation in 2005.

Prior to his appointment to the current position, he was

Senior Manager of the Operation Engineering Department.

He is currently responsible for the gas transmission and

regasification operations of the Company. He is also assumes

the position of Chief Executive Office of Regas Terminal

(Sg. Udang) Sdn Bhd and Alternate Director on the Board of

Pengerang LNG (Two) Sdn Bhd.


• Director, Transasia Pipeline Company Pty Ltd

Abdul Razak bin SaimHead of Commercial and Corporate Services Division,

Malaysian (age 49)

Abdul Razak assumed his current position in February 2013.


Abdul Razak holds a Degree in Mechanical Engineering

(Hons) from the University of Wollongong, New South Wales,

Australia.

Abdul Razak has been in the gas industry for the past 23

years. He began his career as a Procurement Executive in

PGB’s Transmission Operation Division (currently known as

Gas Transmission and Regasification) in 1992. He later held

various technical positions within PGB.

In 2002, Abdul Razak was seconded to East Australia Pipeline

Marketing Pty Ltd. based in Sydney, where he managed the

capacity marketing for the 3,000 km Moomba-Sydney gas

pipeline. He was also involved in the development of the

Papua New Guinea – Queensland pipeline project.

In 2006, Abdul Razak was appointed as Manager, Gas Supply

Planning at Gas Business Unit, PETRONAS. He later headed

this department from 2008 until 2011. Prior to his current

position, Abdul Razak led the Gas Business Development

Department.

He is currently responsible for all commercial and corporate

services for PGB. Abdul Razak is the Chairman of Industrial

Gases Solutions Sdn Bhd as well as a Director of Regas

Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu)

Sdn Bhd and Alternate Director on the Board of Pengerang

LNG (Two) Sdn Bhd. He was appointed as the Chief Operating

Officer and Board member of BAKIPC Sdn Bhd, a subsidiary

of PETRONAS.


• Director, Transasia Pipeline Company Pty Ltd

pg 45

Intan Shafinas (Tuty) binti HussainHead of Legal and Corporate Secretariat Division,

Malaysian (age 42)

Intan Shafinas assumed her current position in March 2012.


Intan Shafinas holds an LLB (Hons) from the University of

Leicester, United Kingdom and Certificate in Legal Practice

(Legal Profession Qualifying Board, Malaysia). She is also a

licensed Company Secretary.

Prior to joining PETRONAS, Intan Shafinas had garnered five

years having worked at several banks. Her career in PETRONAS

started in 2001 as Legal Executive with the Petrochemical

Business. In 2007, she was attached to the Corporate Services

and Technology Department, Legal Division, providing legal

advisory services in the area of intellectual property and

commercialisation of technologies. In 2010, she was

appointed as Senior Legal Counsel of Corporate Services,

PETRONAS.

Intan Shafinas then joined PETRONAS Chemicals Group

Berhad in 2011 and was subsequently appointed as Senior

Manager of Legal and Corporate Secretariat Department,

PETRONAS Gas Berhad in March 2012.

She is currently the Company Secretary, as well as Senior

Legal Counsel, Infrastructure & Utilities, Legal Downstream

PETRONAS, responsible for all legal affairs and company

secretarial services of the Group. In addition, she is the

Company Secretary for Regas Terminal (Sg. Udang) Sdn Bhd,

Regas Terminal (Pengerang) Sdn Bhd and Regas Terminal

(Lahad Datu) Sdn Bhd, Gas District Cooling (UTP) Sdn Bhd,

Industrial Gas Solutions Sdn Bhd, Kimanis Power Sdn Bhd,

Kimanis O&M Sdn Bhd and Pengerang LNG (Two) Sdn Bhd.


• Member and Honorary Secretary, Board of Visitors, Prince

Court Medical Centre

Barishah binti Md HanipahHead of Human Resource Management (HRM) Division,

Malaysian (age 51)

Barishah assumed her current position in March 2013.


Barishah graduated in 1986 with a Bachelor in Business

Administration (Cum Laude) from the University of Toledo,

Ohio, United States of America.

She began her career with PETRONAS in February 1988 as an

Executive at the Education sponsorship. She then held various

positions within HRM Holding company, PETRONAS from

1991 to 2004 in the areas of remunerations, people

development and capability development.

In January 2005, she was assigned as Manager (HR Planning)

in PETRONAS Gas Berhad (PGB). Subsequently, in 2006 she

took on the role of Manager, HRM in PETRONAS Chemicals

Fertiliser Kedah Sdn Bhd.

In December 2011, she was appointed as the Head of

Sponsorship and Talent Sourcing at Talent Sourcing &

Employee Relations Department, HRM Division, PETRONAS.

Amongst her major accomplishments during her 27 years of

service includes the implementation of HRIS/SAP System and

the outsourcing of medical administration for PETRONAS, the

decentralisation of talent sourcing initiative, recruitment and

brand enhancement initiatives as well as the Employee

Referral Program.

She is currently responsible for HRM of PGB. Barishah is also

the joint secretary of the Nomination and Remuneration

Committee of PGB.




Mohd Fairos bin RoslanHead of Planning and Risk Management Division,

Malaysian (age 42)

Mohd Fairos assumed his current position in June 2014.


Mohd Fairos holds a Bachelor of Science in Mechanical

Engineering from the University of Tulsa, Oklahoma, United

States of America.

He started his career with PETRONAS in 1996 as a Shift

Supervisor at PETRONAS Gas Berhad’s (PGB) Gas Processing

Plants. He spent the majority of his time in the plant holding

various positions in the areas of Plant Operations and

Production Planning. He was then assigned to lead the

Operating Performance Improvement (OPI) department at

Centralised Utility Facilities (CUF) responsible for the

performance of its plants.

Mohd Fairos gained experience in business management

while serving as Business Development Manager in PGB’s

Head Office. Subsequently, in 2011, he was seconded to the

Kimanis Power Plant (KPP) project where he served as the

Head of Commercial, responsible for project financing,

commercial agreements and project procurement.

Mohd Fairos is currently responsible for Company’s business

development, planning, risk management and overseeing

PGB Joint Venture companies.

Irwan bin Abdul LatifHead of Health, Safety and Environment & Operational

Excellence Division, Malaysian (age 42)

Irwan assumed his current position on 1 January 2015.


Irwan graduated with a Bachelor in Petroleum Engineering

from Universiti Teknologi Malaysia, Johor in 1997.

His career in PETRONAS Gas Berhad spans over 17 years in

Gas Processing and Utility Businesses, covering plant technical

and operations areas. He started his career in 1997 as the

first batch of Process Supervisor in Operation Department of

Gas Processing Santong, Paka, Terengganu. From 1997 to

2010, he progressed to hold managerial position in Operation

Department.

He was then holding positions as Asset Manager in Utilities

Kerteh, Terengganu before being appointed as the Head of

Central Engineering Department in 2013.

In 2014, Irwan assumed the position of PGB Head of Health,

Safety and Environment (HSE) and Operational Excellence

(OE) where he is responsible for developing and implementing

strategies to ensure sustainable plant operational performance.

He is also responsible for effective implementation of HSE

Policy and assurance framework in PGB Group.

pg 47

SUSTAINABLEGROWTHAmidst a challenging oil and gas industry landscape,

we are constantly gathering impetus to move

forward. Following a restructuring exercise and

the integration of our Gas Processing and Utilities

businesses as well as our Gas Transmission and

Regasification businesses into new Divisions, we

are now a more streamlined organisation set for

the next phase of our growth.

VISIONTo be A Leading Gas

Infrastructure and Utilities Company

MISSION• We are a business entity

• Gas is our core business

• Our primary responsibility is to

add value to this natural resource



BUSINESS STRATEGY

THE STRATEGIES ARE BUILT UPON• Empowered leaders with clear ownership

and accountability

• Business savvy with excellent competencies

to deliver value

• Performance-driven culture and customer-

oriented mindset.

pg 51

The three focus areas of our strategic platform are as follows:

1. HEALTH, SAFETY & ENVIRONMENT (HSE)

• Robust HSE governance and

assurance – PGB is committed

towards exhibiting leadership in

the area of safety, and ensuring

the adherence and compliance

of the various HSE governance

and assurance framework and

the PETRONAS Mandatory

Control Framework at all times

to safeguard lives, assets and

our overall business continuity.

• Institutionalisation of Process and

Behavioural Safety – PGB is

determined to increase efforts

towards instilling safety-at-heart

to all members of our workforce,

towards the safe operationalisation

of the Company’s assets.

3. VALUE OPTIMISATION & GROWTH

• Optimum cost control and

asset uti l isation – PGB is

dedicated towards minimising

value leakages and improving

overall asset utilisation, which

translates into higher returns to

its shareholders.

• Improved energy efficiency –

PGB is committed towards

u t i l i s ing energy e f f ic ient

technologies to reduce energy

per unit cost of production,

which translates into lower

production cost, as well as to

reduce our overall energy

intensity and carbon footprint.

• S t r a t e g i c g r o w t h i n g a s

infrastructure and utilities –

PGB is determined to pursue,

explore and execute new

business ventures within the

core area of the Company’s

expertise towards establishing

new revenue streams for its

shareholders.

• Excellence in project delivery –

PGB is focused on implementing

a seamless project execution

strategy across all of its projects

which translates into on-time

a n d o n - b u d g e t p r o j e c t

completion and delivery.

These strategies are supported by the

two phases of our organisational

transformation, which was initiated in

Financial Year 2013. The two phases of

this initiative to date are as follows:

PETRONAS Gas Berhad (PGB) remains committed towards realising our vision of becoming A Leading Gas Infrastructure and Utilities Company.

OUR GROUP STRATEGY FOCUSES ON DRIVING PGB’S LONG-TERM

TRANSFORMATION THAT WILL ELEVATE THE COMPANY’S PERFORMANCE TO

THE NEXT LEVEL, WHILE PREPARING THE WHOLE ORGANISATION FOR THE

NEXT WAVE OF GROWTH.

2. OPERATIONAL EXCELLENCE

• Superior product delivery and

reliability – PGB is striving

towards elevating its Overall

Equipment Effectiveness (OEE)

for equipment reliability, which

translates into higher product

delivery to our customers.

• Sustainable improvement of

key operational indicators –

PGB is committed towards

improving and sustaining our

plant operational performance

in optimising the value delivered

to our stakeholders.



BUSINESS STRATEGY

Phase 1: Strategic PGB Organisational

Review and Alignment (SPORA)

The SPORA project was undertaken in

mid-2013 to review PGB’s overall

structure, systems and process towards

delivering better HSE performance,

improved operational excellence and

superior performing assets.

The effort also worked on streamlining

the Company’s overall structure to

better focus on PGB’s talents and

resources towards the most productive

goals, resulting in shaping PGB towards

Production Centered Organisation,

which is to support the cash generating

assets at the operating divisions.

SPORA resulted in the merger of our

Gas Processing and Utilities businesses

into Gas Processing and Utilities (GPU)

and Gas Transmission and Regasification

businesses into Gas Transmission and

Regasification (GTR). It also resulted in

a more streamlined Management

Committee with clear roles and

oversight over the totality of PGB’s

business.

Phase 2: 3ZERO100

As a follow up to the SPORA project,

3ZERO100 was initiated in late 2014 to

further cascade the message of the

organisation’s transformation to the line,

allowing our staff to own, drive and co-

create the results of the change journey.

Through this transformation, PGB is

determined to reach an immediate

target of zero non-compliance, zero

HSE incidents and zero interruption to

assets, as well as achieve 100% product

delivery reliability for all our assets.

3ZERO100 will propel PGB in three

specific strategic thrusts, which are;

Asset, System & Process and People &

Culture. Efforts are being focused to

maximise human productivity and assets

reliability. PGB believes that an engaged

superior workforce will produce the

target encapsulated in 3ZERO100.

In the long run, PGB is determined to

see a transformation of the Company’s

people, systems and processes towards

attaining the world-class standards

expected of a leading gas infrastructure

and utilities company.

pg 53

PETRONAS Gas Berhad (PGB) embarked on a transformation journey in December 2013 following a Strategic PGB Organisational Review and Alignment (SPORA) to strengthen its foundations and stimulate further growth within its core competencies. AIMED AT REVITALISING AND STREAMLINING THE ORGANISATION, THE

TRANSFORMATION HAS STARTED TO DELIVER POSITIVE RESULTS.

I n 2 0 1 4 , o v e r a l l e q u i p m e n t

effectiveness (OEE) and reliability of

ethane production increased to 87.6%

and 95.1% from 80.0% and 89.1%

respectively in 2013. Even more

encouragingly, it delivered 100% OEE in

sa les gas (C1 ) p roduct ion and

maintained world-class reliability and

ava i lab i l i ty s tandards in i ts gas

transportation system. PGB rejuvenated

the Dew Point Control Unit 2 (DPCU2)

ahead of schedule with zero lost time

injury while the Plant Rejuvenation and

Revamp 4 project (PRR4) at Gas

Processing plant 4, Kertih was well

on track.

DELIVERING TRANSFORMATION

Further strengthening the reliability of

PGB’s operations and to safeguard the

supply of gas and util it ies to its

customers, the Company on December

2014 embarked on the second

phase of its transformation journey to

move towards a high performance

organisation. Development of this

second phase entailed a rigorous

process to unearth every potential and

opportunity to deliver greater value to

PGB customers and stakeholders.

Called 3ZERO100, its transformation

sequel aims to achieve zero Health,

Safety and Environment (HSE) incident

zero interruption, zero non-compliance

and 100% product delivery reliability by

end of 2016. Various strategic initiatives

outlined under this phase seek to drive

the organisation towards HSE and

Operat ional Excel lence through

enhanced Assets, System & Process

and People & Culture.

3ZERO100

ORGANISATION

PERFORMANCE

HIGH

KEY ASSETS SYSTEM & PEOPLE& Elimination of all

Bad Actors & proactive

prevention to ensure

high asset reliability

Maximising Human Reliability

through effective management system

Achieving sustainability through

competency development

and cultural re-engineering

PROCESS CULTURE

0 HSE Incident 0 Non-compliance

0 Interruption100% Product

Delivery Reliability

Efficient & Sustainable System & Work Process

Highly Engaged & Capable Workforce

STRATEGICTHRUSTS

PGB TRANSFORMATION



PGB TRANSFORMATION

2015 FOCUS

To deliver its transformation targets,

PGB es tab l i shed a P rogramme

Management Office in December 2014,

tasked with expediting the delivery of

results. High-potential employees have

been chosen to head various strategic

initiatives, with guidance from the top

Management. This not only supports its

transformation programme but is also

integral to the Company’s leadership

development initiatives to a greater

heights.

A series of upgrading activities will

be undertaken on critical equipment in

the Company‘s facilities to eliminate

breakdowns or malfunctions and

achieve 100% product delivery reliability.

Other than corrective actions, PGB has

adopted a proactive approach to

implement industrial best practices in

order to strengthen its inspection,

testing and maintenance programme to

ensure all assets are safe and reliable.

The Company also streamlined its work

processes to reduce duplication,

redundancy and waste. At the same

time, it empowered its employees to

respond faster to changes in the supply

cha in and encouraged g rea te r

collaboration towards optimising its

customer delivery. The design and

development of this initiative started in

September 2014 and the new work

processes are expected to be rolled

out in 2015.

PGB has always placed top priority to

its people. To nurture a cadre of quality

employees, PGB established a Gas

Academy and Gas Transmiss ion

Academy in 2014 . A se r ies o f

development programmes aimed at

up-skilling technical competencies has

been identified in keeping employees

abreast of the latest technology

developments and industrial best

practices to improve their performance.

The technical competency enhancement

will prepare the organisation to take on

future growth opportunities while

maintaining the highest performance

delivery of current assets.

To accelerate the progress, PGB

plans to run a cultural development

programme focusing on operational

and HSE excellence to support its

transformation journey. Leadership

performance coaching will be provided

a t a l l leve ls , wh i le PETRONAS’

Downstream Cultural Beliefs will be

rolled out to strengthen personal

accountability within the organisation in

delivering results.

The Downstream Cultural Beliefs

programme and continuous leadership

performance coaching will help the

organisation to face challenges ahead

and sustain a high level of performance

at all times.

DOWNSTREAMCULTURAL BELIEFS

Deliver Value I deliver breakthrough performance for

PETRONAS

Focus Execution I own the goal, prioritise and execute in a

timely manner

Step-up I take calculated risks and own my actions

Nurture TrustI deliver my promise and stand by you

Tell MeI seek, I listen, I appreciate continuous

feedback and act on it

Shared SuccessI drive group performance through

common objectives and shares values

pg 55

THE FINANCIAL INDICATORS ASSESS THE GROUP’S CURRENT YEAR PERFORMANCE AS COMPARED TO THE PRECEDING YEAR.

GROUP PERFORMANCE RATIOS

Attributed to lower amounts owing to

suppliers and contractors for purchase of

property, plant and equipment for the Group

during the year.

Current ratio is defined as the Company’s

ability to meet its short-term obligations.

NET PROFIT MARGIN

2014

2013

42%

53%37%

38% 2014

2013

14%

16%11%

13%

RETURN ON ASSETS (ROA)

2014

2013

1.63

1.47

CURRENT RATIO

2014

2013

16%

14% 20%

17%

RETURN ON EQUITY (ROE)

Including recognition of DTA arising from ITA granted for the Group.


Attributed to contribution from Regasification

and Gas Transportation segments and profit

contribution from Kimanis Power Sdn Bhd

(KPSB).

Net profit margin is defined as a ratio of

net profit after tax to revenue.

In tandem with higher normalised net profit

for the year.

ROE is defined as profit attributable to

shareholders divided by the average

shareholders’ equity for the financial year.

In line with higher normalised net profit for

the year.

ROA is an indicator that measures the

Company’s efficiency in using the total

assets to generate profit.

All analysis below is after excluding impact of the one-off deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group in FY2013 and FY2014.



KEY PERFORMANCE

INVESTORS RATIOS

Sustainable dividend payout in respect of

FY2014 in tandem with strong performance

of the Group.

DPS is interim and final dividends declared

for the shareholders divided by the number

of ordinary shares issued.

EARNINGS PER SHARE (EPS)

2014

2013

93 sen

105 sen73 sen

85 sen 2014

2013 75%

64%

DIVIDEND PAYOUT RATIO (DPR)

2014

2013 82% 27%

-6%

TOTAL SHAREHOLDERS RETURN (TSR)

2014

2013

55 sen

55 sen

DIVIDENDS PER SHARE (DPS)

Including recognition of DTA arising from ITA granted for the Group.


Within the industry average of DPR.

DPR is defined as the percentage of

earnings paid to shareholders in dividend.

In line with higher normalised net profit for

the year.

EPS represents the portion of the Company’s

distributable income allocated to each equity

share.

Fundamentally in tandem with FTSE Bursa

Malaysia (FBM) Kuala Lumpur Composite

Index (KLCI).

TSR is the measure of share pr ice

performance and dividend paid during the

year, divided by the opening share prices.

All analysis below is after excluding impact of the one-off deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group in FY2013 and FY2014.

pg 57

Financial Results Announcements

In line with guidelines under the Malaysian Code on Corporate Governance 2012 and Main Market Listing Requirements of

Bursa Malaysia Securities Berhad (Bursa Malaysia), PGB issues comprehensive and timely announcements to Bursa Malaysia

on its quarterly and annual financial results. These announcements are subsequently posted on PGB’s corporate website

under the Investor Relations portal.

Date Event Share Price Results Briefing

6 May 2014 Q1 2014 Announcement RM23.36 On 7 May 2014 – via Conference Call

8 August 2014 Q2 2014 Announcement RM21.08 On 11 August 2014 – via Webcast & Conference Call

4 November 2014 Q3 2014 Announcement RM21.08 On 5 November 2014 – via Webcast & Conference Call

17 February 2015 Q4 2014 Announcement RM22.38 On 18 February 2015 – via Webcast & Conference Call

ENGAGEMENT WITH INVESTORS

T hrough its Investor Relations

platform, PGB maintains an open

channel of communication with analysts

and investors in order to provide in-

depth information on the Company’s

current and projected performance, its

business strategies and direction. As a

result of conscientious efforts to

engage with analysts, PGB is covered

by 12 leading research houses.

During the year, the Company organised

two corporate development briefings;

the new Gas Processing and Gas

Transportation Agreements and the

liquefied natural gas (LNG) Regasification

Terminal and Air Separation Unit

Projects in Pengerang, Johor. The Gas

Processing and Gas Transportation

Agreements briefing was held in the

Twin Towers, KLCC where 28 analysts

and investors attended while the LNG

Regas i f icat ion Terminal and A i r

Separation Unit Projects briefing was

conducted via webcast and conference

call with 27 analysts and investors.

Additionally, the Company attended to

a total of 21 analyst meetings including

face-to-face sessions and conference

calls. At these interactive dialogues,

feedbacks from the analysts were

encouraged for better understanding of

their interests and concerns.

As a public listed company, PETRONAS Gas Berhad (PGB) is committed to creating value for its shareholders. THIS IS EMPHASISED THROUGH THE ESTABLISHMENT OF PGB INVESTOR RELATIONS POLICY IN 2014 TO SET OUT THE MANNER

IN WHICH THE INVESTOR RELATIONS PROGRAMME IS TO BE EXECUTED AND THE INTERNAL PROCEDURES RELATED TO ITS

ACTIVITIES. THE INVESTOR RELATIONS UNIT BELIEVES IT IS IMPORTANT TO ENGAGE WITH PGB SHAREHOLDERS AND THE

BROADER INVESTMENT COMMUNITY TO CREATE GREATER TRANSPARENCY OF THE COMPANY’S BUSINESS AND PERFORMANCE.

INVESTOR RELATIONS’ FUNCTION PLAYS A KEY ROLE IN ALL INITIATIVES TARGETING THIS STAKEHOLDER GROUP.



INVESTOR RELATIONS

1. MalaysiaNo. of Analyst/Research House : 11

2. SingaporeNo. of Analyst/Research House : 1

RESEARCH HOUSE1 2 3 4 5 6 7 8 9 10 11 12

CONFERENCES

To further extend its investors reach,

the Investor Relations Unit participated

in regional conferences organised by

research houses. In 2014, it attended

Pulse of Asia 2014 and dbAccess Asia

Conference 2014, both in Singapore;

and the RHB Asian Corporate Day

Conference 2014 held in Kuala Lumpur.

INVESTORS’ PLANT VISITS

T h e I n v e s t o r R e l a t i o n s U n i t

acknowledges the need for PGB’s

investors to understand and appreciate

the nature of the business. As such, the

Company hosted two visits to its

facilities in Segamat Operation Centre

in Johor and Gas Processing Santong

and Utilities Kertih in Terengganu. The

visits received positive feedbacks from

a total of 60 investors who attended as

they were able to see the operations

first-hand, therefore increasing their

appreciation of PGB.

INVESTOR RELATIONS PORTAL

The Unit maintains a user-friendly

Investor Relations portal on the Company’s

website, www.petronasgas.com, that can

be accessed not only by analysts and

shareholders but anyone interested in

discovering more about PGB. The portal

contains vital financial and operational

information including its annual reports,

quarterly results, corporate updates,

replies to the Minority Shareholder

W a t c h d o g G r o u p ( M W S G ) ,

announcements to Bursa Malaysia,

minutes of Annual General Meetings

(AGMs) and corporate development

briefings.

An email address, ir.petronasgas@

petronas.com.my, is provided whereby

investors, analysts, shareholders, the

media and members of the public can

give encouraging feedback, post

comments or seek further information or

clarification on matters related to PGB.

MARKET FEEDBACKIn add i t ion , the Company was

acknowledged for its investor relations

efforts via a number of awards as

follows:

• Best Performing Industrial Stock

by the Edge Billion Ringgit Club

• 4th Most Transparent Big Stock in

Malaysia by Focus Malaysia

• 3rd Best Managed Company in

Malaysia by Finance Asia

• Best Annual Report in the

Products & Technology category

by the National Annual Corporate

Report Awards (NACRA) 2014

• Excellent Corporate Governance

in the Oil and Gas sector by

the MSWG-ASEAN Corporate

Governance Index 2014

In addition, PGB also met globally

recognised standards on environment,

social and governance practices for

inclusion in the FTSE4Good Bursa

Malaysia Index.

pg 59

PETRONAS Gas Berhad (PGB) was

listed on the Main Board of Bursa

Malaysia Securities Berhad (Bursa

Malaysia) in 1995. Since then, the

Company has grown steadily to

become an active player in the

capital market, especially with the

realisation of various projects in

recent years.

PGB’s market capital isation as

at 31 December 2014 stood at

RM44 billion, ranking it as one of the

largest corporations listed on the

Main Market of Bursa Malaysia. PGB

was recognised by the Edge Billion

Ringgit Club as the Best Performing

Stock under the Industrial Category

with a market capitalisation of more

than RM10 billion. PGB was also

named the fourth most transparent

big stock in Malaysia by Focus

Malaysia.

The Company’s substantial shareholders

are Petrol iam Nasional Berhad

(PETRONAS), the Employees Provident

Fund (EPF) Board, Permodalan Nasional

Berhad (PNB) and Kumpulan Wang

Persaraan (Diperbadankan), which

together account for 84% of its

shareholdings. On top of this, foreign

shareholdings as at 31 December 2014

stood at 7%.

PGB’s share price experienced a

decline of 8% in FY2014. It started the

year at RM24.28, rose to peak at

RM24.50 on 30 May 2014 and gradually

headed down towards the end of the

year to RM22.16. The highest share

price during the year was RM24.881,

the highest price ever recorded by

PGB since the Company’s listing on

Bursa Malaysia while the lowest share

price was RM20.902, fundamentally in

tandem with FTSE Bursa Malaysia

(FBM) Kuala Lumpur Composite Index

(KLCI) and supported by the Company’s

growth act iv i t ies part icular ly in

regasification and power business. The

Company’s shares were actively traded

throughout the year with the highest

volume being 5,935,100 units3.

DIVIDENDS PER SHARE

FY2014: 55 sen

FY2013: 55 sen

SHARE PRICE

-RM2.12

FY2014: RM22.16

FY2013: RM24.28

EARNINGS PER SHARE*

+12 sen

FY2014: 85 sen

FY2013: 73 sen

TOTAL SHAREHOLDERS’ RETURN

-33%

FY2014: -6%

FY2013: 27%

MARKET CAPITALISATION

-RM4 billion

FY2014: RM44 billion

FY2013: RM48 billion

For the Year Ended 31 December 2012



Share price

(RM)

Volume

(’00)

Share price

(RM)

Volume

(’00)

Share price

(RM)

Volume

(’00)

Highest 20.50 81,719 24.52 35,674 24.88 59,351

Lowest 14.70 1 18.20 207 20.90 887

Note:* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.




PERFORMANCE OF SHARES

Jan

2014

Feb Mar

Closing Price (sen)/Composite Index

Shares

Closing PriceComposite IndexVolume

45,000

Volume

60,000

55,000

50,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Apr May Jun Jul Aug Sept Oct Nov Dec

2015

Jan Feb

100

300

500

700

900

1,300

1,500

1,700

1,900

2,100

2,300

2,500

1,100

2. Lowest share price

1. Highest share price 3. Highest volume

RESULTS AGMDIVIDENDSFirst Quarter ended 31 March 2014Announced On : 6 May 2014

Second Quarter ended 30 June 2014Announced On : 8 August 2014

Third Quarter ended 30 September 2014Announced On : 4 November 2014

Fourth Quarter ended 31 December 2014Announced On : 17 February 2015

First InterimEntitlement Date : 26 August 2014

Paid On : 26 September 2014

Second InterimEntitlement Date : 20 November 2014

Paid On : 8 December 2014

Third InterimEntitlement Date : 9 March 2015

Payable On : 25 March 2015

Notice of Annual General Meeting

7 April 2015

32nd Annual General Meeting

30 April 2015

pg 61

FINANCIAL CALENDARFinancial year from 1 January 2014 to 31 December 2014

1983 PETRONAS Gas Sdn Bhd

(PGSB) was incorporated

a s a w h o l l y - o w n e d

subsidiary of PETRONAS

on 23 May 1983.

1984 C o m m i s s i o n i n g o f

Peninsular Gas Utilisation

(PGU) 1, Commissioning of

Gas Processing Plant (GPP)

1 with first gas in and first

sales gas delivery to power

and industrial customers.

1987 Appointment of PGSB as

throughput and servicing

agent to PETRONAS in

relation to the PGU project

in Peninsular Malaysia

(Throughput Agreement)

on 2 November 1987.

1991 Commissioning of PGU 2

and the official opening of

t h e S e g a m a t G a s

Transmission Operation

Centre by Prime Minister

o f Ma lays i a , Tun Dr .

Mahathir bin Mohamed.

1992 First sales gas delivery to

Senoko Power Station in

Singapore via submarine

p i p e l i n e a n d t h e

commissioning of GPP2

and GPP3.

1994 Commissioning of GPP4.

1995 S ign ing of a 20-year

agreement between PGSB

and PETRONAS for the

provision of services relating

to Gas Processing and Gas

Transmission Agreement

(GPTA) in Malaysia on

31 March 1995 with effective

date 1 April 1994.

Conversion of PGSB from

private limited to a public

listed company (PETRONAS

Gas Berhad) and was listed

on the main board of

K u a l a L u m p u r S t o c k

Exchange (now Bursa

Malaysia Securities Berhad

(Bursa Malaysia)).

1998 Complet ion of PGU 3

project and the signing of

first Sale and Purchase

Agreement with Centralised

Utility Facilities (CUF).

1999 Commissioning of GPP5

and GPP6, first delivery of

electricity from CUF Kertih

a n d C U F G e b e n g t o

customers.

2000 PGB secures RM1.4 billion

worth of Islamic Financing

from the domestic private

debt securities to partly

finance its CUF project.

2001 PGB’s CUF and PGU III

projects were completed

allowing additional revenue

for PGB besides being one

of the first to become

the supplier of steam,

e l e c t r i c i t y , o x y g e n ,

nitrogen, compressed air,

demineralised water and

waste treatment.

FROM 1983 TO 2001

CORPORATE MILESTONES:OUR JOURNEY 1983-2014

CORPORATE MILESTONES:OUR JOURNEY 1983-2014



2002 P G B e m b a r k e d o n a

framework discussion on

Environment Reporting to

incorporate sustainable

d e v e l o p m e n t o f t h e

country’s resources based

o n t h e B r u n d t l a n d

Commission Sustainable

Development Guide.

2003 Creat ion of Customer

Relat ions Management

(CRM) to ensure effective

customer re la t ionsh ip

management for a more

robust customer focused

and market driven entity.

2004 The es tab l i shment of

Service Level Arrangements

(SLA) to enhance overall

c u s t o m e r f o c u s a n d

efficiency to facilitate the

n e w o r g a n i s a t i o n a l

structure which became

effective in 1 January 2004.

2005 First gas-in from Malaysia-

Thailand Joint Development

Area; Signing of Operation

and Maintenance Services

Agreement with Trans

Thai-Malaysia (M) Sdn Bhd.

2007 S i g n i n g o f P r o j e c t

E x e c u t i o n S e r v i c e s

Agreement with PETRONAS

Car iga l i Sdn Bhd for

S a b a h - S a r a w a k G a s

Pipeline (SSGP) Project.

2008 Signing of Shareholders

Agreement (SHA) with NRG

Consortium (Sabah) Sdn

Bhd, a subsidiary of Yayasan

Sabah on 24 November

2008 for the establishment

of Kimanis Power Sdn Bhd, a

60:40 joint venture company

tasked with the development

of a 300 megawatt power

plant in Kimanis, Sabah.

2009 Ground breaking ceremony

of Kimanis Power Plant

project on 26 November

2009 by Chief Minister of

Sabah, Datuk Seri Panglima

Musa bin Haji Aman.

2010 Prime Minister of Malaysia,

Dato’ Sri Mohd Najib bin Tun

Haji Abdul Razak announced

on 10 June 2010 the

development of Malaysia’s

first liquefied natural gas

( L N G ) R e g a s i f i c a t i o n

Terminal in Sungai Udang,

M e l a k a ( R G T S U ) b y

PETRONAS under the 10th

Malaysia Plan. PETRONAS

assigned PGB to undertake

the RGTSU project on 29

June 2010.

2011 Signing of Engineering,

Procurement, Construction,

I n s t a l l a t i o n a n d

Commissioning All iance

agreement between PGB and

a consortium of contractors

for LNG Regasif icat ion

F a c i l i t i e s P r o j e c t o n

25 February 2011. PGB

unveiled the PGB Network

Code on the 23 December

2011 to the public via official

announcement to Bursa

Malaysia.

2012 S i g n i n g o f a P o w e r

Purchase Agreement (PPA)

between PGB and Sabah

Electricity Sdn Bhd (SESB),

witnessed by Prime Minister

of Malaysia, Dato’ Sri Mohd

Najib bin Tun Haji Abdul

Razak and Chief Minister of

Sabah, Datuk Seri Panglima

Musa bin Haji Aman on 16

February 2012.

O f f i c i a l l a u n c h f o r

mechanical completion of

the RGTSU by the Prime

Minister of Malaysia, Dato’

Sri Mohd Najib bin Tun Haji

Abdul Razak and the Chief

Minister of Melaka, Datuk

Seri Haji Mohd Ali bin Mohd

Rustam on 4 June 2012 in

conjunction with World

Gas Conference 2012.

2013 C o m m i s s i o n i n g o f

RGTSU on 23 May 2013;

Commissioning and testing

of Kimanis Power Plant.

2014 In November 2014, PGB

achieved another milestone

as its power venture arm

K imanis Power P lant ,

became fully operationalise,

allowing additional power

for the people of Sabah.

PGB signed a series of

a g r e e m e n t s t o w a r d s

developing Malaysia’s Second

LNG Regasification Terminal

in Pengerang and a heads of

agreement with Linde to

develop an Air Separation

Unit Plant to produce

industrial gases for Pengerang

Integrated Complex.

FROM 2002 TO 2014

pg 63

MEDIA MILESTONES2014

PGB renews 20-year contract with PETRONAS

1 April 2014

Top 10

Biggest Malaysian Companies

25 August 2014

10 November 2014

KPP

begins full operations

MOST TRANSPARENT BIG STOCKS

28 June – 4 July 2014

10 November 2014

PETRONAS

Yayasan Sabah’s joint venture power plant begins full operations



Kimanis Power Plant begins full commercial operations

10 November 2014

11 November 2014

PETRONAS Kimanis Power Plant commences operations

Top awards for

Annual Corporate Reports

6 December 2014

17 November 2014Dialog,

PETRONAS

Gas sign shareholders’ pact for project

11 November 2014

Sabah gets electricity boost as

Kimanis plant becomes operational

pg 65

29 JANUARY CORPORATE SOCIAL RESPONSIBILITY (CSR) PROGRAMME WITH SEKOLAH KEBANGSAAN DAIGIN

• Kimanis Power Sdn Bhd (KPSB) and Kimanis O&M Sdn Bhd (KOMSB) jointly organised a CSR programme and contributed

school necessities to Sekolah Kebangsaan Daigin Kimanis, Papar in Sabah, such as students’ tables, chairs, cabinets and

reading materials for the betterment of the school.

16 MARCH BRIEFING AND ENGAGEMENT SESSION

• Briefing on Industrial Efficient Regulations (IER2009) by Department of Environment (DOE) Kuala Terengganu at

Kelab Golf Rantau PETRONAS and followed by a bowling tournament between DOE and GPU Management at Mesra Mall,

Kertih.

26 FEBRUARY LAUNCHING OF GAS ACADEMY

• PGB MD/CEO, Yusa’ bin Hassan, conducted his sharing

session on PGB’s FY2013 performance and then launched

Gas Academy at Gas Processing Kertih in Terengganu.

20 MARCH DOSH OFFICIAL VISIT TO KIMANIS POWER PLANT

• A courtesy visit by the Department of Safety and Health

(DOSH) Putrajaya and Sabah, led by Director of Industrial

Safety Division, Ir. Abdul Aziz bin Yahya, to Kimanis Power

Plant. Among the matters being discussed were on DOSH’s

assistance on the process of obtaining safe structures that

were in compliance with the regulatory act. In addition,

DOSH also gave an insight on the government’s roles and

responsibilities in assisting the economic growth of mega

projects in Sabah.



2014 CALENDAROF EVENTS

30 APRIL PRR4 ACHIEVED 500,000 MAN-HOURS WITHOUT LTI

• A collaboration between PGB and a consortium led by

Toyo Engineering Corporation of Japan commemorated

500,000 man hours without Lost Time Injury (LTI) for Plant

Rejuvenation and Revamp 4 Project (PRR4). A wall breaking

ceremony as a symbolic sign for the commencement of

the renovation of Central Control Room 1, 2, 3 (CCR123)

was initiated by GPU Head, Azlimi bin Mohd Lazim.

5 MAY PETRONAS GAS BERHAD 31ST ANNUAL GENERAL MEETING

• PGB organised its 31st Annual General Meeting (AGM) at

Mandarin Oriental Hotel in Kuala Lumpur.

8 APRIL ENGAGEMENT SESSION WITH MAJLIS BANDARAYA SHAH ALAM

• An engagement session between Majlis Bandaraya Shah Alam (MBSA) and PGB’s Shah Alam regional office (RO) at Shah Alam

Convention Centre in Selangor. The session was to provide a common understanding with regards to PGB’s Gas Transmission

and Regasification (GTR) facilities, which emphasised on public safety and pipeline management, as well as a sharing session

on emergency response plan.

pg 67

24 MAY GTR FUN RIDE WITH DOSH

• PGB GTR organised GTR Fun Ride at Bukit Bandaraya which involved 40 cyclists. The programme served as a platform

to further strengthen relationship with DOSH. The event was attended by DOSH offices from Putrajaya, Kuala Lumpur

and Selangor while PGB was represented by its Regional Offices (RO) from Pasir Gudang, Setiawan and Segamat

Operations Centre.

1 JUNE GTR ENGAGEMENT SESSION WITH DOSH SABAH

• PGB GTR organised an engagement session with DOSH Sabah at Sutera Harbour Resort, Kota Kinabalu. This event serves

as a platform to enhance the relationship between PGB and DOSH.

22 MAY CSR PROGRAMME WITH OLD FOLKS AND ORPHANS

• Secretaries from GPU Kertih and Kimanis O&M Sdn Bhd

(KOMSB) jointly brought joy to the elderly of the Rumah

Wargatua Sri Pritchard Kinarut in Papar and orphans of

the Rumah Kanak-kanak Kota Kinabalu in Beringgis, both

in Sabah.

23 – 25 MAY PROGRAM SENTUHAN ILMU PETRONAS (PSIP) MELAKA

• PGB Head Office (HO) organised a PSIP programme at

Sekolah Kebangsaan Cherana Putih in Melaka. During this

PSIP, students were exposed to the method of leading and

living a healthy lifestyle. Various activities were carried out

such as ‘Senamrobik’.




5 – 6 SEPTEMBER PGB – SENOKO INTERACTIVE GAMES 2014 DI PGRO

• PGB and SENOKO jointly organised an interaction game as part of its stakeholders engagement to strengthen partnership

while building up good support between operation teams.

12 AUGUST CSR HARI RAYA WITH SEKOLAH KEBANGSAAN SERI NILAM

• A CSR Hari Raya was organised by PGB Head Office for the students of Sekolah Kebangsaan Seri Nilam, Taman Koperasi

Polis, Gombak. The pupils received goodies in conjunction with Hari Raya celebration.

31 AUGUST NATIONAL DAY CELEBRATION

• PGB’s Segamat RO bagged the champion award for banner competition at the Segamat District’s annual Merdeka parade.

28 AUGUST SHAREHOLDERS OFFICIAL VISIT

• PGB held an educational engagement programme with its

shareholders at GPU Kertih to enlighten them on PGB’s

businesses.

3 – 4 SEPTEMBER “EX TANJUNG” (TIER-3 EMERGENCY EXERCISE) WITH

MAJLIS KESELAMATAN NEGARA AT TSET

• A Tier-3 emergency exercise with code name “Ex-Tanjung”

was jointly collaborated between PGB and Majlis Keselamatan

Negara (MKN) which was held at Tanjung Sulong Export

Terminal (TSET). About 300 participants were involved in the

exercise including PGB staff, MKN, Unit Tindakan Khas (UTK)

and local authorities such as Royal Malaysian Police, The Fire

& Rescue Department and The Health Department.

pg 69

24 SEPTEMBER VISIT BY BANK NEGARA MALAYSIA, SABAH ECONOMIC DEVELOPMENT AND INVESTMENT AUTHORITY TO KIMANIS

POWER PLANT

• Bank Negara Malaysia (BNM), Sabah Economic Development and Investment Authority (SEDIA) organised regular

discussions with industry players to better understand the developments and issues. This will also help BNM to propose

policies to facilitate growth in the economy.

• The BNM delegate was led by Deputy Director of Economics Department, Dr. Mohamad Hasni bin Sha’ari with six other

officers.

9 NOVEMBER PGB HO CSR 2014: PROGRAM SENTUHAN IHSAN PGB AT

MASJID AMINAH AL-MUHAIRI, SS2 PETALING JAYA

• It is part of PGB‘s initiatives to create awareness for the

communities in need and provide opportunities to

strengthen the nurturing culture amongst participants.

10 – 11 OCTOBER PGB CONTRACTORS FORUM 2014

• The event was conducted to impart best practices between

PGB and Contractors towards successful project delivery;

• A platform for continuous engagement between PGB and

Contractors to overcome challenges and develop strategies

for improvement on any gaps; and

• Serves to share information and new regulations on matters

related to HSE, Contractual Performance, Integrity,

Ownership and Accountability.




11 DECEMBER CSR PROGRAMME AT SEK KEB MOOK, KINARUT, PAPAR

• Kimanis Power Sdn Bhd (KPSB) and KOMSB jointly organised a CSR at Sekolah Kebangsaan Mook, Kinarut, Papar, Sabah.

• School facilities such as students desk, chairs and educational books were contributed to 200 primary students.

15 DECEMBER PGB AND DOSH ENGAGEMENT SESSION AT IOI MARRIOTT PUTRAJAYA

• A collaboration event between DOSH and PGB. The activities include golf interactive tournament between head of

PETRONAS and DOSH followed by meeting sessions. One of the objectives was to introduce the new DOSH Director

General to all PGB Heads and to conduct discussion in addition to embracing way forward on several issues.

17 NOVEMBER PROGRAM SENTUHAN ILMU PETRONAS (PSIP) SEGAMAT

• PGB GTR organised a back to school programme for the

students’ of Sekolah Kebangsaan Batu Anam which was

held at Vip Hotel at Segamat. The students were given

basic school necessities such as shoes and clothes.

7 DECEMBER PGB GOLF ANNUAL INVITATION 2014 AT AMVERTON COVE

GOLF & RESORT, PULAU CAREY

• PGB Annual Golf tournament with stakeholders.

pg 71

WE ARE THRILLED TO HAVE BEEN BESTOWED WITH NUMEROUS

AWARDS AND CERTIFICATIONS IN THE YEAR UNDER REVIEW

IN RECOGNITION OF OUR STELLAR ACCOMPLISHMENTS

WE ARE THRILLED TO HAVE BEEN BESTOWED WITH NU

AWARDS AND CERTIFICATIONS IN THE YEAR UNDE

IN RECOGNITION OF OUR STELLAR ACCOMPLISHM

AWARDS& ACHIEVEMENTS

2 0 1 4

pg 72

THE EDGE BILLION RINGGIT CLUBPETRONAS Gas Berhad was

honoured for having the Best

Performing Industrial Stock

with a market capitalisation of

more than RM10 billion in the

Industrial Sector.

Certifications

The following certifications validate the high

standards to which PETRONAS Gas Berhad

adheres in its processes and systems.

• Jabatan Alam Sekitar Award for

compliance with all stipulated conditions

related to the management of scheduled

wastes.

• IQNet and SIRIM International Quality

Management System ISO 9001:2008.

NACRA 2014PETRONAS Gas Berhad won the Best Annual

Report in the Industrial Products &

Technology Category at the National Annual

Corporate Report Awards (NACRA) 2014 for

annual report produced for the year ended

December 2013.

MSWG-ASEAN CORPORATE GOVERNANCE INDEX 2014PETRONAS Gas Berhad was recognised for

having the best corporate governance

pract ices including t ransparency and

performance in the Oil and Gas Sector.

FINANCE ASIA AWARDPETRONAS Gas Berhad was named

the third Best Managed Company in

Malaysia by a Finance Asia poll which

tallied the votes of 265 investors and

analysts across the region.

FOCUS MALAYSIA AWARDPETRONAS Gas Berhad was

named the fourth Most

Transparent Big Stock in

Malaysia in a poll conducted

by Focus Malaysia, a leading

English business weekly.

pg 73

AWARDS AND ACHIEVEMENTS 2013DURING THE YEAR UNDER REVIEW,

PETRONAS GAS BERHAD WAS

ACCREDITED WITH SEVERAL

AWARDS AND CERTIFICATIONS

AS A RESULT OF THE HIGH

STANDARDS IN ITS OPERATIONS.

Awards:

1. The Edge Billion Ringgit Club

– PETRONAS Gas Berhad (PGB) was recognised as one of Malaysia’s top three

Companies in the Industrial Products Sector in terms of Return on Equity.

2. Alpha Annual Southeast Asia Institutional Investor Corporate Awards

– PGB won the Best Senior Management Investor Relations (IR) Support

Category in Malaysia.

3. MSOSH (Malaysian Society for Occupational Safety and Health)

– Gold Merit

• MSOSH Gold Merit Award Winner 2012 for Segamat Operation Centre

(SOC), Segamat Regional Office, Transmission Operations Division,

(TOD)

• MSOSH Gold Merit Award Winner 2012 for Pasir Gudang Regional

Office, TOD

• MSOSH Gold Merit Award Winner 2012 for Gas Processing Plant Paka

(GPPB), Plant Operations Division (POD)

• MSOSH Gold Merit Award Winner 2012 for Export Terminal (ET), POD

– Gold Class 1

• MSOSH Gold Class 1 Award Winner 2012 for Gurun Regional Office,

TOD

4. NCOSH (National Council for Occupational Safety and Health)

– OSH National Award Winner for Gurun Regional Office, TOD

5. NACRA (National Annual Corporate Reports Award)

– Industry Excellence Awards Merit Winner under the Industrial Products

and Technology category in National Annual Corporate Reward Awards

(NACRA 2013) for Annual Report Ending 31 December 2012

6. ICC (Innovative and Creative Circle)

– Team BUBBLE from PGB was awarded

• Best Young ICC Award at the Central Mini Regional Convention on

Team Excellence

• Gold Medal at the Central Regional Convention on Team Excellence

• 3 Stars Gold Medal and Most Potential Group Award at the National

Convention Team Excellence ICC

7. IKM (Institut Kimia Malaysia)

– IKM Laboratory Excellence Award

Certifications:

1. SIRIM Certification of Occupational Health and Safety Assessment Series

(OHSAS) 18001:2007, MS1722:2011 for Occupational Health and Safety

Management System

2. SIRIM Certification of MS ISO 9001:2008 for Quality Management System

3. SIRIM Certification of MS ISO 14001 for Environmental Management System

4. Certification of Quality Improvement Practices (5S) from the Malaysia

Productivity Corporation (MPC) for Tanjung Sulong Export Terminal (TSET)

20

13



PAST AWARDS

Awards:

1. MSOSH 2011 Grand Award for GPPB, POD

2. MSOSH 2011 Gold Merit Award for Segamat Operation Centre (SOC), TOD

3. MSOSH 2011 Gold Merit Award for Centralised Utilities Facilities, Kertih (CUFK)

4. MSOSH 2011 Gold Class 1 Award for Kuantan Regional Office, Shah Alam

Regional Office and Seremban Regional Office, TOD

5. MSOSH 2011 Gold Class 1 Award for Centralised Utility Facilities, Gebeng

(CUFG)

6. MSOSH 2011 Gold Class 1 Award for Technical and Facilities Development

Division (TFDD)

7. OSH 2011 National Award Winner for Gurun Regional Office, TOD

8. Industry Excellence Awards Winner under the Industrial Products and

Technology Category in National Annual Corporate Reward Awards (NACRA

2012) for Annual Report Ending 31 December 2011

9 Gold Medal Three Stars for CUF Team (Fusion Ready–Energy) at the National

ICC Convention

10. IKM Laboratory Excellence Award for POD

Certifications:

1. PGB Head Office received certifications for:

a. OHSAS 18001:2007, MS1722: Part 1:2005

b. Certification of Quality Improvement Practices (5S) from the Malaysia

Productivity Corporation (MPC) for ET, POD

AWARDS AND ACHIEVEMENTS 2012DURING THE YEAR UNDER REVIEW,

PETRONAS GAS BERHAD WAS

ACCREDITED WITH SEVERAL

AWARDS AND CERTIFICATIONS

AS A RESULT OF THE HIGH

STANDARDS IN ITS OPERATIONS.2

012

pg 75

Property, plant and equipment 82% Cash and cash equivalents 5% Trade and other receivables 5% Deferred tax assets 4% Investment in joint ventures 3% Investment in associate 1% Trade and other inventories 0% Fund and other investments 0%

TOTAL ASSETS

2014RM13,260.5 million

TOTAL ASSETS


Property, plant and equipment 80% Cash and cash equivalents 7% Trade and other receivables 5% Deferred tax assets 5% Investment in joint ventures 2% Investment in associate 1% Trade and other inventories 0% Fund and other investments 0%



SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION & SEGMENTAL ANALYSIS

Reserves 63% Share Capital 15% Deferred tax liabilities 7% Non-current borrowings 6% Trade and other payables 8% Taxation 1% Non-controlling interests 0% Current borrowings 0% Deferred income 0%

Reserves 65% Share Capital 15% Deferred tax liabilities 8% Non-current borrowings 6% Trade and other payables 5% Taxation 1% Non-controlling interests 0% Current borrowings 0% Deferred income 0%

TOTAL LIABILITIES &SHAREHOLDERS’ EQUITY


TOTAL LIABILITIES &SHAREHOLDERS’ EQUITY


pg 77

SEGMENT OPERATING REVENUEfor the financial year ended 31 DecemberRM million

2014

2013 1,497.4

1,480.2

2014

2013 751.3

701.7

2014

2013 3,847.7

4,292.3

2014

2013 1,189.3

1,286.7

2014

2013 902.4

1,006.7

2014

2013 2,255.3

2,437.8

SEGMENT RESULTfor the financial year ended 31 DecemberRM million

SEGMENT ASSETSfor the financial year ended 31 DecemberRM million

2013RM3,892.1million



Gas Processing

Gas Processing

Gas Processing

Gas Transportation

Gas Transportation

Gas Transportation



SIMPLIFIED GROUP STATEMENT OF FINANCIAL POSITION & SEGMENTAL ANALYSIS

2014

2013 867.2

1,008.6

2014

2013 127.7

195.9

2014

2013 1,420.9

1,265.1

2014

2013 338.2

616.2

2014

2013 163.5

308.0

2014

2013 4,344.9

4,046.3




Utilities

Utilities

Utilities

Regasification

Regasification

Regasification

pg 79

First Second Third Fourth YearRM million Quarter Quarter Quarter Quarter 2014

Operating revenue 1,054.2 1,102.4 1,123.5 1,111.6 4,391.7

Operating profit before finance cost 545.5 583.5 552.6 460.5 2,142.1

Profit before taxation 543.1 578.9 549.2 683.2 2,354.4

Profit attributable to equity holders of the Company 418.0 435.3 418.6 571.3 1,843.2

Earnings per share (sen) 21.1 22.0 21.1 28.9 93.1

Proposed/declared dividends per share (sen) – 20.0 20.0 15.0 55.0

First Second Third Fourth YearRM million Quarter Quarter Quarter Quarter 2013

Operating revenue 910.4 930.8 1,022.9 1,028.1 3,892.1

Operating profit before finance cost 479.1 475.5 477.3 471.9 1,903.7

Profit before taxation 485.9 468.1 471.1 471.4 1,896.4

Profit attributable to equity holders of the Company 360.4 944.9 379.8 393.7 2,078.9

Earnings per share (sen) 18.2 47.8 19.2 19.9 105.1

Proposed/declared dividends per share (sen) – 15.0 – 40.0 55.0

2014

2013



GROUP QUARTERLY FINANCIAL PERFORMANCE

2014RM million

2013RM million

Revenue 4,391.7 3,892.1

Purchase of goods and services (1,055.1) (965.9)

Value added by the companies 3,336.6 2,926.2

Other income and expenses 4.7 78.9

Financing costs (76.3) (50.1)

Share of profit after tax of equity-accounted associate and joint ventures 288.7 42.8

Value added available for distribution 3,553.7 2,997.8

DISTRIBUTION OF VALUE ADDED

To employees

– Employment costs 368.1 374.5

To government

– Taxation 368.4 443.6

To shareholders

– Dividends 1,583.0 989.4

– Non-controlling interest (1.1) –

Retained for reinvestment and future growth

Depreciation and amortisation 831.1 726.9

Deferred tax expense/(income) 144.0 (626.1)

Retained profit 260.2 1,089.5

3,553.7 2,997.8

pg 81

STATEMENT OF VALUE ADDED

GROUP

2014 To employees 10% To government 10% Retained for reinvestment 35%

and future growth

To shareholders 45%

GROUP

2013 To employees 12% To government 15% Retained for reinvestment 33%

and future growth

To shareholders 40%



DISTRIBUTION OF VALUE ADDED

Note:* Excluding recognition of deferred tax assets (DTA) arising from investment tax allowance (ITA) granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million)

Gas Processing, Gas Transportation and Utilities

RM3,775.5 million

Regasification RM616.2 million

TOTAL REVENUE

RM4,391.7 million REVENUE GROWTH BY RM499.6 MILLION (13%) FROM

RM3,892.1 MILLION IN FY2013.

FULL YEAR OPERATIONS OF LIQUEFIED NATURAL GAS (LNG)

REGASIFICATION TERMINAL IN SUNGAI UDANG, MELAKA

(RGTSU) CONTRIBUTED RM278.0 MILLION (7%) OF THE

GROWTH IN REVENUE.

pg 83

GROUP FINANCIAL REVIEW

DIVIDENDS PER SHARE

55 SEN SUSTAINABLE DIVIDEND PAYOUT IN

RESPECT OF FY2014, TRANSLATING

TO 64%* PAYOUT RATIO.

EBITDA

RM3,217.6 million(+20%)

HIGHEST EVER EARNINGS BEFORE INTEREST, TAXES,

DEPRECIATION AND AMORTISATION (EBITDA) IN HISTORY

OF PGB

STRONGER PAT*

RM1,687.6 million(+16%)

CONTRIBUTION FROM KIMANIS POWER PLANT (KPP) AS WELL

AS REGASIFICATION AND GAS TRANSPORTATION SEGMENTS,

RESULTING IN PAT SURGED BY RM235.1 MILLION FOR FY2014.

TOTAL ASSETS

RM13,260.5 million

REMAINED STRONG BACKED BY

SOLID GROUP‘S PROPERTY, PLANT

AND EQUIPMENT

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.1 For the nine months period ended 31 December 2011.2 Excluding recognition of DTA arising from ITA granted for the Group.


2014‘13‘12‘111‘11

4,3

91.7

3,8

92

.1

3,5

76

.8

2,7

65

.1

3,5

25

.0

CAGR: 4.5%


‘13‘12‘111‘11

1,8

42

.1

1,6

87

.62

2,0

78

.9

2014

1,4

52

.52

1,4

04

.9

1,0

80

.8

1,4

39

.1

CAGR: 3.2%2


FY2014 has seen a solid financial performance for PGB, where it continues to deliver sustainable returns on the back of its Gas Processing Agreement (GPA) and Gas Transportation Agreements (GTA).

THE COMPANY RECORDED GROWTH THROUGH THE FULL YEAR OPERATIONS OF LIQUEFIED NATURAL GAS (LNG) REGASIFICATION TERMINAL IN SUNGAI UDANG, MELAKA (RGTSU) AND EARNINGS BOOST FROM KIMANIS POWER PLANT (KPP) IN KIMANIS, SABAH.

OVERVIEW

PETRONAS Gas Berhad (PGB) Group have delivered a solid financial performance for the year ended 31 December 2014

(FY2014) on the back of sustainable revenue streams from Gas Processing, Gas Transportation, Utilities and Regasification

segments. The revenue has a compounded annual growth rate (CAGR) of 4.5% per annum throughout the five years.

For FY2014, PGB has recorded profit after tax of RM1,842.1 million, representing a decrease of RM236.8 million (11%) from

RM2,078.9 million in FY2013. Excluding the one-off deferred tax assets of RGTSU and KPP, profit after tax increased by

RM235.1 million (16%) from RM1,452.5 million in FY2013 to RM1,687.6 million in FY2014. Similarly, the CAGR for profit after

tax shows an upward trend of 3.2%2 per annum.




GROUP FINANCIAL PERFORMANCE

Revenue by Segment (RM million)

FY2014

1,480.2

1,286.7

616.2

1,008.6

338.2

867.2 1,497.4

1,189.3

Gas Processing Regasification

Gas Transportation Utilities

Revenue

In the year under review, the Group recorded revenue of

RM4,391.7 million, representing an upsurge of RM499.6

million (13%) from RM3,892.1 million recorded in FY2013.

This was driven primarily by full year operations of RGTSU of

RM278.0 million, higher sales of utilities of RM141.4 million

(16%) and higher gas transportation revenue (GTR) by RM97.4

million (8%). The higher revenue, however, was marginally

offset by lower gas processing revenue (GPR) by RM17.2

million (1%).

The utilities revenue grew by RM141.4 million (16%) as a

result of higher revenue from electricity, industrial gases and

steam, in line with higher products offtake by its customers

and an upward revision of electricity tariff.

During the year, PETRONAS made 8% higher capacity

reservation for the Peninsular Gas Utilisation (PGU) pipeline

under the new GTA, in line with additional gas supply through

RGTSU. This has resulted in an RM97.4 million (8%) increase

in GTR from RM1,189.3 million recorded in the previous year.

The increase in revenue across the different segments was

marginally offset by decrease in GPR by RM17.2 million (1%).

This was mainly due to a lower performance based structure

(PBS) income as a result of lower Overall Equipment

Effectiveness (OEE) plant liquid extraction performance as

compared to the base OEE target, which typically already at

a high level of efficiency, under the new Gas Processing

Agreement (GPA). The impact of lower PBS income, however,

was cushioned by strengthening of reservation charge under

the new structure.

PGB HAS RECORDED ITS HIGHEST REVENUE IN FY2014 SINCE IT WAS ESTABLISHED IN 1983 RESULTING FROM FULL YEAR OPERATIONS OF RGTSU COUPLED WITH HIGHER UTILITIES AND CAPACITY RESERVATION FOR GAS TRANSPORTATION SEGMENT UNDER THE NEW GTA.

FY2013

pg 85

Cost of Revenue

Cost of revenue for the Group rose by RM232.2 million (12%)

from RM1,947.2 million in FY2013 to RM2,179.4 million in

FY2014, in line with full year RGTSU operations during the

year coupled with higher utilities cost of sales due to revision

of fuel gas tariff effective 1 January 2014 by RM133.5 million

and RM73.2 million respectively.

Gross Profit

Gross profit for the year soared by RM267.4 million (14%) from

RM1,944.9 million in the corresponding year to RM2,212.3

million. This is attributable to contributions from Regasification

segment of RM144.5 million, Gas Transportation segment by

RM104.3 million and Utilities segment by RM68.2 million. The

contribution from Gas Processing segment decreased by

RM49.6 million.

Other Income and Administrative Expenses

Other income and administrative expenses for the Group

were lower by RM29.0 million. This was primarily contributed

by recovery from early termination of electricity and utilities

agreement of RM78.3 million in FY2013 and partially offset by

lower administrative expenses by RM45.2 million.

Cost of Revenue by Segment (RM million)

FY2014

308.2

812.7

778.5

280.0

746.1

174.7

739.5

286.9

Gas Processing Regasification


PGB HAS ACHIEVED ITS HIGHEST GROSS PROFIT TO DATE, ATTRIBUTABLE TO THE STRONGER REVENUE FROM REGASIFICATION AND GAS TRANSPORTATION SEGMENTS

FY2013




701.7

1,006.7

308.0

195.9

127.7

163.5

751.3

902.4

FY2013

Share of PAT of Associates and Joint Ventures

The Group’s associate, Gas Malaysia Berhad (GMB) contributed

share of profit after tax of RM26.8 million whilst the joint

ventures, Kimanis Power Sdn Bhd (KPSB), Kimanis O&M

Sdn Bhd, and Industrial Gases Solutions Sdn Bhd, contributed

share of profit after tax of RM254.8 million, RM4.0 million and

RM3.1 million respectively. The total share of profit after tax of

equity-accounted associate and joint ventures amounted to

RM288.7 million, a surge of RM245.9 million (575%) as

compared to FY2013. This was mainly resulting from higher

PGB’s share of profit after tax from KPSB due to recognition

of deferred tax assets (DTA) arising from investment tax

allowance (ITA) granted by Ministry of Finance (MOF), following

commercial operations of all three blocks in FY2014.

Tax Expenses

Tax expenses were higher by RM694.8 million (381%) as

compared to RM182.5 million in FY2013 predominantly due

to recognition of deferred tax assets arising from RGTSU’s

ITA granted by Malaysian Investment Development Authority

(MIDA) amounting to RM626.4 million in FY2013.

Profit

As a result, the Group recorded profit after tax for the year

amounted to RM1,842.1 million, a drop of RM236.8 million

(11%) from RM2,078.9 million recorded in the previous year.

Excluding impact of the DTA, profit for the year increased by

RM235.1 million primarily attributable to profit contribution

from KPSB and higher profit contribution from Regasification

and Gas Transportation segments. Gas Processing Regasification


Result by Segment (RM million)

FY2014

PGB HAS REACHED ANOTHER MILESTONE IN FY2014 WHERE IT RECORDED HIGHEST PROFIT BEFORE TAX OF RM2,354.4 MILLION IN THE HISTORY OF THE GROUP

pg 87

SEGMENT FINANCIAL PERFORMANCE

Gas Processing

The Gas Processing segment contributed RM701.7

million (32%) of the Group’s gross profit. Segment

results dropped by RM49.6 million (7%) as compared

to FY2013 mainly due to higher cost of revenue by

RM32.4 million (4%) as a result of higher repair and

maintenance.

Gas Transportation

The Gas Transportation segment contributed

RM1,006.7 million (46%) of the Group’s gross

profit. Segment revenue for the year at RM1,286.7

million, represents an increase of RM97.4 million

(8%) on the back of higher transportation capacity

booked by PETRONAS under the new GTA.

Accordingly, segment results improved by

RM104.3 million (12%) in tandem with the higher

revenue.

Utilities

The Utilities segment contributed RM195.9 million

(8%) of the Group’s gross profit on the back of

RM1,008.6 million revenue. Segment revenue was

higher by RM141.4 million (16%) as compared to

FY2013 due to higher products offtake by

customers and upward revision of electricity tariff.

The Utilities segment results increased by RM68.2

million (53%) in tandem with higher revenue,

partially offset by higher utilities cost of sales in

line with fuel gas price revision effective 1 January

2014.

Regasification

The Regasification segment contributed RM308.0

million (14%) of the Group’s gross profit. Revenue

was RM616.2 million as a result of full year RGTSU

operations in FY2014. Accordingly, the segment

results increased by RM144.5 million for the year.

Revenue

Gross Profit

COR

1,008.6

867.2

812.7

739.5

195.9

127.7

2014 2013

Revenue

Gross Profit

COR

616.2

338.2

308.2

174.7

308.0

163.5

2014 2013

Revenue

Gross Profit

COR

1,286.7

1,189.3

280.0

286.9

1,006.7

902.4

2014 2013

Revenue

Gross Profit

COR

1,480.2

1,497.4

778.5

746.1

701.7

751.3

2014 2013

RM million

RM million

RM million

RM million




GROUP FINANCIAL POSITION

608.7

10,858.5

1,155.6

637.7

972.7

927.1

711.5

10,611.1

Assets

The Group’s total assets remained strong at

RM13,260.5 million as at 31 December 2014, marking

a marginal increase of RM38.1 million from RM13,222.4

million last year.

Property, Plant and Equipment (PPE)

Property, plant and equipment increased by RM247.4

million (2%) from RM10,611.1 million as at 31 December

2013 to RM10,858.5 million as at 31 December 2014

mainly resulting from further investments in major

growth projects and improvements to maintain the

integrity of the Group’s assets.

Cash and Fund Investments

The Group generated RM2.6 billion in cash from

operations. This was sufficient to sustain the current

year dividend payment to the shareholders of

RM1,583.0 million and significant portion of the

Group’s capital investments. Consequently, the

Group’s cash and fund investments decreased

by RM289.4 million (31%) from RM927.1 million as at

31 December 2013.

Trade and Other Receivables

Trade and other receivables decreased by RM102.8

million (14%) from RM711.5 million as at 31 December

2013 mainly resulted from repayment from related

companies during the year.

Other assets

Others assets increased by RM182.9 million (19%)

from RM972.7 million as at 31 December 2013 to

RM1,155.6 million as at 31 December 2014 in line with

increase in investment in joint ventures.

Property, plant and equipment Others assets

Trade and other receivable Cash and fund investment

Assets (RM million)

FY2014

FY2013

pg 89

811.0

8,555.1

882.3

1,033.3

1,978.7

Reserves Finance lease liabilities

Deferred tax liabilities Others

Share capital

1,133.9

8,287.0

841.8

981.0

1,978.7

Equity

Total equity of the Group as at 31 December 2014 of

RM10,569.0 million rose by RM303.5 million (3%)

from RM10,265.5 million as at 31 December 2013

primarily contributed by profit attributable to the

shareholders of the Company, offset by dividend

payment.

Liabilities

Total liabilities for the Group reduced by RM265.4

million (9%) from RM2,956.9 million as at 31 December

2013 to RM2,691.5 million as at 31 December 2014.

The decrease was mainly due to lower trade and

other payables by RM346.2 million (34%).

However, the decrease in liabilities was partially offset

by higher of deferred tax liability of RM52.3 million

(5%) and finance lease liabilities of RM40.5 million

(5%).

Equity and Liabilities (RM million)

FY2014

FY2013




Dividends

During the year, the Company made two interim

dividend payments of 20 sen per ordinary share each

under the single tier tax system in relation to financial

year ended 31 December 2014 amounting to RM791.4

million. The Board of Directors had declared an

interim dividend of 15 sen per ordinary share under

the single tier tax system amounting to RM296.8

million in respect of the financial year ended 31

December 2014 in February 2015. This, together with

the two interim dividends, resulted in net dividend of

55 sen per ordinary share, representing a dividend

payout ratio of 64%* on the profit after tax attributable

to the shareholders of the Company for the financial

year ended 31 December 2014.

Earnings Per Share (EPS) and Return on Equity

(ROE)

EPS for the Group decreased by 12.0 sen (11%) from

105.1 sen to 93.1 sen in line with lower profit after tax.

Excluding impact of DTA, EPS grew by 12.0 sen (16%).

The Group’s normalised ROE improved from 14% in

FY2013 to 16% in FY2014 in tandem with higher

normalised net income generated for the year.

Third Interim Dividend

Second Interim Dividend

First Interim Dividend

Final Dividend

Interim Dividend

Net Dividends Per Share (sen)

20142013

40.0

15.0

15.0

20.0

20.0

Note:* Excluding recognition of DTA arising from ITA granted for the Group.

(FY2014: RM154.5 million vs. FY2013: RM626.4 million)

pg 91

pg 93

TRUST & STEWARDSHIPWe recognise the importance of corporate

governance as it underpins the Management’s

actions and the Company’s business operations. In

enhancing the long-term value of the company for

the benefit of our shareholders and stakeholders,

we ensure that we comply with the highest

standards of trust, accountability and stewardship.

The Directors of PETRONAS Gas Berhad (PGB or the Company) promote and ensure good corporate governance within the Company so as to protect the interests of its shareholders.

The Company was also awarded Best

Corporate Governance Practices for Oil

and Gas by the MSWG-ASEAN

Corporate Governance Transparency

Index, Findings and Recognition 2014,

the Malaysian Chapter. The Company

was also ranked amongst the top ten

public listed companies for transparency

in disclosures benchmarked against the

ASEAN CG Scorecard published by the

Minority Shareholders Watchdog Group

in which strong emphasis is placed in

advocating good corporate governance

in companies.

The Company, for the financial year

under review was also awarded the

following accolades:

• Best Performing Stock with a

Market Capitalisation of more than

RM10 Billion

By The Edge Billion Ringgit Club

(Industrial Category)

• 4th Most Transparent Big Stocks in

Malaysia

By Focus Malaysia

• 3rd Best Managed Company in

Malaysia

By Finance Asia

• FTSE4Good Bursa Malaysia Index

By Bursa Malaysia

The Company’s compliance to the

principles and recommendations of the

MCCG 2012 are provided for throughout

the various sections of this Corporate

Governance Statement as well as in

other parts of this Annual Report for the

financial year ended 31 December 2014.

THE BOARD OF DIRECTORS

1. P r i n c i p a l R o l e s a n d

Responsibilities of the Board

The Board is generally entrusted

with the overall governance of the

Company, the responsibility to

exercise reasonable and proper

care of the Company’s resources

for the best interests of i ts

shareholders as well as to safeguard

the Company’s assets.

The Board is mindful of the

importance of the establishment

of clear roles and responsibilities

in d i scharg ing i t s f iduc ia ry

and leadersh ip funct ion as

recommended by MCCG 2012. In

this regard, the Board has assumed

the following responsibilities:

a) Review and approval of the

annual corporate plan, which

includes overall corporate

strategy, operational plan,

m a r k e t i n g p l a n , h u m a n

resources plan, financial plan

and budget, risk management

p l a n a n d i n f o r m a t i o n

technology plan;

b) Overseeing the conduct of

business, and evaluation of

whether the business is being

properly managed;

c) Identification of principal

r i s k s a n d e n s u r i n g t h e

implementation of appropriate

systems to control, monitor

and manage these risks;

T he Board has model led the

Company’s governance structure to

observe the following principles of

compliance:

• Malaysian Code on Corporate

Governance (MCCG 2012).

• Main Market Listing Requirements of

Bursa Malaysia Securities Berhad

(MMLR).

• Corporate D isc losure Gu ide :

Towards Boardroom Excellence (CG

Guide) by Bursa Malaysia Securities

Berhad (Bursa Malaysia) (2nd Edition)

• Corporate Disclosure Guide by

Bursa Malaysia.

• Minority Shareholders Watchdog

Group (MSWG) Malaysia-ASEAN

Corporate Governance Scorecard.

The Company’s stance in safeguarding

the transparent disclosure of its

corporate governance is evident in the

numerous accolades received in financial

year 2014. PGB received the 2014

National Annual Corporate Governance

Award (NACRA) for Industrial Products

and Technology under the Industry

Excellence category for Companies

Listed on the Main Market.



CORPORATE GOVERNANCE STATEMENT

d) Overseeing the succession

planning and appointment of

senior management, including

ensuring senior management

personnel are of sufficient

calibre;

e) Review the adequacy and

integrity of internal control

systems and management

information systems, ensuring

the establishment of sound

framework of reporting on

internal controls, including

regulatory compliance; and

f) Rev iew and approval of

quarterly results and year end

financial statements.

2. Board Charter

In discharging its duties and roles

effectively, the Board is guided by

its Board Charter, a document

which sets out the principles and

guidelines that are to be applied

by the Board and the Board

Committees. The Board Charter

was developed based on the

principles and recommendations

as set out in the MCCG 2012.

The PGB Board Charter was

adopted by the Board in March

2013 and serves as a guideline for

the Board and its Committees in

the execution of their responsibilities

for the Company. The Board

Charter shall be periodical ly

reviewed and updated from time to

time to reflect relevant changes to

policies, procedures and processes

as well as amendments to rules

and regulations.

The Board Charter is accessible to

the public for reference on the

Company’s official website at

www.petronasgas.com.

AN EFFECTIVE BOARD

A. Composition

The Board currently comprises of

eight Directors of which four are

Independent Non-Execut i ve

Directors who have been selected

based on their character, integrity,

experience and expertise in a wide

range of industries, as well as their

ability to add strength to the

stewardship of the Company.

The current composition of the

Board are as follows:

50%

12.5%

37.5%

Non-Independent Executive

Directors (also the MD/CEO)

Independent Non-Executive

Directors

Non-Independent Non-Executive

Directors

The composition of the Board is in

compliance with Paragraph 15.02

of the MMLR as more than one

t h i r d o f i t s m e m b e r s a r e

Independent Directors. A balanced

composit ion of Independent

Directors enables an effective and

objective check and balance on the

Board’s deliberation and decision

making. The presence of the

Independent Directors are also

crucial in the mitigation of any

possible conflicts of interests in

relation to related party transactions.

The Board consists of members

who have the mix of ski l ls ,

knowledge , exper ience and

capabilities which are relevant to

enable the Board to carry out its

responsibilities in an effective and

competent manner.

The profile of each Director is

presented in the Board of Directors’

Profile on pages 34 to 41 of the

Annual Report.

Separation of Powers between

Chairman and Managing Director/

Chief Executive Officer

There is a clear demarcation of

responsibilities within the Company

to ensure a balance of power and

author i ty . The pos i t ions o f

Chairman and Managing Director/

Chief Executive Officer (MD/CEO)

are separately held. The Chairman

is primarily responsible for smooth

functioning of the Board and

ensuring that all Directors have full

and timely access to all relevant

information, which is necessary

for informed decision making.

The MD/CEO ove r sees the

implementation of Board policies,

the day to day running of the

business and operational decision

making and ensures the Group

strengthened its sustainability

governance of its businesses and

p r o m o t e s a w a r e n e s s o n

environmental and social aspects.

The MD/CEO also manages the

respective responsibilities of the

divisions and departments in the

Company and he is assisted in the

management of the business by

the Management Committee (MC).

The distinct and separate roles of

the Chairman and the MD/CEO

ensures a balance of power and

authority , such that no one

individual has unfettered powers of

decision making.

pg 95

During the financial year under

review, Datuk Anuar bin Ahmad,

vacated his position as Chairman

and Board member o f the

Company effective 15 May 2014.

Datuk Anuar is succeeded by

Datuk Manharlal Ratilal, whose

profile is available on page 34 of

the Annual Report.

Non-Executive Directors

All Non-Executive Directors have

the necessary expertise and skill to

ensure that the strategies proposed

by the Management are fully

evaluated, taking into account the

long- te rm in te res t s o f the

shareholders. They review and

engage with the Management and

provide input to the strategy

development and the planning

process of the Company. In doing

so, the Non-Executive Directors

consider and rat ional ise the

initiatives and priorities towards

developing value proposition in

achieving the Company’s target.

In addition, they contribute to

policy formulation and are actively

involved in decision-making. They

provide guidance and promote

professionalism and competence

a m o n g M a n a g e m e n t a n d

employees.

The Directors who are nominated

as the representatives of Petroliam

Nasional Berhad (PETRONAS),

when making any decisions, always

act in the best interest of the

Company in line with Section

132(1E) of the Companies Act,

1965, Malaysia.

During deliberation of the Board

papers at the Board meetings, any

director who is in any conflict of

duties or conflict of interests

declares his interests and refrains

himself from participating in the

discussions of such Board papers.

B. Independence

The presence of the Independent

Non-Execut i ve D i rec to rs i s

essential in providing unbiased and

independent views, advice and

judgment, as well as in safeguarding

the interests of other stakeholders

including minority shareholders of

the Company. All Independent

Directors have met the criteria of

independence as set out in in

Paragraph 1.01 of the MMLR which

amongst o thers , s ta te tha t

Independent Directors must be

independent from Management

and free from any business

relationship which could interfere

with the exercise of his/her

independent judgment.

All Independent Directors are

required to submit a Statement of

Independence on an annual basis

as a conf i rmat ion o f the i r

independence. In addition, the

assessment of independence is

also included as part of the annual

Board evaluation.

Senior Independent Non-Executive

Director

Dato’ N. Sadasivan N.N. Pillay

continues to play an active role

a s a S e n i o r I n d e p e n d e n t

Non-Executive Director to whom

any concerns pertaining to the

Company may be conveyed.

Dato’ N. Sadasivan has served as

Senior Independent Director of the

Company for 19 years. At the

31st Annual General Meeting (AGM)

of PGB held on 5 May 2014, the

shareholders have approved the

re-appointment of Dato ’ N.

Sadasivan.

The Board believes that there are

notable benefits to be acquired

from long serving Directors who

possess insightful knowledge of

the Company’s businesses and

proceedings.

Following an assessment by the

Nomination and Remuneration

(NomRem) Committee and further

concurred by the Board in February

2015, the Board has agreed for

Dato’ N. Sadasivan to continue

to serve as an Independent

Director based on the following

justifications:

a) The appointment meets the

requirements under Paragraph

1.01 of the MMLR.

b) He provided effective check

and balance in the proceedings

of the Board and the Board

Committees.

c) He provided objectivity in

decision making through

unbiased and independent

views as well as advice and

judgment, to the Board.

d) He exhibited high commitment

and devoted sufficient time

a n d a t t e n t i o n t o h i s

responsibilities as Independent

Non-Executive Directors of

the Company.

e) He exercised due care in the

interest of the Company and

shareholders during his tenure

as Independent Non-Executive

Director of the Company.

f) He has also met with the

attendance requirements for

Board meetings pursuant to

the MMLR. During the financial

year under review, Dato’ N.

Sadasivan attended eight out

of nine Board meetings. This

testifies his dedication in

discharging the responsibilities

expected of an Independent

Director.




C. Diversity

The current Board composition

comprises of individuals of diverse

backgrounds with expertise and

skills in oil and gas industry,

engineering, finance, business and

accounting. The current overall

Board compos i t ion has the

adequate size and diversity of age,

gender and ethnicity. These are

important to ensure diversity of

view, facilitate effective decision

making and constructive board

deliberation during its meeting.

D. Time Commitment

In compliance to Paragraph 15.06

of the MMLR, each member of the

Board does not hold more than

five directorships in public listed

companies.

The Directors are required to notify

the Chairman before accepting

any new directorships to ensure

that such appointments would not

affect their time commitments and

responsibilities to the Board.

E. Re-election of Directors

Pursuant to Article 93 of the

Company’s Articles of Association,

an election of Directors shall take

place each year at the AGM of the

Company where one-third of the

Directors who are longest in office

shall retire and, if eligible, may

offer themselves for re-election. In

accordance with the Company’s

Articles of Association, at the 31st

AGM held on 5 May 2014, two

Directors retired by rotation and

were re-elected to the Board by

the shareholders.

Pursuant to Article 96 of the

Company’s Articles of Association,

any Director so appointed shall

hold office only until the next

following AGM of the Company

and shall then be eligible for

re-election. At the 31st AGM held

on 5 May 2014, two Directors

retired and were re-elected in

accordance with this provision.

Pursuant to Section 129 of the

Companies Act, 1965, Malaysia, a

Director who is over 70 years of

age must retire at the AGM of the

Company, and may be re-appointed

by shareholders with not less than

a three-fourth majority. At the

forthcoming AGM to be held on 30

April 2015, the Company intends to

seek its shareholders’ approval on

re-appointment of a Director

exceeding 70 years of age.

The Director has demonstrated to

the Board that he exercises

independent judgment and has

acted in the best interest of the

Company and ensured that the

varied competing interests of all

stakeholders are respected without

compromising financial performance

and accountability of the Company.

BOARD STRUCTURES AND PROCEDURES

A. Board Meetings

Board meetings are scheduled in

advance before the beginning of

the new financial year to enable

the Directors to plan ahead their

schedules to fit the series of

meeting during the year. Board

meetings are held at minimum of

quarterly intervals with additional

meet ings , inc lud ing spec ia l

meetings, held whenever necessary.

There were nine meetings during

the financial year under review,

consisting of scheduled and special

meetings. Al l Directors have

complied with the minimum

attendance requirement of at least

50% of Board Meetings pursuant to

the MMLR. The details of the

attendance of the Directors for the

financial year under review are as

follows:

Table 1: Attendance Record

Name of Directors Attendance Percentage

Datuk Manharlal Ratilal* 5/5 100%

Yusa’ bin Hassan 9/9 100%

Dato’ N. Sadasivan N.N. Pillay 8/9 89%

Datuk Rosli bin Boni 9/9 100%

Dato’ Ab. Halim bin Mohyiddin 9/9 100%

Ir. Pramod Kumar Karunakaran 9/9 100%

Lim Beng Choon 8/9 89%

Habibah binti Abdul 9/9 100%

Datuk Anuar bin Ahmad** 4/4 100%

* Appointed on 15 May 2014

**Vacated office on 15 May 2014

pg 97

B. Supply of and Access to Information

In discharging their duties with

reasonable care, skill and diligence,

the Directors will be accorded with

sufficient information on any

subject matter so as to enable the

Directors to make the business

judgment in the best interest of

the Company and shareholders.

Prior to the Board meetings, every

Director is given an agenda and a

set of Board papers covering the

agenda items to facilitate informed

decision making. The agenda and

the Board papers which contain

quantitative information and other

related performance factors are

circulated prior to the Board

Meetings and this will enable the

D i r e c t o r s t o h a v e a g o o d

assessment of the subject in hand

prior to arriving at any decision.

The MD/CEO leads the presentation

of Board papers and provides

comprehensive explanation on

pertinent issues. All proceedings of

Board meetings are minuted and

signed by the Chairman of the

meeting in accordance with the

provisions of Companies Act, 1965

in Malaysia. Minutes of the Board

meetings which record decisions

and resolutions are properly

maintained by the Company

Secretary.

The Board is kept updated on the

Group’s activities and operations

on a regular basis. All Directors

have full access to information,

including monthly reports on the

Company’s overall activities, both

financial and operational.

The Board, as well as the individual

Directors, are entitled to seek

independent professional advice

from technical, financial and legal

a d v i s e r s t o a s s i s t t h e m i n

discharging their responsibilities as

Directors on matters relating to

the Company.

The Directors have access to the

adv ice and serv ices of the

Company Secretar ies, whose

appointments and resignations are

subject to Board’s approval. The

Chairman is always accorded

strong and positive support of the

Company Secretaries in ensuring

the effective functioning of the

Board.

The Company Secretaries attended

all Board Meetings and have

ensured that accurate and adequate

records of the proceedings of the

Board meetings and decision made

are properly kept. The Company

Secretaries also ensure that the

Board members receive briefings

on changes in regulation or law, as

circumstances require.

The Board is fully aware of, and

acts on any matters for decision to

ensure proper direct ion and

control of the Company. Such

matters, outlined in the Company’s

L imi t s o f Author i ty , c lear ly

established the authority of the

Board and the Management.

C. Board Committees

Based on the provision under the

Articles of Association of the

Company, the Board has set up

spec i f i c Board Commi t tees

delegated with specific powers,

functions and responsibilities.

The Board has established two

committees to ass ist in the

execution of its responsibilities as

detailed below:

BOARD OF DIRECTORS

BOARD AUDIT

COMMITTEE

NOMINATION

AND

REMUNERATION

COMMITTEE

Each of the committee is governed

under specific Terms of Reference

detailing its delegated authority

from the Board.

Board Audit Committee (BAC)

The BAC comprising mainly the

Independent Non-Execut i ve

Directors has specific Terms of

Reference including the review

of quarterly results, f inancial

s t a t e m e n t s , c o r p o r a t e

announcements, internal control

system and the reports of the

Group Internal Audit Division of

PETRONAS. It also ensures the

adequacy, integrity and effectiveness

of the Company’s internal control

s y s t e m a n d m a n a g e m e n t

information system and that they

are in compl iance with the

Company’s policies and procedures,

applicable laws and regulations and

MMLR. The BAC monitors the

ef fect ive implementat ion of

programmes to ensure compliance

to the Company’s Risk Management

Policy. It will continue to ensure

that the principal risks facing the

Company are ident i f ied and

mon i to red and appropr i a te

measures are undertaken to




manage these risks. The BAC Terms

of Reference and the BAC Report

are detailed out in pages 130 to 131

and 124 to 127 respectively in the

Annual Report.


Committee (NomRem)

The NomRem Committee of the

Company was established on 14

November 2011 and comprises

three Independent Non-Executive

Directors. In line with the MCCG

2012, all NomRem Committee

members including the Chairman

are Non-Executive Directors. The

m e m b e r s o f t h e N o m R e m

Committee are appointed by the

Board from amongst themselves.

A report on the membership of

the NomRem Committee, i ts

Terms of Reference and its duties,

responsibil it ies as well as its

activit ies are detai led out in

pages 107 to 110 and 111 to 112

respectively in the Annual Report.

Management Committee (MC)

The MC is chaired by the MD/

CEO, who is responsible for the

day to day operations of PGB and

is also accountable to the Board.

The membership of the MC

comprises of the Heads of Divisions

within the Company.

The MD/CEO is further assisted in

the implementation of projects

and the operations of the Company

with the establishment of various

other committees such as the

People Development Committee,

Risk Compliance Committee,

Commercial Steering Committee

and Project Steering Committee.

BOARD DEVELOPMENT AND PROGRESSION

A. Training of Directors

The Directors are mindful that they

shall receive appropriate training

which may be required from time

to time to keep them abreast with

the current developments of the

industry as well as the new statutory

and regulatory requirements.

All Directors have attended the

necessary training as required by

the MMLR, as detailed out on

pages 104 to 105 of the Annual

Report.

Any new Director is given a

comprehensive understanding of

the operations of the Company

through an introductory briefing

on the Company history and

f inancial control systems. In

addition to this, plant visits are

arranged to ensure first-hand

understanding of the Group’s

operation.

INTEGRITY AND ETHICS

The Board further acknowledges its

role in establishing a corporate culture

comprising ethical conduct within the

Group. In line with this principle, the

Board has adopted the PETRONAS

Code of Conduct and Business Ethics,

the Whistleblowing Policy and the Anti-

Bribery and Corruption Manual. The

adoption of such policies are so as to

ensure that the conduct of business

and the Company’s employees are

consistently carried out ethically and

with integrity.

1. Code of Conduct and Business

Ethics

The Code of Conduct and Business

Ethics (CoBE) emphasises and

advances the p r inc ip les o f

discipline, good conduct, loyalty,

integrity, professionalism and

cohes iveness . The CoBE i s

accompanied by the CoBE Guide

which sets out the Frequently

Asked Questions to assist in the

application of the CoBE.

A copy of the CoBE is available on

the Company’s corporate website

for viewing by the public and any

third parties dealing with the

Company.

2. Whistleblowing Policy

I n l i n e w i t h i t s o n - g o i n g

commitment to transparency and

integrity, the Company has also

adopted PETRONAS’ Whistleblowing

Policy to provide an avenue for all

employees of the Company to

d i s c l o s e a n y i m p r o p e r o r

unprofessional conduct at the

workplace.

T h e p o l i c i e s u n d e r t h e

Whistleblowing Policy maintain the

confidentiality of the whistleblower,

to the extent which is reasonably

p r a c t i c a b l e , t o e n s u r e t h e

protection of the whistleblower

from any adverse reactions in his

course of disclosing any improper

conduct committed or about to be

committed within the Company.

Any report submitted under the

Whistleblowing Policy shall be

s u b j e c t e d t o a t h o r o u g h

invest igation to determine a

reasonable course of action.

A copy of the Whistleblowing

P o l i c y i s a v a i l a b l e o n t h e

Company’s corporate website for

viewing by the public and any third

parties dealing with the Company.

pg 99

3. Anti Bribery and Corruption

Manual

In compliance with the CoBE,

the Company has adopted the

PETRONAS Ant i Br ibery and

Corruption Manual which governs

the prevention of corruption and

unethical practices within the

Group.

The Company has also adopted

and implemented the ‘No Gift

Policy’ as a means to avoid any

conflict of interest situations for

either party or potential business

dealings between the Company

and third parties.

4. Corporate Disclosure Guide

The Company has established an

internal Corporate Disclosure Guide

to facilitate the disclosure and

conduct on the dissemination of

information. This Guide is based on

the requirements as set out in the

MMLR, the Corporate Disclosure

Guidelines [2nd Edition] by Bursa

Malaysia and promotes transparency

a n d a c c o u n t a b i l i t y i n t h e

dissemination of material information

amongst the Company organisation

and public. A detailed guide is

available at www.petronasgas.com

ENGAGEMENT WITH SHAREHOLDERS AND STAKEHOLDERS

T he Company recognises the

importance of timely, fair and equal

d isseminat ion of information to

shareholders and public generally. In

this regard, it adheres strictly to the

disclosure requirements of Bursa

Malaysia. Besides the announcement

v i a B u r s a L I N K , t h e C o m p a n y

communicates regularly with the

shareholders through the annual report

and the quarterly financial reports.

I n p r o v i d i n g s t a k e h o l d e r s t h e

opportunity to gain first-hand exposure

on the Company’s operations, several

visits to Gas Processing Plants and

Centralised Utility Facilities located in

Kertih and Santong, Terengganu,

Pahang, as well as the Segamat

Operat ions Centre, Johor, were

organised during the year under review.

The s takeholders were g iven a

presentat ion on the Company’s

operations and were provided the

opportunity to ask for more information

in respect of the plant operations. The

Management be l i eves tha t the

stakeholders by having a better

understanding of the Company’s

a c t i v i t i e s , w i l l h a v e a g r e a t e r

understanding about the Company.

S u c h t w o - w a y c o m m u n i c a t i o n

increases corporate transparency and

helps the stakeholders take a longer

term view of their investment based on

a better understanding of the Company’s

corporate strategy and operations.

1. Disclosures

The Board recognises the need to

fully disclose to shareholders all

major developments in relation to

the Group on a timely basis. In

add i t ion to the mandatory

disclosures requirement by Bursa

Malaysia as well as other corporate

disclosures, the Company has long

established its corporate website

www.petronasgas.com to allow

the pub l i c pa r t i cu la r l y the

shareholders, investors and analysts

to have access to information such

as corporate profile, policies

and guidelines contact details

o f des ignated persons and

announcements made to Bursa

Malaysia.

In all circumstances, the Company

preserves confidentiality with

regard to undisclosed material

information about the Company

and continuously stresses the

importance of timely, fair and

equal dissemination of information

to the shareholders and the public

generally.

2. Annual General Meeting (AGM)

The AGM is a crucial mechanism

in shareholders communication.

This is the platform for dialogue

during which shareholders and

investors are informed of the

financial performance and current

developments of the Group.

Shareholders are notified of the

meeting and provided with a copy

of the Company’s Annual Report

21 days before the meeting.

Shareholders are encouraged to

attend the AGM and participate in

the proceedings.




At each AGM, the Board provides

shareholders with an opportunity

to ask questions on the progress

and performance of the Company,

without limiting the time and types

of questions asked, prior to seeking

approval by show of hands from

members and proxies on the

resolutions. The Chairman informs

on the availability of poll voting by

shareholders on matters raised

during the AGM.

During the meeting, the Chairman

and Board members as well as the

Senior Management and Project

Management team are available to

respond to a l l quer ies and

undertake to provide sufficient

clarification on issues and concerns

raised by the shareholders. The

external auditors are also present

to provide their professional and

independent clarification on issues

and concerns ra ised by the

shareholders. The status of all

resolutions proposed at the AGM

is submitted to the Bursa Malaysia

at the end of the market day on

the AGM day.

The Board has ensured that where

there is special business included

in the notice of the Annual or

Extraordinary General Meeting,

each item of the special business

i s a c c o m p a n i e d b y a f u l l

explanation of the effects of the

proposed resolution.

ACCOUNTABILITY AND AUDIT

1. Financial Reporting

The Board aims to present a

balanced and understandable

assessment of the Company’s

position and prospects. This also

applies to other price-sensitive

public reports and reports to

regulators. The Statement of

Directors’ Responsibility is enclosed

in page 185 of the Annual Report.

2. Risk Management and Internal

Control

The Board continues to maintain a

sound system of risk management

and internal control to safeguard

shareholders’ investment and the

Company’s assets. The principle is

further elaborated under the

Statement on Risk Management

and Internal Control by the

Directors in pages 113 to 122 of

the Annual Report.

3. Related Party Transactions

(RPTs), Recurrent Related Party

Transact ions (RRPTs) and

Conflict of Interests (COI)

a) Compliance Monitoring

The Company’s corporate

structure and integrated

business operations amongst

c o m p a n i e s w i t h i n t h e

PETRONAS Group makes it

susceptible to certain RPT/

RRPT situations. The Company

is responsible to ensure that

all transactions entered into

that involve related parties

comply with al l relevant

r e g u l a t i o n s a n d a r e

appropriately evaluated based

on fairness, reasonableness

and consistency.

b) Policies

The Board has adopted the

RPT Policies & Procedures

(P&P) to ensure that a l l

transactions that involve RPT

or COI are determined on a

fair, reasonable and consistent

basis.

The RPT P&P was developed

t o e n s u r e c o m p l i a n c e

throughout the Group with

any re levant regulat ions

pertaining to RPTs and to

ensure that all RPTs entered

into by the Group are subject

to adequate and effective

monitoring and documentation

processes.

The Company monitors the

report ing thresholds and

percentage ratios of all RPT/

RRPTs of the Group. For

transactions that exceed the

reporting threshold, or when

an announcement is required

u n d e r t h e M M L R , t h e

Company makes prompt and

complete announcements

to Bursa Ma lays i a . The

Company adheres to relevant

requirements as prescribed

under the MMLR in the

reporting of its transactions.

c) Bursa Malaysia Securit ies

Berhad Waiver

The Company may apply to

Bursa Malaysia for specific

waivers on certain RPTs/

RRPTs that may be entered

into by the Group with the

related parties from complying

with certain paragraphs of the

MMLR. The waiver is normally

very specific in nature and the

Group must strictly comply

with the terms and conditions

stated in the approval letter of

Bursa Malaysia if such waiver

was granted by Bursa Malaysia.

pg 101

d) Disclosure of Interests

The Directors complete the

annual declaration forms, for

the purposes of identifying

potential relationships and/or

COI situations. The interested

Directors must also declare in

writing on an annual basis, if

there are any RPT or COI

s ituat ions involving their

interest, either directly or

indirectly.

The interested Director must

abstain from participating in all

Board deliberation and voting

involving the RPTs/RRPTs at all

relevant Board meetings. The

in te res ted D i rector and

interested major shareholder

must ensure that persons

connected with them with any

interest, direct or indirect, shall

abstain from participating in all

de l ibera t ion and vot ing

involving the RPT/RRPT at the

relevant general meetings.

e) Board Aud i t Commit tee

Review and Endorsement

The BAC reviews all RPTs/

R R P T s t o e n s u r e t h a t

Management has established

a comprehensive framework

for the purposes of identifying,

m o n i t o r i n g , e v a l u a t i n g ,

reporting and approving RPTs/

RRPTs. In reviewing the RPTs/

RRPTs, the BAC shall consider

factors it deems appropriate,

including but not limited to

the following:

i) The benef i t s o f the

t r a n s a c t i o n s t o t h e

Group;

ii) The arm’s length basis

m a i n t a i n e d d u r i n g

n e g o t i a t i o n s a n d

t h e c o m m e r c i a l

reasonableness of the

terms of the transactions;

iii) The materiality of the

R P T s / R R P T s t o t h e

Group;

iv) Justification as to why

the transaction must be

undertaken with the

related party, for example

that the goods/services

sourced from the related

party cannot be obtained

elsewhere;

v) The extent of the related

party’s interest in the

RPT/RRPT;

vi) T h e i m p a c t o f t h e

t r a n s a c t i o n o n a n

employee’s or director’s

independence;

vii) The actual or apparent

COI of the related party’s

participating in the RPT/

RRPT; and

viii) Any other matters the

BAC deems appropriate.

f) Process Flow

The process flow in the P&P

is a guide to assist in the

identification of RPTs/RRPTs

and the administration of such

transactions. The process flow

is broken down into three

sections:

i) Verification Stage

The in i t i a l s tage to

ident i fy whether the

transaction is RPT/RRPT;

ii) Review/Approval Stage

The administration stage

where the transaction is

reviewed/endorsed by its

various stakeholders/

relevant departments prior

to approval/execution

f r o m t h e r e l e v a n t

personnel/authority based

on the Group’s Limits of

Authority; and

iii) Monitoring Stage

The post-execution stage

where the transaction is

to be moni tored to

ensure compliance with

the MMLR and filed with

its relevant custodian.

4. Relationship with the Auditors

a) External Auditors

The external auditors, Messrs

KPMG, have continued to

report to members of the

Company on their opinions

which are included as part of

the Company’s f inancia l

reports with respect to their

audit on each year’s statutory

financial statements. In so

doing, the Company has

established a transparent

arrangement with the auditors

t o m e e t t h e a u d i t o r s ’

professional requirements.

From t ime to t ime, the

auditors highlight to the BAC

and the Board, matters that

require the Board’s attention.

The external auditor has had

separate sessions with BAC

without the presence of the

Management to highlight any

c o n c e r n s w i t h i n t h e

Company’s system of internal

control and compliance.

The Report by the BAC on the

review of audit reports is

enclosed in pages 124 and

127 of the Annual Report.

The Board cont inuous ly

reviews and monitors the

suitability and independence

of its external auditors. The

BAC also obtains assurance

from the external auditors on

t h e i r i n d e p e n d e n c e i n

discharging their duties.




b) Internal Auditors

The Company ’s In terna l

Auditors, of which the function

is undertaken by the Group

Internal Audit Deportment

(GIAD) of PETRONAS reports

directly to the BAC and has

unrestricted access to the

BAC.

T h e G I A D f u n c t i o n i s

independent of the activities

o r o p e r a t i o n s o f o t h e r

operating units. The GIAD

conducts regular audits on

the effectiveness of internal

controls, compliance with

i n t e r n a l a n d r e g u l a t o r y

requi rements . The audi t

report which highlights any

f indings, a long with the

recommendations are tabled

to the BAC.

This statement is made in accordance

with the resolution of the Board of

Directors dated 17 February 2015.


Yusa’ bin HassanManaging Director/


ADDITIONAL COMPLIANCE INFORMATION

1. Non-Audit fees

The amount of non-audit fees paid

and payable to the external

auditors by the Company for the

financial year ended 31 December

2014 was RM15,000.

2. Sanctions

During the period, there were no

sanctions and/or penalties imposed

o n t h e C o m p a n y a n d i t s

s u b s i d i a r i e s , D i r e c t o r s o r

Management by the relevant

regulatory bodies.

3. Material Contracts

During the financial year, the

following material contracts were

entered into by the Company or

its subsidiaries involving Major

Shareholders’ interest:

(a) Gas Processing Agreement,

Gas Transportation Agreements

and Agent Services Agreement

The Gas Processing Agreement,

Gas Transportation Agreements

and Agent Services Agreement

were entered into on 31 March

2014 between the Company

and its substantial shareholder,

Petroliam Nasional Berhad

(PETRONAS), for the provision

of services for the processing,

transportation and distribution

of gas via the Peninsular Gas

Utilisation pipeline system for

p r o c e s s i n g a n d g a s

transportation fee that covers

reasonable capital costs and

operating expenses, for a

period of 20 years.

(b) P r o j e c t M a n a g e m e n t

C o n s u l t a n c y S e r v i c e s

Agreement for the Engineering,

Procurement, Construction &

C o m m i s s i o n i n g o f t h e

R e g a s i f i c a t i o n T e r m i n a l

P ro jec t Loca ted a t the

P e n g e r a n g D e e p W a t e r

Terminal, Johor

The Project Management

C o n s u l t a n c y S e r v i c e s

Agreement for the Engineering,

Procurement, Construction &

C o m m i s s i o n i n g o f t h e

R e g a s i f i c a t i o n T e r m i n a l

P r o j e c t l o c a t e d a t t h e

P e n g e r a n g D e e p W a t e r

Terminal, Johor (RGTP) was

entered into on 14 November

2014 between the Company

and a subs id ia ry o f i t s

subs tant i a l sha reho lder ,

PETRONAS Technical Services

Sdn Bhd, for the provision of

consultancy services for the

RGTP during the project

phase based on reimbursable

basis at non-escalating fixed

unit rate for the RGTP project.

Other than the above, the

R e g a s i f i c a t i o n S e r v i c e s

Agreement is a mater ia l

contract which was entered

into since 2013 between the

Company and its substantial

shareholder, PETRONAS, for

the provision of regasification

services at the l iquef ied

natural gas Regasification

Terminal in Sungai Udang,

Melaka, for a period of 20

years.

pg 103

LIST OF TRAINING PROGRAMMES ATTENDED BY DIRECTORS OF PGB IN 2014

No. Director Training Attended

1. Datuk Manharlal Ratilal • MISC Directors’ Training (October 2014)

• Customised Advocacy Session for Directors (27 November 2014)

2. Yusa’ bin Hassan • Pulse of Asia Conference, organised by DBS Vickers,

Singapore (8 January 2014).

• 5th Annual dbAccess Asia Conference, Singapore (19 – 23 May 2014)

• Malaysian Code for Institutional Investors (27 June 2014)

• Innovating Malaysia Conference 2014 (28 – 29 August 2014)


3. Dato’ N. Sadasivan N.N. Pillay • 2014 Audit Committee Conference ‘Stepping Up for Better Governance’

(20 March 2014)

• Directors’ Training on Board Dynamics and Governance (25 August 2014)

• Directors’ Breakfast Series: ‘Great Companies Deserve Great Boards’

(10 October 2014)

• Audit Committee Institute – Breakfast Roundtable Titled: ‘The Impact of Cyber

Security at Board Levels’ (12 November 2014)


4. Dato’ Ab. Halim bin Mohyiddin • MFRS/FRS Update 2013/2014 Seminar (18 March 2014)

• Workshop on Network, Spectrum and Branding (15 May 2014)

• Risk Management and Internal Control (5 June 2014)

• The Role of Chairman Programme (23 June 2014)

• Project Orient Workshop (15 August 2014)


• Budget 2015 Review and Transfer Pricing (30 October 2014)


5. Datuk Rosli bin Boni • Directors’ Training on Board Dynamics and Governance (25 August 2014)




TRAINING PROGRAMMES ATTENDED BY DIRECTORS

No. Director Training Attended

6. Lim Beng Choon • MIA Audit Committee Conference Stepping Up for Better Guidance

(20 March 2014)

• GST – Goods & Service Tax (30 May 2014)

• Valuing Intellectual Property (23 September 2014)

• Great Companies Deserve Great Boards (10 October 2014)

• MISC Annual Directors Training (15 October 2014)



7. Ir. Pramod Kumar Karunakaran • Bursa Malaysia Securities Berhad: Advocacy Sessions on Corporate Disclosure

for Directors of Listed Issuers (2 July 2014)

• PETRONAS Directors’ Training for Calendar Year 2014 – In House Continuing

Directors’ Training Programme (25 August 2014)

8. Habibah binti Abdul • Directors’ Training on Board Dynamics and Governance (25 August 2014)


• GST briefing by KPMG (27 February 2014)

• Briefing Session on Corporate Governance Guide by Bursa Malaysia Securities

Berhad (25 March 2014)

• TalentCorp/ICAEW Women in Leadership Workshop (17 April 2014)

• Risk Posture Workshop for CIMB Directors (24 July 2014)

• Board Dynamics and Governance organised by PETRONAS (25 August 2014)

• Global Islamic Finance Forum by Bank Negara Malaysia (2 September 2014)

• GST Awareness training for CIMB Directors by Ernst & Young

(8 September 2014)

• 12th Women’s Summit (15 September 2014)

• Customised Advocacy session for PETRONAS Directors by Bursa Malaysia

Securities Berhad (14 October 2014)

• Tax Seminar 2015 Tax Budget organised by Ernst & Young (17 October 2014)

• AMLA training for CIMB Directors (12 December 2014)

pg 105

The implementation of the CoBE is part

of the Group’s corporate enhancement

programme and reflects the importance

of an effective corporate governance

and compliance culture within the

Group.

The CoBE is accompanied by a CoBE

Guide that sets out frequently asked

questions and the ‘Dos’ & ‘Don’ts’ in

relation to certain specific situations.

The CoBE Guide is printed in booklets

and distributed to all employees.

As part of the extension of CoBE, PGB

is in the midst of implementing

Corporate Integrity System (CIS) for its

employees and contractors. This is part

of the PGB commitment to uphold the

Anti-Corruption Principles. Amongst the

objective of the CIS are as follows:

i) To promote integrity, accountability

and proper management of anti-

corruption programs, for adoption

by PGB; and

ii) To reinforce corporate governance,

in tegr i t y , t r ansparency and

accountability in the daily operational

processes and procedures of PGB.

PETRONAS Gas Berhad (PGB or the Company) and its subsidiaries (Group) are committed to a high level of accountability, transparency and maintaining an ethical, law-abiding culture that provides enormous benefit to the Group.

The Board of Directors of PGB had

on 30 April 2012 adopted PETRONAS

Code of Conduct and Business Ethics

(CoBE). The CoBE serves as a guide to

be applied by every employee and

director of each PETRONAS companies

worldwide. PETRONAS encourages joint

ventures and associate of the Group to

also adopt these or similar principles

and standards.

The CoBE places significant importance

in upholding loyalty and cohesiveness,

all of which form the foundation for

the success of the Company. The CoBE

contains a detailed policy on the

standards of conduct expected from

each employee as well as the Directors

of the Company. The Company also

enforces the CoBE on all its contractors,

sub-contractors, agents, consultants,

representatives and any other persons

performing works or services for and

on behalf of the Company. In short, the

CoBE expressly prohibits improper

solicitation, bribery and other corrupt

activity not only by employees and

Directors but also by third parties

performing work or services for or

on behal f of companies in the

PETRONAS Group.

Approximately 100 PGB contractors

representing 39 companies have

undertaken a verbal Corporate Integrity

Pledge (CIP) during the PGB Contractors

Forum in October 2014. The awareness

session on the CIS to the PGB

contractors was initiated in 2012 during

sharing session of Integrity Framework.

A copy of the CoBE is available on the

Company’s corporate website, for

viewing by the public and any third

parties dealing with the PGB.



CODE OF CONDUCT AND BUSINESS ETHICS

COMPOSITION

As at 31 December 2014, the NomRem Committee comprises three Independent Non-Executive Directors. In line with the

Malaysian Code on Corporate Governance 2012 (MCCG 2012), all NomRem Committee members including the Chairman are

Non-Executive Directors.

The NomRem Committee is chaired by an Independent Director, Mr Lim Beng Choon. Whilst the MMLR has recommended that

the NomRem Committee be chaired by the Senior Independent Director, the Senior Independent Director, Dato’ N. Sadasivan

N.N. Pillay is currently the Chairman of the Board Audit Committee. The Board has instead elected Mr Lim Beng Choon as the

Chairman of the NomRem Committee so as to have different Directors chairing the committees to leverage on different

perspectives and dynamics as well as to ensure that each Independent Director has equitable roles and responsibilities.

The Members of the NomRem Committee as at 31 December 2014 are:-

No. Name of Members Directorate

1. Lim Beng Choon

(Chairman)

Independent

Non-Executive Director

2. Dato’ N. Sadasivan N.N. Pillay Senior Independent


3. Habibah binti Abdul Independent


In compliance with Paragraph 15.08A of the Main Market Listing Requirement of Bursa Malaysia Securities Berhad (MMLR), the Nomination and Remuneration (NomRem) Committee of PETRONAS Gas Berhad (PGB or the Company) was established on 14 November 2011. The NomRem Committee is pleased to present the NomRem Committee Report for the financial year ended 31 December 2014.

Lim Beng Choon Dato’ N. Sadasivan N.N. Pillay Habibah binti Abdul

pg 107

NOMINATION AND REMUNERATION COMMITTEE REPORT

The Managing Director/Chief Executive

Officer (MD/CEO), Company Secretaries,

Head of Human Resources and any

other persons deemed necessary by

the NomRem Committee are invited to

attend and are present for deliberations

which require their input or advice. The

Company Secretaries and the Head of

Human Resources act as jo in t

secretaries to the NomRem Committee.

RESIGNATION OF NOMREM MEMBERS

Any NomRem Committee member

may resign effective upon the date of

the member giving oral or written

notice to the Chairman of the Board,

the Company Secretary or the Board

(unless the notice specifies a later time

for the effectiveness of such resignation).

The Board will elect a successor to

take off ice once the resignation

becomes effective.

The NomRem Committee member

shall automatically be terminated if the

member ceases to be a Director for

any reason whatsoever or as determined

by the Board.

ROLES AND RESPONSIBILITIES

The following shall be the common

recurring duties and responsibilities of

the NomRem Committee in carrying

out its purposes. These duties and

responsibilities are set forth as a guide

to the NomRem Committee with the

understanding that the NomRem

Committee may amend or supplement

them as appropr iate under the

circumstances to the extent permitted

by applicable laws:

(a) Assess the effectiveness of the

Board as a whole, the Committees

of the Board and the contribution

of each individual Director.

(b) Review regularly the selection

criteria for Board membership,

the Board structure, size and

c o m p o s i t i o n a n d m a k e

r e c o m m e n d a t i o n s f o r a n y

adjustments thereto.

(c) Develop membership qualifications

for the Board, including defining

specif ic cr i ter ia for Director

independence and committee

membership.

d) Review annually the Board’s mix of

ski l ls , education, experience,

diversity in terms of gender,

ethnicity and age and other

q u a l i t i e s i n c l u d i n g c o r e

competencies which Directors

should bring to the Board, taking

into account the current and

future needs of the Company.

e) Review and recommend any change

to the remuneration structure and

policy for Directors and Senior

Management, as necessary.

TERMS OF REFERENCE

T he NomRem Commit tee i s

governed by the Terms of Reference as

stipulated on pages 111 to 112 of the

Annual Report.

MEETINGS AND ACTIVITIES

T he NomRem Committee wil l

deliberate on the above matters during

meetings which shall be held at least

twice a year or at such other times as

the Cha i rman of the NomRem

Committee deems necessary. In addition

to the schedule of regular meetings

established by the NomRem Committee,

the Cha i rman of the NomRem

Committee may call a special meeting

at any time. In order to form a quorum,

two of the members of the NomRem

Committee must be present, one of

whom must be an Independent Director.

During the financial year under review, the NomRem Committee met twice and

the attendance of the members are as follows:-

Name of Members No. of meetings attended

Lim Beng Choon (Chairman) 2/2

Dato’ N. Sadasivan N.N. Pillay 2/2

Habibah binti Abdul 2/2

On the appointment process of Board Members, all nominees to the Board are

considered by the NomRem Committee. The NomRem Committee’s role in the

appointment process is to undertake an assessment of the potential nominees’ and

to initiate the selection process for the Board.




SUMMARY OF ACTIVITIES OF THE NOMREM COMMITTEE

The following activities were carried

out by the NomRem Committee during

the financial year ended 31 December

2014:-

(a) Assessment on the effectiveness of

the Board as a whole , the

Committees of the Board as well

as the contr ibut ion of each

individual Director through a Board

Ef fect iveness and Directors ’

Evaluation exercise.

(b) Review of the succession planning

o f the sen io r management

positions of PGB as well as the

E m p l o y e e P e r f o r m a n c e

Management System and the

evaluation of the performance of

PGB’s Senior Management.

(c) Review of Directors’ Training

Requirements.

(d) Review of the status of PGB’s

compliance and gaps with respect

to the recommendations as set

out in the MCCG 2012.

(e) R e v i e w o f t h e P G B B o a r d

Evaluation Questionnaires.

BOARD EVALUATION

Every year, under the purview of the

NomRem Commit tee , a fo rma l

evaluation is undertaken to assess the

effectiveness of the following:-

(a) The Board as a whole and the

various Board Committees.

(b) Contribution of each Individual

Director.

(c) Independence of Independent

Directors.

This is conducted through a Board

Evaluation process which consists of a

Board and Peer Annual Assessment

(Board Evaluation). The Board Evaluation

focuses on maximising the effectiveness

and performance of the Board in the

best interest of the Company.

DIRECTORS’ FEES

W ith the exception of the MD/

CEO, all Non-Executive Directors are

paid Directors’ fees as approved by the

shareholders at the Annual General

Meeting, based on the recommendation

of the Board. For the financial year

under review, the Directors’ Fees paid

are as follows:

Table: Details of Directors’ Fees

Directors’ NameDirectors’ Fees

(RM)

Board Meeting Attendance

Fees(RM)

Board Audit Committee

Meeting Attendance

Fees(RM)

NomRem Meeting

Attendance Fees(RM)

Total(RM)

Datuk Manharlal Ratilal

(Chairman)

(Appointed on 15 May 2014) Nil Nil Nil Nil Nil

Yusa’ bin Hassan Nil Nil Nil Nil Nil

Dato’ N. Sadasivan N.N. Pillay 72,000 24,000 24,000 4,000 124,000

Datuk Rosli bin Boni 72,000 27,000 16,000 Nil 115,000

Ir. Pramod Kumar Karunakaran Nil Nil Nil Nil Nil

Dato’ Ab. Halim bin Mohyiddin 72,000 27,000 16,000 Nil 115,000

Lim Beng Choon 72,000 24,000 Nil 6,000 102,000

Habibah binti Abdul 72,000 27,000 Nil 4,000 103,000

Datuk Anuar bin Ahmad (Chairman)

(Resigned on 15 May 2014) 4,500 4,000 Nil Nil 8,500

Total 364,500 133,000 56,000 14,000 567,500

pg 109

Fees for certain Directors appointed by

PETRONAS are pa id d i rect ly to

PETRONAS as Board of Directors

representation fees. During the year,

the Company paid RM249,500 as Board

of Directors representation fees for

PETRONAS. A formal written policy and

procedures for directors’ remuneration

is currently being developed.

The MD/CEO, an employee o f

PETRONAS, i s seconded to the

Company as an Executive Director. The

MD/CEO, as well as the other Directors

representing PETRONAS, possess a mix

of skills, knowledge, expertise and

experience, each contributing towards

managing the various assets of the

Company’s d iverse bus iness . In

consideration of the service of the MD/

CEO, the Company is required to pay a

management fee to cover all payroll-

related costs and benefits ordinarily

incurred by him in the course of his

employment. During the year, the

C o m p a n y p a i d R M 7 3 6 , 8 0 0 a s

management fee. The Company also

reimburses all reasonable expenses

incurred by the Directors, where

relevant, in the course of carrying out

their duties as Directors.

In addition to the MD/CEO, other

Senior Management staff are also

seconded from PETRONAS. Their

training and succession planning are

aligned to the PETRONAS’ Human

Resources Division. The Board ensures

that only appropriate personnel with

the relevant skills and experience are

appointed to Senior Management

positions of the Company. The Board

further ensures that the members of

the Management Committee of the

Company are rewarded based on

performance.

REPORTING PROCEDURES

T he Chairman of the NomRem

Committee reports on key issues

deliberated at the NomRem Committee

to the Board and Minutes of the

Meetings of the NomRem Committee

are circulated to all members of the

Board for the Board’s notation.

Lim Beng ChoonChairman


Committee

13 February 2015




The Nomination and Remuneration Committee is to assist the Board in exercising its authority in relation to the matters set out in the Terms of Reference.

The Nomination and Remuneration (NomRem) Committee was formed by the

Board pursuant to its meeting on 14 November 2011.

MEETING

To form a quorum, two of the

members of the NomRem Committee

must be present, one of whom must

be Independent Director.

The Chai rman of the NomRem

Committee will be designated by the

Board based upon recommendation by

the Members. In the absence of the

Chairman, the remaining members

present shall elect one of their members

from the Independent Directors as

Chairman of the meeting. Other

Directors, key executives and employees

may attend any particular meeting only

at the NomRem Committee’s invitation.

The Company Secretary or in his/her

absence, his/her deputy shall be the

Secretary of the NomRem Committee.

Minutes of the meetings shall be duly

entered in the books provided therefor.

Meetings shall be held at least twice a

year or at such other times as the

Chairman of the NomRem Committee

deems necessary. In addition to the

schedule of regular meetings established

by the Committee, the Chairman of the

NomRem Committee may call a special

meeting at any time.

Meetings of the NomRem Committee

shall be arranged by the Secretary at

the request of the Chairman or any

other member of the NomRem

Committee. Unless otherwise agreed,

notice of each meeting confirming the

venue, time and date shall be issued to

each NomRem Committee member

and to other attendees (as appropriate)

in advance of each scheduled meeting

date together with an agenda and

supporting papers.

The terms of office and performance of

the NomRem Committee and each of

its members shall be reviewed by the

Board periodically to whether the

NomRem Committee and/or i ts

members have carried out its duties in

accordance with its Terms of Reference.

RESIGNATION OF MEMBERS

Any NomRem Committee member

may resign effective upon the date of

the member giving oral or written

notice to the Chairman of the Board,

the Company Secretary or the Board

(unless the notice specifies a later time

for the effectiveness of such resignation).

The Board will elect a successor to

take office when the resignation

becomes effective.

The appointment of a NomRem

Committee member shall automatically

be terminated if the member ceases to

be a director for any reason whatsoever

or as determined by the Board.

MEMBERSHIP

T he members of the NomRem

Committee shall be appointed by the

Board from amongst their number and

shall consist of not less than three

members. In line with the Malaysian

Code of Corporate Governance 2012

(MCCG 2012), all NomRem Committee

members including the Chairman shall

be Non-Executive Directors. The

majority of the NomRem Committee

members including the Chairman shall

be Independent Directors.

The members o f the NomRem

Committee shall elect a Chairman from

amongst their number who shall be an

Independent Director.

The actual number of members shall

be determined from time to time by

resolution of the Board.

pg 111

NOMINATION AND REMUNERATION COMMITTEE’S TERMS OF REFERENCE

The NomRem Committee shall regulate

its own detailed procedure, in particular:

i) the calling of meetings;

ii) the notice to be given for meetings;

iii) the voting and proceedings of

meetings;

iv) the keeping of minutes; and

v) the custody; production and

inspection of minutes.

AUTHORITY

T h e N o m R e m C o m m i t t e e i s

authorised by the Board to investigate

any act iv i ty within i ts Terms of

Reference. It is authorised to seek any

information it requires from any

employees, company officers and

external parties.

The NomRem Committee is authorised

to engage external consultants and

other advisers, or otherwise obtain such

independent legal or other professional

services it requires.

The NomRem Committee will have or

be provided with sufficient resources

undertaking its duties, including access

to the Company Secretariat.

DUTIES AND FUNCTIONS

The following shall be the common

recurring duties and responsibilities of

the NomRem Committee in carrying

out its purpose. These duties and

responsibilities are set forth as a guide

to the NomRem Committee with the

understanding that the NomRem

Committee may amend or supplement

them as appropr iate under the

circumstances to the extent permitted

by applicable laws:

a) To assess D i rec tors on an

on-going basis, the effectiveness

of the Board as a whole, the

Committees of the Board and the

contribution of each individual

Director;

b) To review regularly the selection

criteria for Board membership, the

B o a r d s t r u c t u r e , s i z e a n d

c o m p o s i t i o n a n d m a k e

recommendations to the Board

with regard to any adjustments

which are deemed necessary;

c) T o d e v e l o p m e m b e r s h i p

qualifications for the Board and all

Board Committees, including

defining specific criteria for director

independence and committee

membership;

d) To look into suggestions for

candidates for membership on the

Board, recommend prospective

Directors, with a view, to provide

a n a p p r o p r i a t e b a l a n c e o f

knowledge , exper ience and

capability on the Board, including

shareholder’s nominations to the

Board and assess the suitability of

potential candidates against the

set criteria;

e) To review annually the Board’s mix

of skills, education and experience

and other qualities including core

competencies which Directors

should bring to the Board, taking

into account the current and

future needs of the Company;

f) To review and recommend to the

Board appropriate corporate

g o v e r n a n c e p o l i c i e s a n d

procedures of the Company;

g) To monitor compliance with

corporate governance standard;

h) To annually convene a meeting

w i t h t h e C h a i r m a n o f a n y

committee appointed by the Board

for purpose of reviewing their roles

and responsibilities and facilitating

appropriate coordination;

i) To implement a formal appraisal

process for the evaluation of the

effectiveness of the Board as a

whole, the committees and the

individual contribution of each

Board Member; and

j) To carry out other actions and do

such other things as may be

referred to it from time to time by

the Board.

The NomRem Committee shall also,

amongs t o thers , e s tab l i sh and

recommend the remuneration structure

and policy for directors and review

changes to the policy, as necessary.


Draft minutes of each meeting shall

be distributed to all members of the

NomRem Committee. The minutes of

the NomRem Committee Meeting shall

be confirmed at the next meeting of

the NomRem Committee and shall be

available on request from the Company

Secretary to all non-executive Directors.

The confirmed minutes of the meeting

will be tabled to the Board for notation

succeeding the NomRem Committee

Meeting.

Any decision shall be decided by a

majority of votes. In the case of an

equality of votes, the Chairman of the

meeting shall have a second or casting

vote.



NOMINATION AND REMUNERATION COMMITTEE’S TERMS OF REFERENCE

The Group adopts PETRONAS’ shared values of loyalty, integrity, professionalism and cohesiveness which set the tone for a sound system of risk management and internal control.

The Board is committed to maintain and continuously improve the Group’s system of risk

management as well as internal control and is pleased to provide the following statement

which outlines the nature and scope of risk management and internal control of the Group

during the year under review.

BOARD’S ACCOUNTABILITY

T he Board acknowledges the

importance of a sound risk management

system and internal control practices

for good corporate governance with

t h e o b j e c t i v e o f s a f e g u a r d i n g

shareholders’ investments and the

Group’s assets. The Board affirms its

overall responsibility for the Group’s

system of risk management and internal

controls and has undertaken a review

of the adequacy and effectiveness of

those systems and compliance with

relevant laws and regulations.

In view of the limitations that are

inherent in any system of internal

control, this system is designed to

manage, rather than eliminate, the risk

of failure of achieving the corporate

objectives. Accordingly, it can only

provide reasonable but not absolute

assurance against material misstatement

or losses or the occurrence of

unforeseeable circumstances.

The Group has in place an ongoing

process for identifying, evaluating,

monitoring and managing all significant

risks faced by the Group and its

achievement of objectives and strategies

for the year under review and up to the

date of approval of this Statement on

Risk Management and Internal Control

for inclusion in the Annual Report. This

process is regularly reviewed by the

Board in accordance with the Statement

on Risk Management and Internal

Control: Guidelines for Directors of

Listed Issuers.

RISK MANAGEMENT

Risk Management is regarded by the

Board to be an integral part of the

Group’s organisational processes, with

the objective of maintaining a sound

system and ensuring its continuing

adequacy and integrity. Risk Management

is firmly embedded in the Group’s

management system. The Group’s Risk

Management Policy is to adopt an

effective and progressive Enterprise Risk

Management system to identify, evaluate

and monitor the risks faced by the

Group and to take specific measures to

mitigate these risks.

pg 113

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Risk Management Framework

Implementation

Enterprise Risk

The Group’s Enterprise Risk Management

(ERM) adheres to PETRONAS Risk

Governance Framework which adopts

ISO 31000:2009 Risk Management

requirements. Under the framework,

there are four key requirements of ERM:

• Approval and communication of

Risk Policy and Strategy,

• Establishment of Risk Organisation

Structure,

• Utilisation of an appropriate Risk

Measurement techniques, and

• Establishment of Risk Operation and

System for managing, monitoring

and reporting of Group’s Enterprise

Risk Profile

Enterprise Risk Profiling and Assessment

follows a structured process which

ensures a comprehensive and consistent

approach in assessing and analysing

risks faced by the Group. Risks are

reviewed annually with involvement

from Management and Subject Matter

Experts (SMEs) from divisions and

departments across the Group. Prior to

risk profiling and assessment activities,

various inputs are analysed in setting

the context of the assessment which

include both internal and external

factors that may impact the Group’s

business and operations.

The Group’s annual risk profiling and

assessment process is guided by its

approved s t ra teg ies and p lans .

Discussions are focused on risks which

could potentially impede the Group

from meeting its objectives. On a

regular basis existing risk profiles

namely project risks, plant & facilities

risks and new business venture risks are

reviewed to identify significant risks to

be escalated to the Enterprise Risk

Profile. Other key discussions include recent Health, Safety, and Environment (HSE)

or audit findings, operational issues as well as project issues.

From external context, any recent changes in regulatory/statutory requirements as

well as shifts in industry outlook and landscape are also analysed as they may have

direct or indirect impact to the Group’s operations.

Company Strategies

& Plans

Current operational issue,

recent HSE incidents, project issues

Operating Divisions

Plant and Facilities Risk

PGB 2015 Enterprise Risk Profile

Projects

Project Risk Business Ventures Risk

Growth/New businesstransactions

Management

Review

Existing Enterprise

Risk Profile

New Regulatory/

Legal

RequirementsAudit

Findings

Context of PGB 2015 Enterprise Risk Profile is based on various inputs to reflect the latest environment and expectations.

Each risk is mapped based on a matrix

which specifies its likelihood (how likely

is the risk to happen) and its impact

(how bad would it be if it did happen),

analysing from both qualitative and

quantitative perspectives. The matrix is

a d o p t e d f r o m P E T R O N A S R i s k

Governance Framework and adapted

based on the Group’s risk appetite and

tolerance level. Depending on risk

treatment strategies adopted, mitigation

plans are outlined to mitigate the risks

to an acceptable level.

Key Risk Indicators (KRIs) are identified

to facilitate monitoring of the risks

which provide an early warning signal

on potential emerging risks. Risk

Owners, Risk Mitigation Owners and

Risk Focal persons are assigned for

each risk to ensure the risk mitigations

d e v e l o p e d a r e a p p r o p r i a t e l y

implemented, monitored and regularly

reported.




The Planning and Risk Management

Department (PRMD) is entrusted with

responsibility of ensuring effective risk

governance and implementation in the

Group. PRMD provides regular updates

on the Group’s ERM implementation to

both the Group ’ s Management

Committee (MC) and Board Audit

Committee (BAC) in the form of

quarterly Enterprise Risk Report (ERR).

The report covers the risk profile and

status of risk mitigation implementation,

KRIs as well as risk management

framework implementation and risk

initiatives.

During the year under review, the

Group’s Enterprise Risk Assessment has

been aligned with its annual business

planning cycle, with endorsement on

the Group Enterprise Risk Profile (ERP)

by the BAC coincided with the approval

of the Group’s Plans and Budget. This

ensures alignment between the Group’s

risk mitigations and its approved

initiatives under its strategies. In the last

review, key issues and risks were

deliberated at length focusing on the

High and Medium risks in the Group.

The rationale of the likelihood and

impact rating assigned to the key risks

PGB Enterprise Risk Profiling adheres to a structured process which complies with PETRONAS Governance Framework.

Identify Risk Mitigations

& Key Risk Indicators

Determine Risk Owners

and Mitigations Owners

Obtain Approval of

Risk Profile from Management & BAC

Periodically Monitor &Report Mitigation ActionStatus to Management &

BAC

Identify Likelihood

& Impact

Identify Risks &

Existing Controls

Establish Internal &

External Context

were also discussed against Management’s

risk tolerance and appetite. Further

mitigations were identified for the key

risks, mainly in the areas of operational

and HSE areas. These mitigations are in

line with the Group’s focus in driving its

business plans and strategies to achieve its

aspirations as set out in pages 54 and 55.

The Company had also provided

guidance to Kimanis Power Sdn Bhd

(KPSB), one of its joint venture (JV)

companies , on adopt ion of the

C o m p a n y ’ s R i s k M a n a g e m e n t

Framework and practices, where

relevant. During the year under review,

the Company facilitated an Enterprise

Risk Assessment workshop for KPSB.

Risk assessments are also conducted

on new business ventures. The Business

Venture Risk Assessment Reports are

i n c l u d e d a s p a r t o f b u s i n e s s

development proposal presented to the

Commercial Steering Committee (CSC)

or relevant Project Steering Committees

(PSC). The reports are also included in

the Final Investment Decision (FID)

proposals for Board’s approval.


establishment of Risk and Compliance

Committee (RCC) chaired by Managing

Director/Chief Executive Office (MD/

CEO) was endorsed by BAC. The main

objective of the establishment of RCC

was to enhance oversight on risk

management and compliance in the

Group. The Committee sits quarterly

beginning January 2015. The function

of Risk Management Unit under PRMD

which undertakes the role of the

Secretariat to the RCC, has also been

expanded to oversee overall compliance

in the Group.

Plant and Facilities Risk

The Group managed its operational

risks via Plant and Facilit ies Risk

Management (PFRM). Under PFRM, risks

relevant to operations at the Divisions

were assessed, monitored and reported

to the respective Divisions Plant

Leadership Team (PLT).

As per Enterprise Risk, the risks were

rated based on its probability and

impact to the Divisions’ operations.

Appropriate mitigation plans are put in

place for every critical risk.

pg 115

During the year under review, the Plant

and Facilities risk review was conducted

for both Gas Processing & Utilities

(GPU), and Gas Transmission and

Regasification (GTR). Subsequently, the

risks were monitored with mitigation

act ions tracked and periodical ly

reported to the respective PLT at the

Divisions.

The PLT is responsible in ensuring

adequate and effective PFRM at the

Divisions.

Project Risk

The Group continues to implement

Project Risk Management processes in

l ine with the PETRONAS Project

M a n a g e m e n t S y s t e m ( P P M S )

requirements. The Group carries out

Project Risk Assessments, Independent

Reviews and Lessons Learnt for all its

major and critical projects.

Project risk report which includes

project status and areas of concerns

are incorporated into the ERR and

submitted to the MC and BAC on a

quarterly basis.

The PSC chaired by MD/CEO meets on

regular basis to deliberate on project

progress, risk areas and their mitigations.

Updates on project progress are also

incorporated as an agenda deliberated

in the monthly MC meetings and

quarterly Board meetings.

Contractor Risk

Contractor risk is managed through

tendering evaluation exercises facilitated

by the Company’s Project Supply Chain

Management (PSCM) Department,

PETRONAS Group Technology &

Engineer ing Div is ion (GTS) and

PETRONAS Group Shared Material and

Services Organisation (SMSO) prior to

the award of contracts in compliance

with the PETRONAS Group tendering

and contract policy and procedures.

The Contractor Risk Assessment (CoRA)

process is an integral part of the

contractor selection process which is

being applied prior to awarding the

contract to the contractor. Upon award

of contract, the results of CoRA

together with its mitigation plans are

implemented and monitored by the

relevant teams involved in the project.

Finance Risk

The Group has adopted PETRONAS

Corporate Financial Policy (CFP) which

sets forth the governing policy in

effecting the practice of Financial Risk

Management across the Group. The

policy stipulates a consistent framework

in which financial risk exposures are

identified and strategies developed to

mitigate such risks. The Group has

established CFP supporting guidelines

to manage its finance risk exposures

that includes counterparty risk, liquidity

risk, foreign exchange risk and interest

rate risk.


Group has adopted an enhanced

version of CFP incorporating PETRONAS

Integrated Financial Shared Service

Centre ( IFSSC) guidelines. These

guidelines align the Group’s practices

with PETRONAS IFSSC to enable more

efficient cash management.

Credit Risk

To reduce its credit risk exposure, the

Group continues to apply the Credit

Risk Management processes based on

P E T R O N A S C r e d i t R i s k R a t i n g

methodology whereby the customers

are assessed using the PETRONAS

Credit Risk Rating System (PCRRS) to

ensure alignment with the credit

assessment process adopted by the

PETRONAS Group. The system evaluates

the credit worthiness and assigns credit

risk ratings to all of the Group’s external

customers. In addition, annual reviews

are conducted on the assigned credit

risk ratings of these customers while

the trend of the customers’ financials

are also analysed to detect early signs

of financial distress and to provide early

warning to the Management. The

Group used Credit Risk Tolerance Limit

to minimise potential loss from credit

exposure for utilities customers.

The credit risk report includes Credit

Value at Risk which measures potential

loss from customers’ overdue balances

against Credit Risk Tolerance Limit.

On a quarterly basis, the report is

incorporated into the ERR and submitted

to the Management and BAC.

The trade and non-trade receivables

ageing are also deliberated by the

Management Committee as well as

Commercial Steering Committee on

monthly and quarterly basis respectively.

THE GROUP HAS ADOPTED PETRONAS CORPORATE FINANCIAL POLICY (CFP) WHICH SETS FORTH THE GOVERNING POLICY IN EFFECTING THE PRACTICE OF FINANCIAL RISK MANAGEMENT ACROSS THE GROUP.




Contingency Planning & Business

Continuity Management

The Group has in place Contingency

Planning that defines the structure and

processes for managing emergencies at

operational and company level. There is

a three-tier response system in place

which provides a clear demarcation of

roles and responsibilities between

emergency site management, Operating

Division management and MC. Business

Continuity Plan (BCP) is also in place to

ensure business continuity in the event

of crises, or business disruptions. The

BCP implementation is part of the

Group’s Business Continuity Management

set out in page 123.

The above Contingency and Business

Continuity Plans should enhance the

Group’s readiness in dealing with

disruptive incidents, reduce its impact

and ensure continuity of Group’s critical

functions within a reasonable period of

time. A sound business continuity plan

is crucial towards sustaining the

operational survival thus protecting

business, stakeholders and customers

during crisis or disaster.

During the year under review, two

emergency exercises were successfully

conducted to test the Company’s

readiness in managing crisis. A Tier-3

emergency exercise was carried out at

Tanjung Sulong Export Terminal (TSET)

involving local authorities which simulated

fire and explosion incident at TSET. The

Company has also conducted a simulated

exercise at its Head Office (HO) to test

the continuity of its critical functions at

its alternate worksite.

THE GROUP HAS ESTABLISHED A GOVERNANCE STRUCTURE IN MANAGING THE HSE RISK.

Health, Safety and Environment

(HSE) Risk

The Group leverages on the PETRONAS

HSE Management System (HSEMS) to

manage HSE risks and ensure that

operations are in compliance with the

HSE regulatory requirements. The

HSEMS process ensures that HSE risks

within the business are managed

effectively. In addition, the Group adopts

PETRONAS HSE Mandatory Control

Framework to strengthen the HSE

governance within the Group through

clear HSE requirements, effective and

consistent implementation of HSEMS,

and effective implementation of process

safety and HSE assurance.

The Group has established a governance

structure in managing the HSE risks, in

tandem with the PETRONAS HSEMS and

HSE Mandatory Control Framework. The

governance structure includes the

identification of HSE risks, HSE annual

targets and plans, roles and responsibilities

and appointment of HSE Management

Representative to monitor and review

HSEMS implementation.

The Group has established multiple

p la t fo rms to conduct per iod ic

management review on HSE related

risks and events in addressing changes

and development that are triggered

f rom pas t inc idents and p lant

modifications activities. The MD/CEO

chairs the HSE Steering Committee

which comprises members from the

Management to discuss HSE matters

concerning the Group on monthly basis.

Similar HSE management committee

meetings are held at the facilities,

projects as well as at Division level

which are chaired by respective

management personnel at site. In

addition, the Group’s HSE risks are

registered under the Group’s Enterprise

Risk Profile where closure of mitigation

actions are reported as part of quarterly

Enterprise Risk Reporting to the

Management and BAC.

The Group has also put in place a

series of assurance programmes to

review and verify the effectiveness of

the HSEMS and HSE risk mitigations.

The HSE assurance programs adheres

to the requirement of PETRONAS

HSEMS, Mandatory Control Framework,

PETRONAS Technical Standards, and

international standards such as ISO

14001, OHSAS 18001 and MS 1722.

During the year under review, external

audits which involved SIRIM surveillance

audits for ISO 14001:2004, OHSAS

18001:2007 and MS 1722:2011, were

conducted at Head Office, GTR, Utilities

Kerteh (UK) and Utilities Gebeng (UG).

SIRIM survei l lance audit for ISO

14001:2004 was also conducted at Gas

Processing Kerteh (GPK), Gas Processing

Santong (GPS) and TSET. Apart from

external audits , the Group also

per fo rmed va r ious HSE-re la ted

assurance programmes and audits on

its facilities, which include Pre-Activity

Safety Review and Project Independent

Review. The Group is committed to

cont inue with i ts r igorous HSE

assurance programmes in ensuring the

e f f e c t i v e n e s s o f i t s H S E M S

implementation.

Risk Initiatives

The Group continues to enhance risk

management awareness and capability

building across the Group through

various sharing of information and

application of best practices.

The Group benefits from being part of

the PETRONAS Group, which has an

established Board Governance and Risk

Committee that primarily provides

guidance and reviews strategies and

p o l i c i e s , o n R i s k M a n a g e m e n t

implementation.

pg 117

Moving Forward

The Group will continue its focus in

implementing key risk management

strategies and init iatives towards

institutionalisation of risk management

as a culture throughout the Group.

INTERNAL AUDIT FUNCTION

T he Board recognises that the

internal audit function is an integral

part of the governance process.

PETRONAS Group Internal Audit

Division (GIAD) undertakes the internal

audit function of the Group and

provides independent assurance on the

adequacy and effectiveness of the

internal control systems implemented

by the Group, and reports its findings

directly to the BAC.

The internal audit function includes

undertaking reviews of the Group’s

system of internal controls , i ts

operations and selected key activities

based on risk assessment and in

accordance with the annual internal

audit plan which is presented and

approved by the BAC.

BAC receives and reviews all GIAD audit

reports including the agreed corrective

actions to be undertaken by the

auditees. GIAD monitors status of the

agreed corrective actions through

Quarterly Audit Report submitted by

auditees which will be assessed and

verified by GIAD. The consolidated

status of the audit issues is submitted

and presented to the BAC for

deliberations on a quarterly basis.

GIAD adopts the standards and

principles outlined in the International

Professional Practices Framework of

the Institute of Internal Auditor.

The key activities of the internal audit

function are set out in the BAC Report

on page 126.

OTHER SIGNIFICANT ELEMENTS OF INTERNAL CONTROL SYSTEM

The other significant elements of the

Group’s internal control system are

tabulated below.

Board

The Board meets at least once a

quarter, in order to maintain its full and

effective supervision on the overall

governance of the Group. The MD/CEO

leads the presentation of Board Papers

and provides comprehensive explanation

on pertinent issues. In arriving at any

decisions, based on recommendations

by the Management, a thorough

deliberation and discussion by the

Board is a prerequisite. In addition, the

Board is kept updated on the Group’s

activities and its operations on a regular

basis.

The Board reviews all significant issues

arising from changes in the business

environment, which may result in

significant risks to the Group. The

General Manager of Finance Division

provides the Board with quarterly

performance report.

Where areas for improvement in the

system are identified, the Board will

consider the views and recommendations

made by the BAC and Management.

Organisation Structure

An organisational structure which

defines the formal lines of responsibility

and delegation of authority is in place

to assist in implementing the Group’s

strategies and day-to-day business

activities. A process of hierarchical

reporting has been established which

provides a documented and auditable

trail of accountability. The Company’s

organisational structure is set out on

page 30 of the Annual Report.

The Company has a Management

Committee which serves as an advisory

c a p a c i t y t o t h e M D / C E O i n

accomplishing the vision, mission,

strategies and objectives set for the

Group. Additionally, PLT at GPU and

GTR provide operational direction and

manage operational issues at the

respective Divisions.

Various functional committees have

also been established across the Group

to ensure the Group’s activities, major

projects and operations are properly

a l i gned towards ach iev ing the

organisation’s goals and objectives.

Budget Approval

Budgets are an important control

mechanism used by the Group to

ensure an agreed allocation of Group

resources and that the operational

managers are sufficiently guided in

making business decisions. The Group

undertakes a comprehensive annual

planning and budgeting exercise which

include the development of business

strategies for a five-year period and

establishment of performance indicators

against which operating units and

subsidiaries are evaluated.

Variances against budget are analysed

and reported to the MC and BAC/Board

on a monthly and quarterly basis

respectively. The Management is

responsible to monitor major variances

and take corrective actions, where

necessary.




Limits of Authority

A documented Limits of Authority (LOA)

with clear lines of accountability and

responsibility serves as a tool of

reference to identify the appropriate

approving authority at various levels of

management including matters that

require the Board’s approval.

Full review of LOA is undertaken every

five years and realignment of LOA is

performed every time there is a change

in the organisation structure.

System and Control

System and Control Unit of Finance

D i v i s i o n c o n d u c t s s c h e d u l e d

governance and compliance audits in

addition to the internal audits conducted

by GIAD. The audits are meant to

provide assurance to the Management

on the Group’s internal control

effectiveness and compliance to the

Company Enterprise Resource Planning

(ERP) system’s established roles and

segregation of duties, LOA, policies and

work procedures. At the end of each

audit, a report is presented to the MC

highlighting findings and the agreed

corrective actions. The status of the

audit issues are monitored and reported

to the MC on a quarterly basis.

During the year under review, two

audits on management of Company’s

vehicle and project accounting were

undertaken, with an overall assessment

of fair.

Tendering & Procurement

The Group has c lear ly def ined

authorisation procedures and authority

limits set for awarding tenders and all

procurement transactions covering

both capital and revenue expenditure

items.

Tender Committee structure with

defined level of responsibilities is in

place to govern the tendering activities.

Subsequent to the review by the

relevant Tender Committees, the

contracts will be subject to approval by

the relevant approving authority who is

i n d e p e n d e n t f r o m t h e T e n d e r

Committee. Tenders are called for and

are awarded based on factors such as

capability, quality, HSE, performance

track record, schedule and cost.

O p e r a t i n g P r o c e d u r e s a n d

Guidelines

Internal control procedures are

documented in standard operating

procedure manuals with established

guidelines on business planning, capital

expenditure, f inancial operations,

performance reporting, plant and

transmission operations, supply chain

management , human resource ,

information technology and health,

safety and environment. The Operating

Procedures and Guidelines are being

reviewed on regular basis to ensure

compliance to regulatory requirements

and best practices.

Financial Control Framework

The Group has adopted PETRONAS

Financial Control Framework (FCF) with

the principal objective of enhancing the

quality and integrity of the Group’s

financial reports through a structured

process of ensuring the adequacy and

effectiveness of key internal controls

operating at various levels within the

Group at all times. FCF requires among

others, documentation of key controls,

remediation of control gaps as well as

a regular conduct of testing of control

operating effectiveness.

During the year, the Group embarked

on Governance, Risk and Compliance

system focusing on Process Control

which is a single solution for end-to-

end control management including

documentation, testing, monitoring and

certification. The system function as

central depository of internal control

documentation for FCF for PETRONAS

Group and Operating Units (OPUs).

On a semi-annual basis, each key

process owner at various management

levels is required to complete and

submit a Letter of Assurance which

provides confirmation of compliance to

key controls for the areas of the

business for which they are accountable.

Subsequently, the MD/CEO and General

Manager of Finance Division provides

overall assurance to the Board on the

adequacy and effectiveness of key

internal controls of the Group.

THE GROUP HAS CLEARLY DEFINED AUTHORISATION PROCEDURES AND AUTHORITY LIMITS SET FOR AWARDING TENDERS AND ALL PROCUREMENT TRANSACTIONS.

pg 119

Information and Communication

Technology

The Group leverages on Information

and Communication Technology (ICT)

as key enabler to enhance productivity

and decision making process. Being

part of PETRONAS Group, the Group

adheres to PETRONAS Group ICT Policy

and adopts PETRONAS Group ICT

Strategy and roadmap. Internal ICT

audit and system reviews are conducted

periodically to ensure compliance

against PETRONAS Group policies and

procedures.

Related Party Transaction

The Group has a policy and procedure

in place with regards to all related party

transactions and conflict of interest

situations, including recurrent related

party transactions, to ensure that such

commercial transactions entered into

are conducted in a fair manner and are

not detrimental to the Company’s

minority shareholders.

The Corporate Governance Statement

includes an overview of the Group’s

policy and procedures on related party

transactions as set out on pages 101 to

102 of this Annual Report.

Beginning FY2014, GIAD conducted

quarterly review of the Group Related

Par ty Transact ion and prov ides

assurance to the BAC on the Group’s

compliance to the Related Party

Transaction Guidelines.

Employee Performance Management

In order to maintain the Group as a

high performing organisation, the

Group continues to strengthen and

enhance its Employee Performance

Management. The Group has established

a systematic and wholesome assessment

of staff’s performance against the set

performance indicators which is

reviewed on a half yearly basis.

Accelerated Capability Development

The Group invests a lot of efforts in

accelerating the capability of its staff.

The Group a l igns i ts capabi l i ty

development efforts to the PETRONAS

Accelerated Capability Development

Framework for its technical staff, where

their capabilities are continuously

developed and periodically assessed.

Non-technical staff are appraised

t h r o u g h a n a n n u a l F u n c t i o n a l

Assessment.


Group has established a new platform

to deliberate staff capability matters

through the Company Capabil ity

Development Working Committee

(CDWC). This platform is crucial to

d iscuss on s ta f f capabi l i ty and

intervention plans to close capability

gaps for each Skill Group together with

dedicated Discipline Resource Person

(DRP).

Code of Conduct and Business

Ethics

The Group subscribes to PETRONAS

Code of Conduct and Business Ethics

(CoBe) which sets the policy and

standards of behaviour and ethical

conduct expected of each individual

not only by employees and Directors,

but also by third parties performing

work or services for or on behalf of

companies in the PETRONAS Group.

Benchmarked to internal standards, the

CoBe together with PETRONAS’ shared

values serve as the guide concerning

how all staff are expected to conduct

themselves in maintaining an ethical,

law abiding culture in the Group.

Whistleblowing Policy

The Company recognises employees

and members of the public’s right

under Whistleblower Protection Act

2010 (the Act). Whistleblowing policy is

a platform for employees and members

of the public to report any improper

conduct within PETRONAS (committed

or about to be committed). It is the

duty of every staff in the Company to

report any misconduct, and the

Company will protect employee who

reports the misconduct.

Anti – Bribery and Corruption

Policy

The Group has a zero tolerance policy

against al l forms of bribery and

corruption. The Group adopts the

PETRONAS Ant i – Br ibery and

Corruption Policy and Guidelines which

provides guidance to employees

concerning how to deal with improper

solicitation, bribery and other corrupt

activities and issues that may arise in

the course of business.

PETRONAS Raid Protocol

The Company’s policies are aligned to

the PETRONAS Raid Protocol in

ensur ing appropr iate manner in

hand l ing in te rac t ion w i th , and

submission of information and data to

the authorities in the event that raids

are carried out in PETRONAS’s offices

worldwide. It is an internal procedure in

response to the powers of the

authorities under relevant laws and

various jurisdictions.

THE GROUP HAS A ZERO TOLERANCE POLICY AGAINST ALL FORMS OF BRIBERY AND CORRUPTION.




Succession Planning

The Succession Planning process is

aimed to enable the matching of the

right talents to the right positions for

breakthrough performance. The process

starts with identification of Critical

Position at Business and Corporate level.

The Company invests heavi ly in

developing the Succession Planning for

the focused group of staff i.e. Technical

and Non-Technical Managers as well as

for Technical Professional Positions. This

exercise is crucial in managing talents

within PGB and from other Operating

Units or Business Units. The Succession

Planning information will then facilitate

the Management in deliberating and

charting staff’s career progression

including mobility internally within the

Company or across businesses within

PETRONAS Group for wider exposure as

well as capability gap closure through

an identified development plan. During

the year under review, the Company has

established Succession Planning for the

Company’s key critical positions at a

ratio of 1.9:1.

PETRONAS Leadership Development

The Management recognises the

importance of Leadership Development

in ensuring the organisation has sufficient

leaders in the future. The PETRONAS

Leadership Diamond guides as an

engagement driver for staff to better

understand the Leadership Philosophy

and Enhanced Interventions in Leadership

Development. Communication is

undertaken to update employees on the

enhanced PETRONAS Leadership

Philosophy, emphasising on Leadership

Competencies and i ts identi f ied

b e h a v i o u r s t o p r o m o t e b e t t e r

internalisation.

Human Resource Policies and

Procedures

The Group’s Human Resource (HR)

policies are aligned to the PETRONAS

policy and procedures on all areas of

human resources. This is to ensure that

the Group practices best in class HR

policies and procedures especially with

regards to Human Capital Development.

Other HR areas which are wel l

established in the Group include Job

Management, Succession Planning and

Leadership Development.

MANAGEMENT ROLE

The Management is accountable to

the Board for the implementation of

the processes in identifying, evaluating,

monitoring and reporting of risks and

internal control as prescribed above.

On annual basis all Head of Divisions

provide assurance on their respective

Division’s risk management and internal

control system. Accordingly, the MD/

CEO and General Manager of Finance

Division have provided assurance to the

Board that the Group’s risk management

and internal control system is operating

adequately and effectively.

WEAKNESSES IN RISK MANAGEMENT AND INTERNAL CONTROL THAT RESULT IN MATERIAL LOSSES

T here were no material losses

incurred during the year as a result of

weaknesses in risk management and

internal control. The Management

cont inues to take measures to

strengthen the control environment

and monitor the risk management and

internal control framework. Accordingly,

the Board is satisfied that the Group’s

risk management and internal control

system is adequate and effective.

IMPLEMENTATION OF RISK MANAGEMENT AND INTERNAL CONTROL IN MATERIAL JOINT VENTURE (JV) COMPANIES

One of the Group’s material JV has

just commenced operations in FY2014,

hence implementation of the relevant

risk management and internal control

systems will be in place progressively.

REVIEW OF THIS STATEMENT

The external auditors have reviewed

this Statement on Risk Management &

Internal Control pursuant to the scope

set out in Recommended Practice

Guide (RPG) 5 (Revised), Guidance for

Auditors on Engagements to Report on

the Statement on Risk Management

and Internal Control included in the

Annual Report issued by the Malaysian

Institute of Accountants (MIA) for

inclusion in the Annual Report of the

Group for the year ended 31 December

2014, and reported to the Board that

nothing has come to their attention

that causes them to believe that the

statement intended to be included in

the Annual Report of the Group, in all

material aspects:

a) h a s n o t b e e n p r e p a r e d i n

accordance with the disclosures

required by paragraphs 41 and 42

o f t h e S t a t e m e n t o n R i s k

Management and Internal Control:

Guidelines for Directors of Listed

Issuers, or

b) is factually inaccurate.

pg 121

RPG 5 (Revised) does not require the

external auditors to consider whether

the Directors’ Statement on Risk

Management and Internal Control

covers all risks and controls, or to form

an opinion on the adequacy and

effectiveness of the Group’s risk

management and internal control

system including the assessment and

opinion by the Board of Directors and

management thereon. The auditors are

also not required to consider whether

the processes described to deal with

material internal control aspects of any

significant problems disclosed in the

Annual Report will, in fact, remedy the

problems.

This Statement on Risk Management

and Internal Control is made in

accordance with the resolution of the

Board dated 17 February 2015.


Yusa’ bin HassanManaging Director/





PGB BUSINESS CONTINUITY

MANAGEMENT FRAMEWORK

Risk

Profiling

& Control

Business

Impact

Analysis

Business

Continuity

Plan

Continual

Improve-

ment

Test &

Exercise

Strategy

Selection

Standards

People

Process

Infrastructure

The Group practices a structured Business Continuity Management (BCM) to ensure continuity of Group’s operations and services in the event of disruptions or crises. The Group’s BCM provides a systematic approach from managing its operational risks

to building capability towards effective response during disruptions or crises.

The Group has also formulated BCP in

responding to the unavailability of

PETRONAS Twin Towers where its Head

Office operates. An alternate worksite

has been established to resume its

critical Head Office’s functions in the

event the PETRONAS Twin Towers is

inaccessible.

The Group acknowledges the importance

of capability building in managing crisis.

Continuous awareness and capability

building programmes are carried out for

various level of staff of the Group.

During the year under review, a few

training sessions were conducted on

emergency and crisis management,

namely Crisis Management Training,

Media Crisis Management Training and

Emergency Response Training, targeting

the Management and relevant staff

involved in the Emergency Response

Team (ERT) and Crisis Management

Team (CMT). The training was intended

to provide the fundamentals and

principles in managing crisis, including

the process, roles and responsibilities.

The Group has also successfully

conducted a Tier-3 Emergency Response

Exercise in collaboration with National

Security Council which simulated a fire

and explosion incident at Tanjung Sulong

Export Terminal (TSET). During the

exercise, the Group’s cr is is and

emergency response processes were

tested as well as its Emergency Response

Team (ERT) and Crisis Management

Team’s (CMT) capability in responding to

emergency and crisis. The exercise also

further strengthened teamwork between

the Group’s Operating Divisions and the

local authorities in managing crisis.

Several gaps were identified with further

improvement plans put in place to

address the gaps.

The Group has programmes in place to

drive continuous enhancements in the

Group’s BCM as well as to keep

Management and staff up-to-date on

the requirements and processes. These

are periodically tested to ensure business

continuity and effective response to

crises and business disruptions.

BCM GOVERNANCE


Department (PRMD) is entrusted with

responsibility of ensuring effective BCM

governance and implementation in the

Group. At Operating Divisions, there

are focal persons assigned from the

Plant Operational Excellence (POE)

Department to drive implementation of

the framework and processes rolled out

by PRMD and ensure effective execution

of BCM at the respective Divisions. On

regular basis, PRMD conduct assessments

to ensure Divisions’ compliance to the

Group’s BCM requirements.

BCM PROCESS

The Group’s BCM process involves

various elements towards enhancing

readiness in responding to business

disruptions and crises.

BCM scope encompasses various elements to ensure readiness in responding to business disruptions.

As set out in page 114 of this Annual

Report, risks are periodically assessed

and monitored to ensure the Group’s

critical risks are managed and mitigated.

Business Impact Analysis prioritises the

Group’s key business functions and

spells out the timeframe to resume each

function in the event of disruptions. Post

organisational realignment activities in

2013, the Group undertook a second

review of its Head Office’s Business

Impact Analysis to ensure alignment

with its revised structure.

Business Continuity Plans (BCP) are in

place to address business disruptions. The

Group is currently part of the integrated

PETRONAS Gas Supply Peninsular

Malaysia (GSPM) of which, a BCP will be

activated in the event of sales gas supply

disruption to PETRONAS customers.

pg 123

BUSINESS CONTINUITY MANAGEMENT REPORT

The Board Audit Committee (BAC) of PETRONAS Gas Berhad (PGB or the Company) is pleased to present the Board Audit Committee Report for the financial year ended 31 December 2014 in compliance with paragraph 15.15 of Main Market Listing Requirement of Bursa Malaysia Securities Berhad (MMLR).

COMPOSITION

The BAC was formed by the Board pursuant to its meeting held on 14 August

1995. The BAC comprises three Directors, in compliance with Paragraph 15.09(1)

(a) of the MMLR. The members are as follows:

No. Name of Members Directorate

1. Dato’ N. Sadasivan N.N. Pillay

(Chairman)

Senior Independent


2. Dato’ Ab. Halim bin Mohyiddin Independent


3. Datuk Rosli bin Boni Non-Independent


In line with the Malaysian Code on

Corporate Governance 2012 (MCCG

2012) and paragraph 15.09(1)(b) of the

MMLR, all the three BAC members are

Non-Executive Directors, two of whom

are Independent Directors who satisfy

the test of independence under

paragraph 1.01 of the MMLR.

Dato’ Ab. Halim bin Mohyiddin is

currently a Council Member of the

Malaysian Institute of Certified Public

Accountants and also serves as the

Chairman of the Education Training

Committee of the Institute. He is also a

member of the Malaysian Institute of

Accountants. In this regard, the

Company is in compliance with

paragraph 15.09(c)(i) under the MMLR

which requires at least one member of

the BAC to be a qualified accountant.

Dato’ N. Sadasivan N.N. Pillay Dato’ Ab. Halim bin Mohyiddin Datuk Rosli bin Boni



BOARD AUDIT COMMITTEE REPORT

TERMS OF REFERENCE

The BAC is governed by the Terms of Reference as stipulated on pages 130 to


MEETINGS

During the financial year under review, the BAC held eight meetings. The

meeting attendance record of the members are as follows:

Name of Members No. of meetings attended

Dato’ N. Sadasivan N. N. Pillay

(Chairman)

8/8

Dato’ Ab. Halim bin Mohyiddin 8/8

Datuk Rosli bin Boni 8/8

SUMMARY OF ACTIVITIES OF THE BAC DURING THE FINANCIAL YEAR 2014

During the financial year ended 31

December 2014, the following activities

were carried out by the BAC:

Internal Control

a) Reviewed the effectiveness of the

system of internal controls, taking

account of the findings from

internal and external audit reports.

b) Reviewed the Statement on Risk

Management and Internal Controls

(SORMIC), which is supported by

an independent review by Messrs

KPMG.

Financial Reporting

a) Reviewed the quarterly results for

announcements to Bursa Malaysia

before recommending the same

for approval by the Board upon

being satisfied that, it complies

with applicable approved Malaysian

Financial Reporting Standards

(MFRS) issued by the Malaysian

Accounting Standards Board,

MMLR and other relevant regulatory

requirements.

b) Reviewed the Company’s annual

a n d q u a r t e r l y m a n a g e m e n t

accounts.

c) Reviewed and endorsed the fees

of the external auditors for financial

year end 31 December 2014 to 31

December 2016.

By invitation, the Managing Director/

Chief Executive Officer, Company

Secretaries, General Manager of Finance

Division, Head of Risk Management

Department, external and internal

auditors were also present during

deliberations which required their inputs

and advice.

The Head of Group Internal Audit

Division of PETRONAS (GIAD) presents

the internal audit reports to the BAC.

Relevant members of the Management

are invited to brief the BAC on specific

issues arising from the audit findings.

The external auditors also attend the

BAC meeting to present the external

audit plan for the year as well as the

outcome of the statutory audit

conducted on the Company and its

subsidiaries. In addition, the BAC met

with the external auditors twice during

the financial year without the presence

of the Management.

Deliberations during the BAC meetings

included performance review of the

Company, the proposed annual and

interim financial reporting to Bursa

Malaysia Securities Berhad (Bursa

Malaysia), the status of open audit

findings together with the agreed

corrective actions, risk management

act iv i t ies and proposed inter im

dividends.

The above assists the BAC Chairman to

effectively convey to the Board the

matters del iberated at the BAC

meetings. Minutes of the BAC meeting

are tabled for confirmation during the

next BAC meeting, after which it is

distributed to the Board for notation. In

addition to communicating to the

Board on matters deliberated during

the BAC meeting, the BAC Chairman

also recommends to the Board the

approval of annual financial statements

and quarterly results.

pg 125

d) Reviewed the audited financial

statements of the Company prior

to submission to the Board for

their consideration and approval,

upon being satisfied that, inter alia,

they were drawn up in accordance

w i th the prov i s ions o f the

Companies Act 1965 and the

applicable approved MFRS issued

by the Malaysian Accounting

Standards Board.

Annual Reporting

T h e s t a t e m e n t s f o r C o r p o r a t e

Governance, Board Audit Committee

Report, Board Audit Committee Terms

of Reference and Risk Management and

Internal Controls for financial year

ended 2014 for inclusion in the

Company Annual Report 2014 were

presented and endorsed by the BAC on

11 February 2015.

Related Party Transaction and

Conflict of Interest

The BAC reviews all related party

transaction (RPT) and recurrent related

party transaction (RRPT) in accordance

with the PGB RPT Policies & Procedures

(P&P) to monitor, track and identify

RPTs and RRPTs so as to ensure the

transactions are at all times carried out

on arms-length basis and are not to

the detriment of minority shareholders.

During the financial year under review,

the BAC reviewed on quarterly basis,

the status update on RPTs and RRPTs.

The BAC also ensures that any conflicts

of interests in the deliberation of

a transaction is appropriately declared

in advance.

Internal Audit

a) Reviewed and deliberated on

reports of audits conducted by the

GIAD.

b) Monitored all corrective actions on

audit findings identified by the

GIAD until all issues are resolved.

c) Reviewed the annual internal audit

plan for the year including its

scope, basis of assessments and

risk ratings of the proposed areas

of audit.

External Audit

a) Rev iewed wi th the externa l

auditor’s audit strategies and scope

for the statutory audit of the

Company’s financial statements for

the f inancial year ended 31

December 2014.

b) Reviewed with the external auditors

the results of the statutory audit

and the audit report.

Risk Monitoring

Reviewed on quarterly basis the

Company’s Enterprise Risk Report and

Status of Risk Monitoring. The BAC also

deliberated on the risk exposures and

the mitigation plans required.

INTERNAL AUDIT

The internal audit function of the

Company was carried out by the GIAD.

GIAD maintained at all times their

impartial ity, proficiency and due

professional care by reporting directly

to the BAC.

The internal audits were undertaken to

provide independent assessments on the

adequacy, efficiency and effectiveness of

the Company’s internal control systems

in anticipating potential risks exposures

over key business processes within the

Company. The BAC has full access to

internal auditors and received reports on

all audits performed.

During the year, the internal auditors

had carried out audits according to the

internal audit plan which had been

approved by the BAC. Internal audits

were carried out to provide assurance

that internal controls are established

and operating as intended to achieve

effective and efficient operations and

adherence to applicable policies,

guidelines and procedures. The audits

conducted during the year were:

No. Audit Titles

1 Audit on Project Management

of Plant Rejuvenation and

Revamp 4 Project (PRR 4)

2 Audit on Production,

Maintenance and Technical

Services of utility plants

3 Audit on Operations and

Maintenance Activities of

Liquefied Natural Gas (LNG)

Regasification Terminal in

Sungai Udang, Melaka

4 Shareholders Audit on Overall

Governance and Operation

Readiness of Kimanis

Powerplant Project

5 Audit on Project Management

of LNG Regasification Terminal

in Pengerang, Johor

Note:

Items 3, 4 and 5 of the above were audits

conducted in FY2014 but presented to the BAC in

Q1 FY2015.

The resulting reports from the audits

were reviewed by the BAC and

subsequent ly forwarded to the

Management for the necessary corrective

actions. The Management is responsible

for ensuring that corrective actions are

taken within the required time frame and

all outstanding/open items are reported

to the BAC on a quarterly basis.

The total fees payable to GIAD for the

internal audit function of the Company

and the Group for the financial year was

RM643,929.



BOARD AUDIT COMMITTEE REPORT

RISK MANAGEMENT

T he Board has establ ished an

organisation structure with clearly

defined lines of responsibility and

accountability pursuant to its business

and operational requirements while

ensuring appropriate risk management

processes are in place to protect

shareholders and stakeholders value.


Department (PRMD) of PGB has been

tasked to conduct assessment of risks

for PGB Group of Companies (PGB

Group). PRMD reports directly to the

BAC on quarterly basis or as and when

is necessary.

Pursuant to Recommendation 6.1 of

the MCCG 2012, Risk Management is

enforced through an Enterprise Risk

Report (ERR) reporting tool. Further

details on the Risk Management is

provided under the SORMIC on pages

113 to 118 of this Annual Report.

BAC plays a vital role in reviewing the

adequacy and effectiveness of Risk

Management processes within PGB

Group. In this regard, BAC reviews and

challenges the ERR which entails

amongst others the risk profile and

status of risk mitigation implementation.

INDEPENDENT REVIEW BY MESSRS PRICEWATERHOUSECOOPERS

P G B h a s e n g a g e d M e s s r s

Pr icewaterhouseCoopers Capi ta l

Sdn Bhd (Independent Advisor or

PwCC) to carry out the review on the

methods and procedures in determining

the transaction price and terms of the

RRPT are sufficient to ensure that the

transaction will be carried out on

normal commercial terms and will not

be to the detriment of its minority

shareholders (Minority Shareholders).

The Independent Advisor’s opinion

report was presented to the BAC on 11

February 2015 where PwCC was of the

opinion that the review procedures for

determining the transactions prices of

the RRPTs as set out in the Statement

of Corporate Governance of this Annual

Report are sufficient to ensure that the

RRPTs will be carried out on normal

commercial terms and will not be

detrimental to the interests of PGB and

its Minority Shareholders.

The full report of the Independent

Advisor is set out under pages 128 to


REVIEW PROCEDURES IN DETERMINING AND REVIEWING THE TRANSACTIONS PRICE AND TERMS OF THE RRPT

Details of such review procedures

and threshold limits are set out in PGB’s

P&P. In the review of procedures for

determining the transaction prices of

the RRPT , the fo l low ing were

considered:

a) The Directors’ rationale for, and

the benefits accruing to PGB

arising from the RRPT.

b) The review procedures for the

RRPT.

Bursa Malaysia had on 26 March 2014

granted PGB a waiver from complying

with Paragraph 10.09 of the MMLR, of

having to seek shareholders’ approval

in relation to the new Gas Processing

and Transportation Agreements as well

as the Sh ipper Agent Serv ices

Agreement. Subsequent ly , Bursa

Malaysia had, on 23 May 2014, granted

PGB a waiver of the same in relation to

four of the ancillary agreements for the

regasification services provided by PGB

to PETRONAS in Sungai Udang.

As part of Bursa Malaysia’s condition

for waiver, an independent financial

adv i so r ’ s rev iew o f the above

agreements have been undertaken on

the methods or p rocedures in

determining the transaction prices and

terms of the ancillary agreements are

suf f ic ient to ensure that these

transactions are carried out on normal

commercial terms and will not be

detrimental to minority shareholders.

During the year under review, PGB

undertook a process which primarily

involved determining suitable tariffs,

negotiations and obtaining proper

approvals from the BAC and Board,

which were aligned for the subsequently

approved policies and procedures.

Based on the result of the test, there

were no exceptions as it relates to the

price determination process for RRPT.

Based on the work per formed,

improvement areas have been discussed

and agreed with the BAC and has been

incorporated in the Related Party

Transactions Policies and Procedures

document.

REPORTING TO THE EXCHANGE

For the year under review, the BAC

was of the view that the Company was

in compliance with the MMLR and as

such, the reporting to Bursa Malaysia

under paragraph 15.16 of the MMLR

was not required.

Dato’ N. Sadasivan N.N. PillayChairman


11 February 2015

pg 127


PETRONAS Gas Berhad

Level 51, Tower 1

PETRONAS Twin Towers

50088 Kuala Lumpur

26 February 2015

Dear Sirs,

REVIEW ON METHODS OR PROCEDURES IN DETERMINING AND REVIEWING TRANSACTION PRICES AND TERMS OF RECURRENT RELATED PARTY TRANSACTIONS

1 INTRODUCTION

PETRONAS Gas Berhad (‘PGB’), a subsidiary of Petroliam Nasional Berhad (‘PETRONAS’), is listed on the Main Market of

Bursa Malaysia since 1995. PGB’s business portfolio is divided into four core operations which are Gas Processing, Gas

Transmission, Utilities and Regasification.

This letter has been prepared for the purpose of inclusion in the Annual Report for the financial year ended 31 December

2014 pursuant to the waiver for compliance with Paragraph 10.09 of Bursa Malaysia Main Market Listing Requirements

granted by Bursa Malaysia based on its letters to PGB dated 26 March 2014 and 23 May 2014 (‘the Waiver’).

As part of the Waiver which was granted for the following agreements:

(i) Time Charter Party for Floating Storage Unit Tenaga Satu

(ii) Time Charter Party for Floating Storage Unit Tenaga Empat

(iii) Marine Services Agreement

(iv) Land Lease Agreement (3km pipeline)

(v) Shipper Agent Services Agreement

PGB is required to disclose in its Annual Report after the listing date, an independent financial adviser’s opinion that the

methods or procedures in determining the transaction price and terms of Recurring Related Party Transactions (‘RRPT’)

are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be to the

detriment of its Minority Shareholders.

2 TERMS OF REFERENCE

To comply with the condition attached to the waiver as described above, PricewaterhouseCoopers Capital Sdn Bhd

(‘PwCC’) has been appointed as the independent financial adviser to provide an opinion on whether the methods or

procedures in determining the transaction price and terms of the agreement stated in (i)-(v) above are sufficient to ensure

that the transactions will be carried out on normal commercial terms and will not be to the detriment of Minority

Shareholders.

PwCC’s views as set forth in this letter are based on the prevailing market and economic conditions, and our analysis of

the information provided to us by PGB up to the date of this letter. Accordingly, this opinion shall not take into account

any event or condition which occurs after that date.

PwCC’s work is solely in respect of the review of methods or procedures in determining the transaction prices of the RRPT

and we were not involved in the formulation of these procedures adopted by PGB.

In the course of our evaluation of the procedures, we have performed the following:

• Desktop reviews of standard operating procedures and relevant Board and Management reports that are used to

determine and review the transaction prices and terms of the RRPTs under review

• Performed a walkthrough on the RRPTs under review, to assess procedures undertaken to determine transaction

prices and terms of the RRPTs



INDEPENDENT FINANCIAL ADVISOR’SREPORT

2 TERMS OF REFERENCE (continued)

• Held discussions with selected members of Senior Management on the methods and procedures employed by PGB

to determine and review the transaction prices and terms of the RRPTs under review

• Interviewed the Audit Committee to understand the Board’s role in reviewing the RRPTs

We have not conducted any procedures on information included in PGB 2014 Annual Report.

3 REVIEW PROCEDURES IN DETERMINING AND REVIEWING TRANSACTION PRICES AND TERMS

Details of such review procedures and threshold limits are set out in PGB’s Related Party Transactions Policies and

Procedures document as approved by the Board Audit Committee (‘BAC’) on 10 February 2014. These procedures are

summarised in the Statement of Corporate Governance of this Annual Report, and Shareholders are advised to read the

information carefully.

In our review of procedures for determining the transaction prices and terms of the agreements in (i)-(v) above, we have

considered the following:

(a) The Directors’ rationale and the benefits accruing to PGB arising from the above agreements; and

(b) The review procedures for the above agreements.

Bursa Malaysia had in May 2014 granted PGB a waiver from complying with Chapter 10.09 of the Main Market Listing

Requirements of Bursa Malaysia, of having to seek Shareholders’ approval in relation to the services pertaining to the

agreements stated in (i)-(v) above.

During the period of review, PGB undertook the following procedures which involved:

(a) Determining suitable tariffs for the agreements in (i)-(v) above;

(b) Negotiating with the relevant parties on pricing and terms and conditions; and

(c) Obtaining the required approvals from the BAC and Board, which were aligned to the approved policies and

procedures.

Based on the results of our review, there were no material exceptions relating to the price determination process for

the agreements stated in (i)-(v) above.

Based on work performed, improvement areas have been discussed and agreed with the BAC and will be incorporated

in the Related Party Transactions Policies and Procedures document.

4 OPINION

Based on the analysis undertaken and subject to the qualifications and assumptions made herein, PwCC is of the opinion

that the review procedures for determining the transactions prices of the RRPTs, as set out in the Statement of Corporate

Governance of this Annual Report are sufficient to ensure that the RRPTs will be carried out on normal commercial

terms and will not be detrimental to the interests of PGB and its Minority Shareholders.

We have prepared this letter for the use of PGB in connection with the conditions of the Waiver imposed by Bursa

Malaysia. A copy of the letter may be reproduced in the Annual Report.

Yours faithfully,

PricewaterhouseCoopers Capital Sdn Bhd

pg 129

The Board Audit Committee is responsible to oversight the financial reporting process, selection of external auditor, receipt of audit results both internal and external, internal control system, risk management system and internal and external audit functions.

The Board Audit Committee (BAC) was formed by the Board pursuant to its meeting

on 14 August 1995.

MEMBERSHIP

The members of the BAC shall be

appointed by the Board from amongst

their number and shall consist of not less

than three members. In line with the

Malaysian Code of Corporate Governance,

all BAC members including the Chairman

shall be Non-Executive Directors. The

majority of the BAC members including

the Chairman shall be Independent

Directors. An Independent Director shall

be a director who fulfills the requirements

as provided in the Main Market Listing

Requirements of Bursa Malaysia Securities

Berhad (MMLR).

All BAC members must be financially

literate with at least one member of the

BAC:

(a) shall be a member of the Malaysian

Institute of Accountants; or

(b) if he/she is not a member of the

Malaysian Institute of Accountants,

he/she must have at least three

years’ working experience; and

i) passed the examinat ions

specified in Part 1 of the 1st

Schedule of the Accountants

Act 1967; or

MEETING

To form a quorum, the majority of

the members present must be

Independent Directors and one of

whom shall be the Chairman of the

BAC. The BAC shall be able to convene

meetings with the external auditors,

internal auditors or both without the

presence of any other directors or

employees whenever i t deems

necessary. The external auditors and

internal auditors have the right to

appear and be heard at any meeting of

the BAC and shall appear before the

Committee when required to do so by

the BAC.

The Company Secretary or in his/her

absence, his/her deputy shall be the

Secretary of the BAC. Minutes of the

meetings shall be duly entered in the

books provided therefor.

Meetings shall be held not less than

four times a year. The external auditors

may request a meeting if they consider

it necessary. The Chairman of the BAC

shal l convene a meeting of the

Committee to consider any matters the

external auditor believes should be

brought to the attention of the Board

or shareholders.

AUTHORITY

The BAC is authorised by the Board

to investigate any activity within its

Terms of Reference. It is authorised to

seek any information it requires from

any employee and all employees are

directed to cooperate with any request

made by the BAC.

The BAC is authorised by the Board to

o b t a i n o u t s i d e l e g a l o r o t h e r

independent professional advice and to

secure the attendance of outsiders with

relevant experience and expertise if it

considers this necessary.

ii) is a member of one of the

associations of accountants

specified in Part II of the 1st

Schedule of the Accountants

Act 1967; or

(c) fulfills such other requirements as

prescribed or approved by Bursa

Malaysia Securities Berhad.

The members of the BAC shall elect a

Chairman from amongst their number

who shall be an Independent Director.

If a member of the BAC resigns, dies or

for any other reason ceases to be a

member with the result that the number

of members is reduced to below three,

the Board shall within three months of

that event, appoint such number of new

members as may be required to make up

the minimum number of three members.

No alternate director can be appointed

as a member of the BAC.

The terms of office and performance of

the BAC and each of its members shall

be reviewed by the Board periodically

to whether the BAC and/or its members

have carried out its duties in accordance

with its Terms of Reference.



BOARD AUDIT COMMITTEE’STERMS OF REFERENCE

The BAC is authorised by the Board to

communicate directly with internal and

external auditors, as well as the

members of Management such as the

Chai rman of the Company and

Managing Director/Chief Executive

Officer on a continuous basis in order

to be informed and updated with

matters related to the Company.

DUTIES AND FUNCTIONS

The duties and functions of the BAC

shall be:

1) External Audit

a) To consider the appointment of

the external auditors, the audit

fees, and any question in

relation to resignation or

dismissal of the external auditors

before making recommendation

to the Board; and

b) To review and discuss with the

external auditors, before the

audit commences, the nature

and scope of the audit, and

ensure coordination where

more than one audit firm is

involved.

2) Internal Audit

a) To review the internal audit

plan, consider the major

findings of internal audits and

Management’s responses, and

ensure coordination between

the internal and external

auditors;

b) To review the adequacy of the

scope, functions, competency

and resources of the internal

audit functions and that it has

the necessary authority to

carry out its work;

c) To review the audit reports;

d) T o d i r e c t a n d w h e r e

appropriate supervise any

special project or investigation

considered necessary;

e) To prepare periodic reports to

the Board summarising the

work performed in fulfilling

t h e B A C ’ s p r i m a r y

responsibilities; and

f) To determine the remit of

internal audit function which

reports directly to the BAC.

The internal audit function

should be independent of the

activities they audit and should

be performed with impartiality,

p r o f i c i e n c y a n d d u e

professional care.

3) Financial Reporting Review

To review with the Management

and the external auditors the

quarterly results and year-end

financial statements prior to the

approval by the Board, focusing

particularly on:

a) any change in accounting

policies and practices;

b) significant and unusual events;

c) major judgmental areas;

d) s i g n i f i c a n t a d j u s t m e n t s

resulting from the audit;

e) the going concern assumption;

f) compliance with accounting

standards; and

g) compliance with other legal

requirements and MMLR.

4) Related Party Transactions

To review any related party

transaction and conflict of interest

situation that may arise in the

Company including any transaction,

procedure or course of conduct

that raises the quest ions of

management integrity.

5) Risk Management

To review the adequacy and

effectiveness of risk management

practices and procedures as well

as conducting risk profiling reviews

on the Company, on a quarterly

basis.

6) Internal Control

To keep under rev iew the

effectiveness of internal control

systems and the internal and/or

external auditors’ evaluation of

these systems and in particular

review the external auditors’

M a n a g e m e n t L e t t e r a n d

Management’s responses.

7) Other Matters

a) To arrange for periodic reports

f r o m M a n a g e m e n t , t h e

external auditors and the

internal auditors to assess the

impact of significant regulatory

changes, and accounting or

repor t ing deve lopments

proposed by accounting and

other bodies, or any significant

matter that may have a

b e a r i n g o n t h e a n n u a l

examination;

b) To discuss problems and

reservations arising from the

internal audits, interim and

final audits, and matters the

internal and external auditors

may wish to discuss (in the

absence of Management

where necessary);

c) Where the BAC is of the view

that a matter reported by it to

the Board has not been

satisfactorily resolved resulting

in a breach of the MMLR, the

BAC must promptly report

such matter to the Securities

Commission; and

d) Car ry ing out any other

f u n c t i o n s t h a t m a y b e

mutually agreed upon by BAC

and the Board.


The Secretary shall circulate the

minutes of meetings of the BAC to all

members of the Board.

pg 131

The Company continues to uphold its strong commitment in ensuring compliance to statutory and regulatory requirements as well as internal policies and procedures.

The Company has therefore put in place internal controls and various compliance

exercise, guided by these statutory and regulatory requirements, guidelines and

best practices both from within PETRONAS Group as well as external.

KEY COMPLIANCE REQUIREMENTS AND ASSESSMENTS

T he Company observes various

compliance requirements as part of its

overall governance efforts, covering the

areas of F inance, Health Safety

Env i ronment (HSE) , Operat ional

Excellence, Project Management and

Human Resource, to cite a few.

Internally, the Company’s compliance

assessments or audits are based on a

three-tier hierarchy in line with the

PETRONAS Technical Standards, with

frequency of assessments determined

based on the standards and approved

by Management.

At Tier-1, self-audits are undertaken by

the respective process owners to assess

any gaps on compliance. There are also

selected Departments or Units within

the Company which undertake audits

on other Departments or Units to assess

compliance on specific areas e.g. HSE

Management System, SIRIM requirements

a s we l l a s i n te rna l p rocedure

requirements. Tier-1 audits are the most

frequently conducted compliance

assessments in the Company, some are

even as frequent as on monthly basis.

COMPLIANCE MONITORING AND REPORTING

Audit findings are deliberated and

tracked until closure. At the Divisions,

the Plant Leadership Team (PLT) reviews

audit plans and findings related to the

respective Divisions. Some key audit

findings mainly from Tier-2, 3 and

external audits are reported to the

Company’s Management Committee

(MC) meetings. All findings and progress

of actions items derived from Tier-3

audits conducted by PETRONAS Group

Internal Audit are reported to the Board

Audit Committee (BAC).

In strengthening governance and

c o m p l i a n c e , b e g i n n i n g 2 0 1 5 ,

Management has mandated the Risk

Management Section under Planning

and Risk Management Department

(PRMD) to oversee compliance activities

throughout the Company. A Risk and

Compliance Committee (RCC) was also

established to enhance oversight on risk

management framework implementation

as well as compliance in the Company.

The Risk and Compliance Committee

(RCC) is chaired by Managing Director/

Chief Executive Officer and sits on

quarterly basis. Amongst the scope of

RCC is to ensure appropriate oversight,

deliberation, monitoring and review of

internal controls and risk management

implementation in the Company.

Additional Compliance Information in

accordance with Appendix 9C of the

Main Market Listing Requirements of

Bursa Malaysia Securities Berhad (MMLR)

is as follows:

1. Utilisation of Proceeds from

Corporate Proposals

There was no Corporate Proposals

undertaken for the year under

review.

[Disclosed in accordance with Appendix 9C,

Part A, Item 13 of the MMLR]

At T ier-2 , representat ives f rom

PETRONAS Downstream undertakes

audits on the Company based on

selected areas of compliance which are

carried out at a less frequent interval

compared to Tier-1, which is annually

or once every two years.

At Tier-3, the Company may be subject

to audits conducted by selected

Divisions within PETRONAS Holding

Company for example Group HSE,

Group Technical Solutions and Group

Internal Audit. The exercise may be

conducted periodically or on need

basis based on request by Management.

The Company is also subject to

periodical audits by external bodies or

authorities as part of compliance

assessments against statutory and

regulatory requirements. During the

year under review, amongst the

authorities or external bodies which

conducted audits on the Company

were KPMG, Inland Revenue Board,

SIRIM, Fire and Rescue department,

Department of Standards Malaysia

(DSM), National Security Council and

Malaysian Institute of Chemistry.



ADDITIONAL COMPLIANCE INFORMATION

2. Share Buy-Back

The Company did not propose

any share buy-back during the

financial year.


Part A, Item 14 and Appendix 12D of

paragraph 12.23 of the MMLR]

3. O p t i o n s o r C o n v e r t i b l e

Securities

The Company did not issue any

options or convertible securities

during the financial year.



4. Depository Receipt Programme

The Company did not sponsor any

depository receipt programme

during the financial year.



5. Imposit ion of Sanctions/

Penalties

There were no sanctions and/or

pena l t ies imposed on the

Company or its subsidiaries,

Directors or Management by the

relevant regulatory bodies during

the financial year.



6. Non-Audit Fees

The amount of non-audit fees

incurred for services rendered to

the Group by the external auditors,

Messrs KPMG or its affiliated

companies during the financial year

is RM15,000.



7. Variation in Results

There were no profit estimates,

forecasts or projections made or

released by the Company during

the financial year.



8. Profit Guarantee

The Company did not give any

profit guarantee during the

financial year.



9. Material Contracts Involving

Interests of Directors and

Major Shareholders

The list of Material Contracts is

disclosed on page 103 of this

Annual Report.



10. Analysis of Shareholdings

The analysis of shareholdings is

disclosed on pages 262 to 265 of

this Annual Report.



11. Listing of Properties

The summary of Landed Property,

Plant and Equipment for the

financial year ended 31 December

2014 is disclosed on pages 266 to

274 of this Annual Report.



12. Share Issuance Scheme

The Company did not have Share

Issuance Scheme as required

under paragraph 8.17 of the

MMLR.



13. Share Option Scheme for

Employees

The Company did not have Share

Option Scheme for its Employees.



14. Training Attended by Directors

The list of trainings attended by

Directors is disclosed on pages




15. Corporate Social Responsibility

Activities

The corporate social responsibility

activities undertaken by the

Company is disclosed on pages




16. Recurrent Re lated Par ty

Transactions of a Revenue or

Trading in Nature (RRPT)

Details of the RRPT entered into

during the financial year ended 31

December 2014 pursuant to the

said RRPT Mandate is disclosed on

pages 238 to 241 of this Annual

Report.

[Pursuant to Paragraph 10.09(2)(b) and

Paragraph 3.1.5 of Practice Note 12 of the

MMLR]

pg 133

DELIVERING SUSTAINABLEPROFITSDelivering sustainable financial results to our

shareholders and stakeholders remains our key

priority. By constantly challenging ourselves to

stay ahead of the curve and remain focused on

achieving our targets, we strengthen our resolve

to fulfil our commitment to deliver value to our

shareholders and stakeholders.

GASPROCESSING

HIGHLIGHTS• Rewarded with 20 contract years of Gas Processing Agreement

(GPA)

• Achieved 99.4% sales gas reliability

• Recorded 10.3 million safe manhours

• Marginal drop in revenue by RM17.2 million

Gas Processing is one of PGB’s primary business segments, operated by its Gas Processing and

Utilities (GPU) Division. Operating six Gas Processing Plants (GPP) in Terengganu, it processes

PETRONAS’ raw gas delivered from offshore Peninsular Malaysia into methane (C1), which is also

known as sales gas, as well as other by-products such as ethane (C2), propane (C3) and butane

(C4). Sales gas is supplied to Power and Non-Power sectors as fuel and feedstock while C2, C3

and C4 are supplied to Petrochemical Plants as feedstock. In addition, sales gas, C3 and C4 are

also available for export market.

Gas Processing contributions to PGB Group

34%

Revenue

32%

Gross Profit

Gas Processing Other Segments



BUSINESS REVIEW

OPERATIONAL HIGHLIGHTS

During the year, GPP achieved a sales gas reliability of

99.4% while the reliability for ethane was 95.1%, and that for

propane and butane stood at 95.6%. In terms of production

volumes, it achieved 1,024,920 metric tonnes (Mt) for ethane,

939,072 Mt for propane and 642,108 Mt for butane.

In line with PGB’s Transformation journey to move towards a

higher performance base, our GPP performed better in Overall

Equipment Effectiveness (OEE) and reliability for its liquid

products while sales gas maintained at world-class standards.

In terms of safety performance, GPU achieved 10.3 million

safe manhours for FY2014. It also successfully conducted Ex-

Tanjung, a Tier-3 Emergency Response Exercise at Export

Terminal, Tanjung Sulong, Kemaman, where PGB was the

first operating unit within the PETRONAS Group to be tested

by Majlis Keselamatan Negara (MKN).

Gas Processing recorded a marginal drop in revenue by

RM17.2 million as compared to 2013, mainly due to lower

Performance Based Structure (PBS) income for ethane,

propane and butane. However, the impact of the lower PBS

was cushioned by the strengthening of reservation charge

under the new Gas Processing Agreement (GPA) which came

into effect on 1 April 2014. The Division’s contribution to

PGB’s gross profit decreased slightly by RM49.6 million as a

result of higher cost of revenue due to operations and

maintenance cost in line with plant initiatives and efforts to

intensify plant reliability and production.

Gas Processing Reliability (%)

C1 C2 C3 C4

91.3

99

.6

99

.7

99

.9

99

.9

99

.4

98

.8

98

.3

90

.1

89

.1

95

.1

98

.7

98

.7

99

.3

91.7

95

.6

91.3

99

.3

91.7

95

.6

91.3

2014‘13‘12‘11*‘11 2014‘13‘12‘11*‘11 ‘13‘12‘11*‘11 ‘13‘12‘11*‘112014 2014

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.

* For the nine month period ended 31 December 2011.

pg 137

OTHER HIGHLIGHTS (PRR4)

Plant Rejuvenation and Revamp 4 project (PRR4) achieved

commendable milestones in FY2014. The Dew Point Control

Unit 2 (DPCU2) achieved Initial Acceptance (IA) on 24 April

2014, eight days ahead of schedule. The Kertih Compressor

Station B (KCS-B) completed its upgrading in 12 days,

compared to planned 31 days. In addition, the aspiration to

centralise Control Room for Gas Processing Kertih (GPK) has

been materialised in November 2014. Currently, construction

& commissioning of the biggest package in PRR4 which is at

GPK-4, is progressing as per plan and currently at final phase

of commissioning despite various challenges such as

monsoon season (November to December), multinational

workforce and project complexity. It is expected that an

additional 20 years of lifespan will be added to PGB’s GPK

plant after completion of this PRR4 project. This will provide

long term sustainable revenue for PGB through GPA.

OTHER INITIATIVES

GPU has also continuously undertaken efforts and

initiatives to improve its plant safety towards providing safe

working conditions to all staff and contractors working within

PGB premise.

One of the initiatives undertaken is a project to remove existing

clamps at 42” Resak pipeline inside GPK, which had shown

signs of withering. The pipeline supplies feed gas to both GPK

and Gas Processing Santong (GPS). The shutdown of the

pipeline is very complex due to the difficulty of getting the line

free from hydrocarbons, thus posing a major challenge for the

repair works. Two clamps at the flanges of 42” Resak pipeline

near GPK Gate C road crossing were removed and a new 90

metres spool was successfully installed during the shutdown

timeframe.

By utilising new technology such as 3D Laser Scanning (for

Flange Orientation Control & Spool Dimensional Control) and

Flange Rescue Gasket (FRG), only seven shutdown days was

taken to complete the repair works which was nine days

earlier from the schedule. Completion of the repair works

enabled GPU to close HSEMS Tier-3 Audit finding, Enterprise

Risk Report Action Items and Non Standard Repair (NSR)

Outstanding for Repair.

Another significant initiative undertaken during the year under

review was a project to improve the process of ethane

recovery at GPS 6. This initiative increased ethane recovery

rate by 8% which contributed positively to PETRONAS’ revenue.

Gas Production Volume (Mt)

C4

66

5,7

60

64

2,1

08

C2

98

7,2

52

1,0

24

,92

0

C3

99

7,7

64

93

9,0

72

4%

6%

3%

2013 2014



BUSINESS REVIEW

MOVING FORWARD

In 2015, it is GPU aspiration to incorporate best practices and further improve from past performance which focuses

on reducing interruptions to assets in order to regain its sole position in delivering world-class performance and

reliability.

In line with the PGB Transformation journey, Gas Processing business is expected to continue to enhance Assets,

System & Process and People & Culture to deliver steady returns in 2015 and beyond.

GPU also expects to continue delivering sustainable and steady returns backed by the GPA effective 1 April 2014

whilst performance based structure will be dependent on PGB’s liquid extraction performance.

pg 139

The Gas Transportation business is operated by its Gas Transmission and Regasification (GTR) Division.

Through this business, GTR manages the gas transmission pipelines covering much of West Malaysia

known as the Peninsular Gas Utilisation (PGU) grid as well as smaller distribution systems in Miri and

Bintulu in East Malaysia, which transport gas to PETRONAS’ customers. The year also saw GTR started

its services to manage the pipeline in Kimanis, Sabah.

The business unit also acts as the operations and maintenance (O&M) operators to PETRONAS’

exploration and production subsidiary, PETRONAS Carigali Sdn Bhd (PCSB), for the Sabah-Sarawak Gas

Pipeline (SSGP) and Trans Thai-Malaysia (M) Sdn Bhd’s pipeline from Malaysia border to Seberang Prai.

GASTRANSPORTATION

HIGHLIGHTS• Renewal of 20 contract years of Gas Transportation Agreements

(GTA)

• Achieved 99.92% system reliability

• Launched Gas Transmission Academy

• Revenue increased by 8% on the back of higher capacity reservation

for the Peninsular Gas Utilisation (PGU)

Gas Transportation contributions to PGB Group

29%

46%Revenue Gross Profit

Gas Transportation Other Segments



BUSINESS REVIEW

Gas Transportation Reliability and Availability (%)

Reliability

99

.97

99

.98

99

.99

99

.98

99

.92

99

.89

99

.92

99

.99

99

.95

99

.85

Availability

2014‘13‘12‘11*‘112014‘13‘12‘11*‘11

Note:Financial year 2011 comprises reporting period from 1 April to 31 March.

* For the nine month period ended 31 December 2011.

pg 141


A key highlight of the year was the signing of a new

Gas Transportation Agreements (GTA) with PETRONAS,

which increased the Company’s booking capacity on the

back of availability of additional injection following

commissioning of liquefied natural gas (LNG) Regasification

Terminal in Sungai Udang, Melaka. Through effective

supply demand balancing, the business unit ensured

uninterrupted gas delivery to PETRONAS’ customers,

managing the transport and supply of a total of 2,322

mmscfd of sales gas during the year.

Continued focus on pipeline integrity which entails regular

inspection and rehabilitation of the 2,583 kilometre (km)

grid led to a consistently high system reliability and

availability of 99.92% and 99.85% respectively.

The year also saw GTR was tested with a challenge in

operations through pipeline burst piping incident in Kerteh,

Terengganu. In addition, PGB also involved in assisting

PETRONAS Carigali Sdn Bhd in managing the pipeline

explosion incident for Sabah-Sarawak Gas Pipeline (SSGP)

in Lawas, Sarawak. GTR managed to resolve these crisis

timely and has demonstrated high capability in responding

to the challenges. The learning from these challenges has

elevated GTR level of maintenance practices and enhanced

its risk management.

Gas Transportation recorded an 8% increase in revenue to

RM1,286.7 million in 2014, mainly attributable to the

revised capacity reservation under the new GTA. The

business division also derived additional income from

operation readiness services for SSGP and operations and

maintenance of pipeline for the supply of gas to two new

PETRONAS’ customers in Sabah. This followed the

successful management of gas-in and commencement of

commercial operations at the plants. On the back of

increased revenue, Gas Transportation notched 11% growth

in gross profit to RM1,006.7 million.



BUSINESS REVIEW

OTHER HIGHLIGHTS

GTR Engineering consultancy team continued to explore

opportunities within their proven technical expertise

domestically and internationally. GTR are involved in various

technical governance reviews and assessment for Prince

Rupert Gas Transmission Pipeline Project in Canada; Garraf

gas, oil and water pipelines in Iraq, and a Ready for Start-Up

(RFSU) review for GLNG Gas Transmission Pipeline in Australia.

In addition, GTR has received several requests from

PETRONAS to conduct feasibility studies for new pipelines in

Peninsular Malaysia, Sabah and Sarawak to supply gas to a

growing list of new customers in the power and industrial

sectors.

Efforts to build the knowledge and skills of personnel were

further intensified during the year. GTR new recruit staff will

receive training at the Gas Transmission Academy which was

launched in November 2014. On top of that, GTR also

extend the Gas Transmission Academy learning program to

PETRONAS Carigali staff via Technical Competency

Development Agreement (TCDA) of which the first intake will

be trained in June 2015.

MOVING FORWARD

Following the Strategic PGB Organisational Review and

Alignment (SPORA) in December 2013, Gas Transportation

embarked on a Production Centered Organisations (PCO)

concept which would serve to strengthen area-based

ownership and management. The PCO drives the efforts to

maintain the highest level of infrastructure integrity and

operational excellence through enhanced Assets, System &

Process and People & Culture which supports the overall

PGB Transformation journey.

GTR also expects to continue delivering sustainable and

steady returns, augmented by higher capacity reservation

made in advance by PETRONAS under the Gas Transportation

Agreements which came into effect on 1 April 2014.

pg 143

UTILITIES

HIGHLIGHTS• High reliability for all products ranging from 97.8% – 99.0%

• Received Gold Medal Award from International Convention Quality Creative Circle (ICQCC)

• Revenue surged by 16% attributable to higher offtake by customers coupled with

an upward revision in prices

Gas utility plants in Kertih, Terengganu;

and Gebeng, Pahang; is on merchant

mode. It supplies a range of industrial

utilities to the petrochemical businesses

located in the Ker t ih In tegrated

Petrochemical Complex and Gebeng

Industrial Area. These includes electricity,

steam, industrial gases and other products

such as liquid oxygen, liquid nitrogen,

demineralised water, raw water, cooling

water and boiler feed water.

Utilities contributions to PGB Group

23%

9%

Revenue Gross Profit

Utilities Other Segments

Utilities Reliability (%)

91.3

99

.5

99

.8

99

.5

99

.0

97

.8

99

.5

99

.7

94

.9

99

.1

97

.9

99

.6

99

.9

95

.5

99

.0

98

.6

Electricity Steam Industrial Gases

2014‘13‘12‘11*‘11 2014‘13‘12‘11*‘11 ‘13‘12‘11*‘11 2014Note:Financial year 2011 comprises reporting

period from 1 April to 31 March.

* For the nine month period ended

31 December 2011.



BUSINESS REVIEW


Despite some plant-related issues and project-related challenges, the plants continued to deliver relatively good

performance at 97.8% reliability for electricity, 97.9% reliability for steam and 99.0% reliability for industrial gases. Over the

year, electricity production stood at 1,864 gigawatt hour (GWh); steam at 4,246 kilometric tonnes (KMt); and industrial gases

at 626 mega normal cubic metres (MNm3).

Concerted efforts to maintain a high level of safety led to a consistently positive health, safety and environment (HSE)

performance throughout the year. In FY2014, the Utilities business recorded an RM141.4 million increase in revenue as

compared to 2013 and this is primarily due to higher offtake by customers of electricity, steam and industrial gases coupled

with an upward revision in prices due to upward revision of electricity tariff effective 1 January 2014. On the back of its

revenue, the Division’s contribution to PGB’s gross profit grew by RM68.2 million as compared to 2013.

pg 145

OTHER HIGHLIGHTS

The Division also embarked on an upgrade of our electrical and instrument

control system for both our utility plants. This project was executed as part

of the plant obsolescence management to sustain plant’s product delivery

reliability (PDR) to our customers. The upgrading project has been completed

at both Utilities Kerteh (UK) and Utilities Gebeng (UG) plant.

During the year, PGB Utilities business bagged the Gold Medal Award for our

Innovative and Creative Circle Team at the International Convention Quality

Creative Circle (ICQCC) in Colombo, Sri Lanka.

Utilities Volume

Steam (MMt) Electricity (GWh) Industrial Gases (MNm3)

3,9

87

4,2

46

1,7

70

1,8

64

57

8

62

6

6%5%

8%

2013 2014



BUSINESS REVIEW

MOVING FORWARD

Revenue and results for the Utilities segment will

cont inue to be heavi ly inf luenced by the

petrochemicals customer’s demand.

The Utility Gebeng plant upgrading activities for

FY2015 is to position the Company for projected

growth in Gebeng Industrial Area. Plant utilisation in

Gebeng is expected to reach its maximum sustainable

capacity by FY2016. We have also dedicated our

hearts and minds to accelerate our progress to

achieve our target in the path of transforming

PGB into a leading gas infrastructure and utilities

company.

Under the newly embarked PGB Transformation

journey, the utility plants are poised to elevate the

plant performance and deliver greater value to the

stakeholders.

For FY2015, utility plants will continue to incorporate

best practices and further improvements from past

experiences to achieve its vision of zero interruptions

to customers and delivering world-class performance.

pg 147

The Regasification business operates and maintains its offshore LNG Regasification Terminal in Sungai Udang, Melaka

(RGTSU), which began its commercial operations on second quarter of 2013. The facility receives vessels carrying

LNG imported from around the world, stores it in two floating storage units and converts the LNG to gas before

injecting it into the Peninsular Gas Utilisation (PGU) grid for distribution to PETRONAS’ customers.



BUSINESS REVIEW

REGASIFICATION

HIGHLIGHTS• Achieved Overall Equipment Effectiveness (OEE) of 94.1%

• Received 27 liquefied natural gas (LNG) cargoes in 2014

• Revenue rose by 82% due to full year operations in 2014

Regasification contribution to PGB Group

14% 14%

Revenue Gross Profit

Regasification Other Segments

pg 149


In its first full year of operations, RGTSU achieved 79.2%

reliability and 73.0% availability for regasification due to

unplanned downtime from trains cleaning and boroscoping,

and seawater overboard piping repair. Meanwhile, its

Overall Equipment Effectiveness (OEE) improved from

92.2% in 2013 to 94.1%. Despite facing several equipment

issues last year, RGTSU still managed to meet nomination

given by Malaysian Gas Management, PETRONAS.

During the year, RGTSU underwent its first Department of

Occupational Safety and Health (DOSH) turnaround which

was executed within its planned downtime of 21 days. It

also successfully received 27 cargoes, which added up to

a total of 50 cargoes since it commenced operations in

May 2013.

The business unit recorded an 82% growth in revenue to

RM616.2 million, derived primarily from a full year

operations in 2014, comprising regasification and storage

fees.

RGT’s gross profit stood at RM308.0 million, marking an

increase of RM144.5 million, or 88%, from 2013. It

recorded a 289% increase in profit before tax to RM180.6

million and a net profit after tax of RM112.5 million.

MOVING FORWARD

As the first regasification business established in the

country, there is much potential for RGTSU to expand

through the provision of operations and technical services

to future regasification terminals in the country and

elsewhere in the region. Meanwhile, to build its internal

strengths and capabilities, Regasification business has

developed its own Regasification Plant Operations

capability training programme for personnel which will be

launched in 2015. This will focus on developing new

talents to support PETRONAS Downstream business

growth in view of the upcoming Refinery and Petrochemical

Integrated Development (RAPID) project to complement

existing development programmes, as well as to accelerate

the readiness of our new talents to undertake

responsibilities in existing plants.

The Regasification business is expected to contribute

positively, on the back of capacity reservation by

PETRONAS for regasification and storage fees under the

Regasification Services Agreement.



BUSINESS REVIEW

pg 151

PERFORMANCEDEFINESOUR FUTUREAs a leading gas infrastructure and utilities company, we

are gearing towards achieving performance excellence at

all levels – from our infrastructure to our people, from our

philosophy to our business presence, and from our role in

supporting the national agenda to position ourselves as a

leading gas infrastructure and utilities company.

PETRONAS Gas Berhad (PGB) is committed to upholding the highest standards of safety in its operations. It manages all Health, Safety and Environment (HSE) risks across the business through strict adherence to regulatory requirements, PETRONAS’ HSE Mandatory Control Framework (MCF), PETRONAS’ Technical Standards, and the HSE Management System (HSEMS).

To drive HSE high performance, PGB

has embarked on a three year HSE

Roadmap that is gearing the organisation

towards a Generative Culture, namely

one in which safe behaviour is fully

integrated into every aspect of the

Company’s systems and processes. As

part of the roadmap, PGB has enhanced

its behavioural safety programme and

extended its coverage to include

contractors working in its facilities. In

addition, a Felt Leadership programe was

introduced to the senior management in

September 2014 to strengthen their HSE

awareness and knowledge. More HSE

programmes will be implemented in

2015 in line with PGB’s Transformation

to achieve its 3ZERO100 targets,

specifically in delivering the targets of

zero HSE incident, and zero non-

compliance.

In 2014, PGB undertook a process

safety review of all its processes and

equipment following which a list of

Safety Critical Element (SCE) equipment

was identified. SCE equipment form

layers of barriers to protect against

major hazards in the facilities. All SCE

equipment will be given more attentive

care and prioritised inspection and

testing under a preventive maintenance

programme to ensure their functionality

and integrity.



HEALTH, SAFETY &ENVIRONMENT

Following the fatal incident in one of

the pipeline scrapper launcher stations

in Kertih involving a contractor, PGB

has instructed Pipeline and Facility Units

to review their piping integrity at site.

The Company has also conducted a

major review of its as-built engineering

documentation and pipeline integrity

programme, covering the areas of

design, construction, operations,

inspection, testing and maintenance.

PGB is regret to lose two of its staff in

a road accident in December 2014

when the East Coast States of Peninsular

Malaysia experienced one of the worst

floods in recent years. The Company

has taken serious steps to review its

standard operating procedure on road

transport safety and inspected all

Company vehicles. PGB is working

closely with PETRONAS Group to

improve the road transport safety

practice in the Company, including

tightening the routine inspection and

maintenance check list, and providing

defensive driving training to the staff.

Despite the incidents in 2014, the

Company has always prioritised HSE

performance as encompassed by its

emissions management, improved

energy efficiency, reduced flaring and

the prevention of spills. As part of

ongoing efforts to improve its HSE

scorecard, in June 2014 PGB managed

to recover valuable hydrocarbons from

flare gas at the Gas Processing Kertih

(GPK) and Gas Processing Santong

(GPS) plants through a Flare Gas

Recovery Unit Project. The newly

installed system has managed to cut

down plant emissions and achieved an

estimated RM4.4 million of gas saving.

Apart from the yearly exercises on

HSEMS assurance and emergency

response, PGB in 2014 carried out a

Tier-3 Emergency Response Exercise in

September, involving its Tanjung Sulong

Export Terminal, local regulatory bodies

as well as security and emergency

response units. The objective of the

exercise was to enhance the state of

preparedness of the parties involved

and their effectiveness in handling

emergencies. The exercise also fulfilled

PGB’s safety obligations in line with

regulatory requirements.

PGB is committed to continuously

improving its HSE programme, and

uphold ing a h igh leve l of HSE

performance in delivering value to its

stakeholders. With the Transformation

Programmes in place, PGB will strive

towards its 3ZERO100 targets and to

elevate the organisation to the next

level of the Generative Culture.

pg 155

Among PGB’s more recent and

significant innovations were the removal

of mercury and other impurities from

gas streams released from its gas

processing plants. PGB is ahead of the

curve in mercury management through

HycaptureTM Hg, a proprietary ionic

liquid mercury removal technology

developed by PETRONAS’ Technology

& Engineering Division (T&E). PGB

volunteered to have a pilot unit built in

its Gas Processing Santong (GPS) 6 in

2010. This unit has since delivered an

impressive performance, leading to the

installation of the system in Gas

Processing Kertih (GPK) in June 2014.



INNOVATION

As a gas infrastructure and utilities company, PGB has always explored new technologies and invested in the latest solutions to improve its operations. Innovative technology provides an opportunity to extract more value from the entire value chain and helps the businesses to perform better.

In June 2014, PGB has commissioned

the new Flare Gas Recovery System in

GPK and GPS. The new system has

provided an opportunity to recover

remaining hydrocarbon from the flare

gas system and return it as fuel gas

source to the plant. The innovative

effort by the Company in reducing

emission and hydrocarbon release

has resulted in estimated savings of

RM4.4 million in the year under review.

With its capable workforce and the

adoption of relevant technologies, PGB

will always maintain an edge by

innovating on the way it operates

and maintains its facilities to provide

more value to its shareholders and

stakeholders.

PGB has also improved its gas turbine

maintenance programme by introducing

a system that allows gas turbine washing

to take place without shutting down the

unit. Online gas turbine washing units

have been installed at Gas Processing

Kertih (GPK), Gas Processing Santong

(GPS) and Utilities Kertih (UK). While

enabling the gas turbines to run for

extended periods without shutting down

for maintenance work, the units have

also contributed to a saving of estimated

RM3.0 million from the improved gas

turbine rate efficiency.

pg 157

PETRONAS Gas Berhad (PGB)’s Group Human Capital (GHC) methodologies and practices are in line with the world’s best. They are designed to elevate people’s capability to meet the Company’s needs and aspirations.

TO INSTITUTIONALISE THE CAPABILITY DEVELOPMENT IN THE ORGANISATION

AND TO ACHIEVE HIGH TECHNICAL CAPABILITY OF ITS WORKFORCE, PGB

HAD ESTABLISHED A GAS ACADEMY AND GAS TRANSMISSION ACADEMY IN

FEBRUARY 2014.



HUMAN CAPITAL DEVELOPMENT

CAPABILITY DEVELOPMENT – MAJOR ACHIEVEMENT FOR 2014

In 2014, PGB established a Capability

Development Working Committee

(CDWC) to drive and strategise the

enhancement and development of staff

capability to support business needs

and growth. Continuous review by

CDWC ensures department heads take

accountability and follow through on

their staff capability development

progress.

DEVELOPMENT OF PGB CAPABILITY FRAMEWORK AND FIVE YEARS ROADMAP

The new techn ica l capab i l i t y

f ramework and roadmap ref lect

aspirations towards high technically

competence and capable workforce.

They were developed to provide the

way forward for PGB to track its

capability development efforts. The

mission of the framework and roadmap

is to bui ld dist inct ive Technical

Capability in Gas Processing and

Ut i l i t ies , Gas Transmiss ion and

Regasification to support business

requirement and expansion. The PGB

Technical Capability Framework was

developed and approved by PGB

Management on 15 April 2014.

PGB “LEADER IN ME” PROGRAM FOR NON-EXECUTIVES

The objective of this programme

is to refresh and strengthen the

non-executives’ understanding on

PETRONAS Behavioural Competencies

in order for them to apply the

knowledge in their day to day functions

and tasks through fun learning activities.

The program includes a talk given by a

well-known motivational speaker on

the expected behaviour and the desired

competencies from the non-executive

towards achieving high performing

workforce under PGB Transformation

journey.

GAS ACADEMY AND GAS TRANSMISSION ACADEMY

To institutionalise the capability

development in the organisation and to

achieve high technical capability of

workforce, PGB had established Gas

Academy and Gas Transmiss ion

Academy in February 2014. The main

objective of the academies is to give a

proper foundation to new joiners in

term of theory and practical, gauge

their readiness to take up accountability

and responsibility and to have structured

learning development programme for

Technical Executives in PGB.

pg 159

Shareholder ValueSustaining the Company’s profitability

through value creation, efficient

extraction and manufacturing processes

Natural Resource UsePromoting efficient use of hydrocarbons

and water and supporting the use of

renewable energy

Societal NeedsSafeguarding human rights within our

sphere of influence, contributing to

community needs, investing in training

and education, promoting arts and

sports and conducting business in a

transparent manner

BiodiversityEnsuring projects and operations do not

have significant effect on the diversity

of plants and animals

Health, Safety and EnvironmentPreventing and eliminating injuries, health hazard

and damage to properties and communities,

including conserving the environment

Climate ChangeLimiting emissions of greenhouse gases

into atmosphere

Product StewardshipEnsuring that products conform to

quality and HSE standards

throughout the product lifecycle and

meet the needs of society

PGB initiatives are in line with the PETRONAS’

Group-wide Corporate Responsibility (CR)

initiatives that are built upon a heritage of

ensuring that the fruits of its efforts are shared

with society at large and investing in the future

by bringing improvements to the lives of the

people today.

The initiatives are guided by the PETRONAS Corporate Sustainability Framework which

focuses on seven key result areas:

CORPORATERESPONSIBILITY

CORPORATE SUSTAINABILITY

FRAMEWORK

PETRONAS Gas Berhad (PGB) remains committed to

safeguard the health and safety of the people especially

those living in the areas where it operates, particularly in education, environmental

and community wellbeing and development.



Towards this end, some of PGB’s signature programmes have

grown from strength-to-strength, a testament to the

Company’s unrelenting efforts to improve the delivery and

impact of these initiatives on its stakeholders in the

Marketplace, Workplace, Environment and Community.

Above all, the Company is committed to making a difference

in the lives of others in its distinctive way.

At the Marketplace, the Company works hard to build bridges

and opportunities for interaction with its shareholders and

other important stakeholders, while maintaining the highest

standards for its operations and services.

At the Workplace, the Company makes every effort to

empower the people with the right knowledge, skills and

capabilities. This enables them to grow in their respective

career paths and deliver breakthrough performance to the

Company, while emphasising on their safety and wellbeing at

work, wherever they maybe.

In the Environment, the Company ensures that every

operation causes minimal adverse impact on the planet. It

also champions efforts to drive greater awareness amongst

its staff and other stakeholders on preserving the environment

for future generations.

In the Community, the Company devotes its time, resources

and ideas to improve the lives of others by cultivating the

younger generations to aspire for greater heights in their

academic achievements, as well as to assist the needy and

less-fortunate members of the community.

pg 161



MARKETPLACE

AT PGB, WE STRIVE TO CONDUCT OUR BUSINESS

RESPONSIBLY TO ADD VALUE TO THE GAS AND

UTILITIES INDUSTRY. WE ARE COMMITTED TO

UPHOLDING HIGH STANDARDS OF GOVERNANCE

AND CORPORATE ETHICS WHICH ENCOMPASS

BEING ACCOUNTABLE, TRANSPARENT AND FAIR IN

DEALINGS WITH ALL OUR STAKEHOLDERS. AT THE

SAME TIME, WE SEEK CONTINUOUSLY TO EXPAND

OUR BUSINESS PORTFOLIO TO SUPPORT THE

NATIONAL AGENDA AS WELL AS OUR OWN BUSINESS

GOALS; ENHANCE OUR STAKEHOLDERS’ KNOWLEDGE

AND UNDERSTANDING OF THE GAS INDUSTRY; AND

ADHERE TO TRANSPARENT PROCUREMENT POLICIES.

BEST PRACTICES IN CORPORATE GOVERNANCE

In adhering to best practices in Corporate Governance, we are guided by the Malaysian Code on Corporate

Governance 2012 (MCCG 2012) which clearly outlines the responsibilities of the Board in setting a tone of

transparency, integrity and professionalism across the Company. As a measure of our commitment to fulfilling MCCG

2012’s guidelines, we have given due consideration to its recommendation on gender diversity and in 2013 welcomed

our first female Board member.

With regard to transparency, we provide comprehensive information about the Company and our performance

through our quarterly and annual reports, guaranteeing the accuracy and viability of our financial statements by

adhering to the Financial Control Framework. We also provide the opportunity for investors, analysts, shareholders,

regulators and other stakeholders to visit our plants and other operational units to gain first-hand exposure to our

business. As a member of the PETRONAS Group, we have fully adopted the PETRONAS Code of Conduct and

Business Ethics which is applicable to everyone in the organisation, from our Directors to employees on the floor.

Supported by a Whistleblowing Policy, this ensures a high level of integrity and professionalism.


pg 163

SUPPORTING THE NATIONAL AGENDA

Malaysia’s power supply is dependent on gas, which

makes up about 60% of the generation mix. Supply security

is therefore of national interest, and PGB plays a major role

in this regard. We are committed to maintaining high

operational performance standards at our plants and ensuring

seamless delivery of gas and utilities to customers. All our

operations are reliable while some have attained world-class

standards.

To safeguard the supply of high-quality gas, we have

embarked on a Plant Rejuvenation and Revamp Project (PRR)

to extend the useful life of our Gas Processing Plants (GPPs)

2, 3 and 4 by another 20 years. As a result of ongoing

upgrades, we increased the reliability of our ethane, propane

and butane to 95.1%, 95.6% and 95.6% respectively from

89.1%, 91.3% and 91.3% in 2013. Reliability of our sales gas

marginally dropped to 99.4% from 99.9% in 2013.

Meanwhile, we continue to maintain an exceptionally high

level of system reliability at 99.92% and availability of 99.85%

in our gas transmission pipelines.

Our liquefied natural gas (LNG) Regasification Terminal in

Sungai Udang, Melaka recorded 79.2% reliability and 73.0%

availability as well as Overall Equipment Effectiveness (OEE)

of 94.1%, which are encouraging figures for a first full year

of operations.

Our Utilities business, which supplies electricity to Kerteh

Integrated Petrochemical Complex (KIPC), Gebeng Industrial

Area as well as Tenaga Nasional Berhad, achieved reliability

of 97.8% for electricity. The supplies of steam and industrial

gases achieved reliability of 97.9% and 99.0% respectively.

In addition to supporting energy security via the supply of

gas, PGB is now contributing directly to power generation via

Kimanis Power Sdn Bhd (KPSB), our joint venture company

with Yayasan Sabah. KPSB manages three power plants,

which started commercial operations on 16 May, 22 July and

7 November 2014. This 300MW Kimanis Power Plant is

expected to meet Sabah’s increasing electricity demand as a

full-fledged independent power producer (IPP).

ENHANCING INDUSTRY KNOWLEDGE

PGB believes it is essential to engage with and educate the

stakeholders which include government agencies, academia

and the public to promote transparency, encourage safe

practises in the area of gas technology, stimulate the

development of gas industry in Malaysia and create greater

understanding of our business and the role of gas as a clean

and efficient choice of energy for the nation.

Such efforts also serve to enhance PGB’s positive reputation,

the store of goodwill and relationship with our stakeholders.

In 2014, we entertained more than 30 visits to our facilities

from various stakeholders.

Our commitment to this cause is evidenced as follows:

1. Engagements with international and domestic

corporations through delegation visits to our

Gas Processing Plants (GPPs), Utilities plants and

Kimanis Power Plant (KPP):

• 15 January

Republic of South Sudan; oil and gas trainees

• 8 July

General Electric, Malaysia

• 8 July

Load Despatch Centre (LDC), Sabah, Sabah

Electricity Sdn Bhd (SESB) and Energy

Commission (EC)

• 9 July

China Technical Consultants Inc.

• 5 September

Sabah Oil and Gas Terminal (SOGT)

• 19 September

South Oil Company, Iraq

• 31 October

SOGT and other Independent Power

Producers (IPPs)




2. Engagements with local authorities through

delegation visits to our GPPs and KPP:

• 7 March

Department of Environment (DOE)

• 16 March

DOE

• 20 March

Department of Safety and Health (DOSH),

Putrajaya

• 24 May

DOSH, Putrajaya

• 1 June

DOSH

• 23 June

EC

• 26 June

DOSH

• 10 July

DOSH

• 4 September

EC

• 23 September

EC

• 25 September

DOSH, Sabah

• 7 October

Malaysia Fire and Rescue Department, Papar

• 10 October

DOE

• 10 October

Sabah Electricity Sdn Bhd (SESB)

• 11 October

SESB

• 30 October

Malaysia Fire and Rescue Department, Kuantan

• 31 October

EC and SESB

• 6 November

Government Agencies from the district of

Papar, Sabah

• 15 November

SESB and other IPPs

• 30 November

DOSH, Sabah

3. Engagements with financial institutions through

delegation visits to our KPP:

• 24 September

Bank Negara Malaysia

• 24 September

Sabah Economic Development And

Investment Authority

pg 165

TRANSPARENT PROCUREMENT POLICIES

Our Supply Chain Management (SCM) covers the whole

cycle of activities from the conception of needs to the

disposal of materials and discontinuation of services. It

encompasses the process of planning, implementing and

controlling supply chain operations with the purpose of

satisfying customer requirements as efficiently as possible.

Currently, SCM focuses heavily on the procurement of

services and materials that ensure the success of our projects,

and hence create value for PGB’s growth.

All SCM activities in PGB comply with PETRONAS’ directives

and circulars from the Government.

MAXIMISING SHAREHOLDERS’ VALUE

PGB strongly believes in providing our shareholders with a

strong communication avenue in order to maximise our

shareholders’ value. In FY2014, we have elevated our Investor

Relations function to ensure that there is strong engagement

between the Company and shareholders. Through this

medium, shareholders are in contact regularly with the

Company and given regular updates on our business and

strategic direction.

pg 167

WORKPLACE

RETAINING & DEVELOPING SUCCESSORS FOR PGB: PGB SUCCESSION PLANNING FOR TECHNICAL & NON-TECHNICAL PROFESSIONALS

In 2014, PGB Human Resource Management (HRM) paid special attention on succession planning for critical

positions particularly Technical positions. On that note, PGB had successfully conducted Succession Planning

workshop for Technical and Non-Technical managers’ positions at Resort World Awana, Kijal on 22 May 2014. A total

of 133 Technical and Non-Technical positions including Technical Professional positions were assessed.

The session which was facilitated by our HRM practitioners and chaired by selected Senior Management reviewed

Technical and Non-Technical positions, managed potential successors and charted successors development plan

prior to their mobility to higher positions.

PGB IS COMMITTED TOWARDS PROVIDING

CHALLENGING, YET FULF ILL ING CAREER

OPPORTUNITIES FOR ITS STAFF, ALLOWING THEM

TO ATTAIN PERSONAL GROWTH AND DEVELOPMENT,

WHICH WOULD SPUR THEM TO CONTRIBUTE TO

THE BREAKTHROUGH PERFORMANCE OF THE

ORGANISATION. DURING THE YEAR, WE HAD ROLLED

OUT A NUMBER OF INITIATIVES TO IMPROVE THE

WAY WE MANAGED THE CAREER DEVELOPMENT

AND GROWTH OF OUR PEOPLE, AS WELL AS WAYS

THROUGH WHICH WE COULD ENHANCE THEIR

CAPABILITIES, SKILLS AND COMPETENCIES.




pg 169

A total of

interns enrolled in PGB

Internship Programme.

In order to strengthen human

competencies, PGB initiated

aggressive recruitment

Employee Performance Management

(EPM) inculcates a coaching culture

that will propel PGB towards

achieving its aspiration as a High

Performance Culture organisation

243


ANNUAL REPORT 2014www.petronasgas.com pg 170


PGB Internship Programme

PGB has in place a structured internship programme where

it opens to undergraduates from local and overseas

universities. These undergraduates will typically spend

between three to eight months or one semester at various

departments within PGB. The relevant department will

propose key activities for the intern prior to their enrolment

into this Programme.

During the period of internship, the intern will have the

opportunity to understand PGB business in particular as well

as Downstream business.

In 2014, a total of 243 interns enrolled in the Programme at

three different locations i.e. Head Office (HO), Gas Processing

& Utilities (GPU) and Gas Transmission & Regasification (GTR)

Divisions with majority of them attached to technical-based

departments.

PGB was also recognised by local universities as a good

platform for their student to gain and apply their academic

knowledge particularly in Technical areas during the

Programme.

PGB Talent Management

In order to strengthen human competencies in the

organisation PGB had initiated aggressive recruitment

together with Downstream Business Unit beginning with

Overseas Recruitment in Mumbai from 23 to 28 August 2014

and Middle East Recruitment Drive in Doha and Dubai from

21 to 27 November 2014. As for domestic, PGB had advertised

the vacancies in various local newspapers such as The Star,

Berita Harian, Daily Express Sabah and Borneo on 18 and 19

October 2014.

pg 171

Employee Performance Management (EPM)

Enhanced Performance Management System (PMS), now known as Employee Performance Management (EPM) was approved

by the PETRONAS ExCo People Development Committee (PDC). EPM is aimed to drive employees’ individual performance

through Coaching, Review & Feedback which would positively impact the overall business objectives.

EPM will boost employees’ performance and delivery. It inculcates a coaching culture that will propel PGB towards achieving

its aspiration as a High Performance Culture organisation. PGB employees will be able to drive and enhance their own

performance which will ultimately benefit the organisation.

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COACHING, REVIEW & FEEDBACKCoaching, Review and Feedback are illustrated

as the continuous engagement driver that

accelerates the journey towards the aspiration in

becoming High Performing Organisation.

WHOLESALE APPRAISALBoth superior and subordinate will collect data

and evidence to conduct the periodic and Year

End Performance review, which consist of

Performance Objectives, Leadership Behaviour,

Shared Values and People Management

Contribution.

GOAL SETTING & ALIGNMENTEPM activities begin with Goal Setting & Alignment

where Business Units set, discuss and cascade the

strategic priorities and performance objectives.

These performance objectives will be cascaded

down to employees at all level to drive the

one-on-one expectation setting discussion with

Superior and must be aligned with business target.

REWARD & CONSEQUENCEPerformance result based on differentiated

performance standard, are linked to meaningful

reward and right consequence to motivate and

sustain High Performance Culture in ensuring

continuous performance achievement.




From the top, Managing Director/Chief Executive Officer

(MD/CEO), General Managers (GMs) and other Senior

Management staff will pioneer the transformation through

coaching interventions and they are expected to cascade

best practices within their respective units. At the same time,

their subordinates will be equipped with basic awareness and

understanding of coaching methods as well as seek

continuous feedback. This two-pronged strategy will further

instill a coaching culture in PGB.

PGB’s HR policies are aligned to the PETRONAS policy &

procedures on the areas of Human Resources. This is to

ensure that the Company practices best in class HR policies

and procedures especially with regards to Human Capital

Development

Code of Conduct and Business Ethics (CoBe)

The objective of CoBe which is to provide an ethical and law

abiding culture in the Company has provided enormous

benefit to the organisation. All PGB staff are expected to

uphold the highest standards in taking actions that reflect

well on the Company and public interest.

As such, PGB has subscribed to the PETRONAS’ Code of

Conduct and Business Ethics that was benchmarked to

international standards, with PETRONAS shared values serve

as the guide concerning how all staff are expected to

conduct themselves at work.

Anti – Bribery and Corruption (ABC) Policy

PGB has a zero tolerance policy against all forms of bribery

and corruption. PGB has adopted the PETRONAS Anti –

Bribery and Corruption Policy and Guidelines which provides

guidance to employees concerning how to deal with

improper solicitation, bribery and other corrupt activities and

issues that may arise in the course of business.

Whistleblowing Policy

Whistleblowing Policy is part of the Anti-Bribery & Corruption

Policy. It is a platform for employees and members of the

public to report any improper conduct, committed or about

to be committed by PETRONAS staff. Under this policy, the

identity of the person who reports the misconduct is protected.

PETRONAS Raid Protocol

PGB’s policies are aligned to the PETRONAS Raid Protocol in

ensuring appropriate manner in handling interaction with, and

submission of information and data to the authorities in the

event that raids are carried out in PETRONAS’s offices worldwide.

It is an internal procedure in response to the powers of the

authorities under relevant laws and various jurisdictions.

pg 173

ENVIRONMENT

PROTECTING THE ENVIRONMENT

BY SUPPLYING GAS TO MEET THE COUNTRY’S

ENERGY GENERATION MIX, PGB IS CONTRIBUTING

IN A POSITIVE WAY TO A LOWERED CARBON

FOOTPRINT AS GAS IS A CLEANER FUEL THAN OIL,

COAL AND OTHER PETROLEUM DERIVATIVES.

HOWEVER, AS A GAS INFRASTRUCTURE AND UTILITIES

COMPANY, IT ACKNOWLEDGES THE ADDITIONAL

RESPONSIBILITY TO ENSURE ITS PROCESSES AND

SYSTEMS ARE AS EFFICIENT AS POSSIBLE TO MINIMISE

IMPACT TO THE ENVIRONMENT.

COMMITMENT TO GREENHOUSE GAS EMISSIONS REDUCTION

PGB has installed Flare Gas Recovery Unit at both Gas Processing Santong and Gas Processing Kertih in 2014 to

reduce the flaring emission, by recovering hydrocarbon in flare system into plant fuel gas. PGB will continue to

monitor its emissions and report it using the IPIECA [International Petroleum Industry Environmental Conservation

Association] GHG Accounting and Reporting Guidelines via SANGEA® software.




pg 175

COMMITMENT TO OPTIMISING ENERGY CONSUMPTION

A comprehensive list of new initiatives undertaken in 2014

to reduce energy consumption are as follows:

• installation of high pressure online washing at Gas

Turbines inlet in 2014 at the Utilities Kerteh (UK) and Gas

Processing Kertih (GPK), both in Terengganu; and Gas

Processing Santong (GPS) resulted in improvement in

heat rate.

• installation of Flare Gas Recovery Unit which has resulted

in recovery of hydrocarbon in flare system into fuel gas.

COMMITMENT TO MANAGING WATER CONSUMPTION AND WITHDRAWAL

For social and economic reasons, PGB constantly monitors

our water usage, and identifies water conservation and

recycling opportunities to avoid depletion of our freshwater

reserves. In the year under review, a total of 7.9 million cubic

metres (m3) of freshwater was withdrawn as compared to 5.5

million m3 in 2013, marking an increase of 48%. The increment

was due to shutdown of Brine Reverse Osmosis (BRO)

recovery systems, and plant shutdown attributed to Plant

Revamp and Rejuvenation 2 Project (PRR2) in 2013.




COMMITMENT TO WASTE MINIMISATION

PGB has put in place a waste minimisation roadmap which

focuses on creating efficiencies at every point along the

waste chain. The Company adopts a holistic approach to

waste management that sees it conducting the Environmental

Impact Assessments (EIA) prior to embarking on any project.

As a result, the Company is able to minimise of waste

generation, while also having mechanisms to recover

hazardous wastes and to convert special waste.

During the year, a total of 901 metric tonnes (Mt) of waste

was generated as compared to 909 Mt in 2013, marking a 1%

reduction. Apart from continuous recovery of waste efforts

that we have embarked since 2012, our waste management

has not only enhanced our environmental profile but also

contributed to RM400K in operational savings in 2014.

COMMITMENT TO BIODIVERSITY CONSERVATION

PGB recognises the importance of conserving the

environment, particularly areas with high biodiversity value.

As a rule, the company analyses the potential impact of its

operations on the ecosystem via EIAs and carefully plan

activities to preserve the country’s natural assets.

Proactive management actions are focused on preserving the

mangrove area neighbouring the Pengerang Gas Pipeline

project in Johor and stretches of rainforest that is traversed

by the Sabah-Sarawak Gas Pipeline (SSGP).

To protect the mangrove ecosystem, PGB has strategised a

range of mitigation activities to be put in place at the

construction as well as operational stages. These include

plans to minimise disturbance of the downstream portion of

the mangrove area of Sungai Lebam as a result of PGB’s

soon to be implemented pipeline laying and burial works

based on Environmental Management Plan (EMP)

recommendations.

In Sabah and Sarawak, PGB also acknowledges some species

within the pipeline corridor are either endemic to Borneo,

totally protected species or belong to highly endangered

categories. Consequently, stringent measures have been put

in place to minimise the project’s impact on the natural

environment during construction stage. These include the

prevention of poaching and hunting of protected species,

protection of slopes, reclaiming of degraded areas via re-

turfing and constant environmental awareness sessions for

our contractors.

While the Company focuses on its transformation journey,

PGB continues its commitment towards improving the fragile

ecosystems. Towards this end, PGB has done a desktop

analysis to monitor the growth of the mangrove plantlets in

Kuala Selangor Nature Park which the Company planted in

2013. This is to ensure the growth is sustained after a year.

At the same time, this initiative is expected to enhance the

good relationship with an non-governmental organisation

(NGO) such as Malaysian Nature Society (MNS) who is

actively in conservation effort.

pg 177

COMMUNITY

PGB REBRANDED ITS FLAGSHIP CORPORATE SOCIAL

INVESTMENT (CSI) INITIATIVE KNOWN AS PROGRAM

BAKTI PENDIDIKAN PETRONAS (PBPP) INTO PROGRAM

SENTUHAN ILMU PETRONAS (PSIP), TO REALIGN

WITH THE PETRONAS’ GROUP-WIDE CSI EFFORT.

This programme underlines PETRONAS’ unparalleled commitment and unified efforts towards contributing to the

growth and transformation of the nation in addition to grasping the concept of empowering people’s lives through

education. Under this programme, PGB has adopted the following schools:

• Sekolah Kebangsaan Santong in Paka, Terengganu (2005)

• Sekolah Kebangsaan Batu Anam in Segamat, Johor (2008)

• Sekolah Kebangsaan Sungai Baging in Kuantan, Pahang (2012)

• Sekolah Kebangsaan Cherana Puteh in Simpang Ampat, Melaka (2013)

Some criteria for the PSIP targeted audience include:

• Borderline students

• Low income families

• Students of families who have yet to receive assistance from the government




pg 179

During the year under review, PGB adopted Sekolah Cherana

Puteh in Melaka. Under the PSIP banner, the school is the

first adopted institute by PGB which has the most number of

orang Asli pupils. This sums up the total number of schools

to four adopted schools.

COMMUNITY OUTREACH

PGB Corporate Social Responsibility Programme

PGB Corporate Social Responsibility Programmes (CSR) are

tailored to add value to every community relations activity in

helping the less fortunate while indoctrinating amongst

our staff the spirit of helping the underprivileged. These

programmes remain as PGB’s main agenda to instil a sense

of gratitude and responsibility to the community, our staff

and their family members.

During the year under review, PGB continued to implement

its comprehensive and staff driven CSR programmes from

assisting senior citizens, single mothers and physically

challenged in addition to giving motivational and moral

support to orphans.

Its CSR programmes are formulated with the guiding

principles of adhering closely to the Company’s tagline

which was “Bakti Dihulur, Kasih Disemai” or instilling the spirit

of caring for each other.

The general CSR criteria for its target audience or group are:

• Welfare homes which include old folks home

• Orphanage and shelter organisations

• Cases of extreme poverty

• Hospital or Health Care Centers

• Education Centers

• Victims in any natural disaster hit areas

PGB Community Engagement

PGB emphasises great importance in reaching out to the

communities wherever it operates. This is realised through

specially crafted and organised communication sessions that

allow closer interaction with the community. These

engagements are used to leverage and share greater details

the nature of its business as well as to foster an understanding

on the safety measures that the residents of surrounding

areas need to be aware of, in the unlikely event of an

emergency.




Quick facts at a glance on CSR conducted in 2014:

• Total donation from Staff

RM67,065

• Total number of Staff participated

1,369

• Total number of hours spent per staff (average)

• Total hours of Community Service (average)

12 hours

15,552 hours

• Total donation from Company

RM166,000

• Number of CSR programmes conducted

• Total collective man-hours spent (average)

• Average number of CSR conducted monthly

36

432 hours

4pg 181

HIGHLIGHTS OF KEY ENGAGEMENTS WITH THE COMMUNITY IN 2014:

Transformational CSR programmes

PGB’s CSR programmes are tailored with the end in mind at

focusing on enhancing the lives of the poor whilst enriching

them with the knowledge of our business and fulfilling their

basic needs. During the year under review, several high

impact programmes were conducted that aimed around

these missions.

One of the programmes, dubbed the “Food Basket” event,

was a part of a two-day event to provide the less fortunate

families in Subang Jaya by providing them with basic food

necessities such as rice, malted drinks, cooking oils and

other groceries. Whilst the second day portion of the event

was followed by the mission to help the underprivileged

school students’ provisional items such as school uniforms,

shoes, school bag and stationaries at Masjid Aminah SS2,

Petaling Jaya. The successful CSR session was graced by our

MD/CEO together with the Management Committee whom

also shared their aspiration with the students.

This session also gave the Company a first-hand understanding

on the business we are engaged in, as well as allowing open

and direct communications between PGB representatives

and the communities.




Metamorphosing the people of Sabah

PGB’s new business venture, Kimanis Power Plant (KPP),

which was fully operational in November 2014, is our

commitment in delivering more to the society while increasing

our business portfolio and presence beyond Peninsular

Malaysia.

KPP project which is situated in Kimanis in Papar, Sabah is a

project developed by Kimanis Power Sdn Bhd, a joint venture

company between PGB and NRG Consortium (Sabah) Sdn

Bhd, the energy counterpart of Yayasan Sabah. PGB in 2012,

signed a 21-year Power Purchase Agreement with Sabah

Electricity Sdn Bhd.

From the inception of this project, PGB and its partner have

made it a target to provide employment to local Sabahans,

as part of PETRONAS’ larger human capital building efforts.

In 2014, the total number of locally employed staff in KPP

and Kimanis O&M Sdn Bhd (KOMSB) was 24 against a total

staff strength of 38. This means that the percentage of local

(Sabahans) employed in KPP and KOMSB reached some 63%

of its manpower.

It is predicted that more local businesses around the area in

Kimanis will benefit from business opportunities due to the

domino effect of growth since KPP started its full-scale

operations in November 2014; hence transforming the lives

of local Sabahans into a robust growing community.

pg 183

FINANCIALSTATEMENTS

185 Statement of Directors’ Responsibility in

Relation to the Financial Statements

186 Directors’ Report

191 Statement by Directors

191 Statutory Declaration

192 Consolidated Statement of Financial Position

193 Consolidated Statement of Profit or Loss and

Other Comprehensive Income

194 Consolidated Statement of Changes in Equity

196 Consolidated Statement of Cash Flows

197 Statement of Financial Position

198 Statement of Profit or Loss and Other

Comprehensive Income

199 Statement of Changes in Equity

200 Statement of Cash Flows

201 Notes to the Financial Statements

260 Independent Auditors’ Report

to the members of PETRONAS Gas Berhad

The financial statements of the Group and of the Company as set out on pages 192 to 259, are properly drawn up so as to

give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2014 and of the results

of its operations and cash flows for the year ended on that date.

The Directors consider that in preparing the financial statements of the Group and of the Company:

• appropriate accounting policies have been used and consistently applied;

• reasonable and prudent judgments and estimates were made;

• all Financial Reporting Standards and the Malaysian Companies Act, 1965 have been followed; and

• are prepared on a going concern basis.

The Directors are responsible for ensuring that the accounting and other records and registers required by the Malaysian

Companies Act, 1965 to be retained by the Company and its subsidiaries have been properly kept in accordance with the

provisions of the said Act.

The Directors also have general responsibilities for taking such steps that are reasonably available to them to safeguard the

assets of the Group and the Company, and to prevent and detect fraud and other irregularities.

pg 185

STATEMENT OF DIRECTORS’ RESPONSIBILITYIN RELATION TO THE FINANCIAL STATEMENTS

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company

for the financial year ended 31 December 2014.

PRINCIPAL ACTIVITIES

The principal activities of the Company in the course of the financial year remain unchanged and consist of separating natural

gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial

utilities.

The principal activities of the subsidiaries, associate and joint ventures are as stated in note 4, note 5 and note 6 to the

financial statements respectively.

RESULTS

Group RM’000

Company RM’000

Profit for the year 1,842,080 1,694,369

Attributable to:

Shareholders of the Company 1,843,186 –

Non-controlling interests (1,106) –

DIVIDENDS

During the financial year, the Company paid:

i) a final dividend of 40 sen per ordinary share under single tier system amounting to RM791,494,000 in respect of the

financial year ended 31 December 2013 on 10 June 2014;

ii) a first interim dividend of 20 sen per ordinary share under single tier system amounting to RM395,747,000 in respect of

the financial year ended 31 December 2014 on 11 September 2014; and

iii) a second interim dividend of 20 sen per ordinary share under single tier system amounting to RM395,747,000 in respect

of the financial year ended 31 December 2014 on 8 December 2014.

The Directors had on 17 February 2015 declared a third interim dividend of 15 sen per ordinary share under single tier system

amounting to RM296,810,000 in respect of the financial year ended 31 December 2014.

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend, will be

accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31

December 2015.

RESERVES AND PROVISIONS

There were no material movements to and from reserves and provisions during the year other than as disclosed in the

financial statements.



DIRECTORS’ REPORTfor the year ended 31 December 2014

DIRECTORS OF THE COMPANY

Directors who served since the date of the last report are:

Datuk Manharlal Ratilal (appointed on 15 May 2014)

Dato’ N. Sadasivan N.N. Pillay

Datuk Rosli bin Boni

Ir. Pramod Kumar Karunakaran

Dato’ Ab. Halim bin Mohyiddin

Lim Beng Choon

Yusa’ bin Hassan

Habibah binti Abdul

Datuk Anuar bin Ahmad (resigned on 15 May 2014)

In accordance with Article 93 of the Company’s Articles of Association, Datuk Rosli bin Boni and Dato’ Ab. Halim bin

Mohyiddin will retire by rotation from the Board at the forthcoming Annual General Meeting, and being eligible, offer

themselves for re-election.

In accordance with Article 96 of the Company’s Articles of Association, Datuk Manharlal Ratilal who was appointed to fill a

casual vacancy on the Board, will retire at the forthcoming Annual General Meeting, and being eligible, offer himself for

re-election.

In accordance with Section 129(6) of the Companies Act, 1965, Dato’ N. Sadasivan N.N. Pillay is retiring at the forthcoming

Annual General Meeting. Dato’ N. Sadasivan N.N. Pillay offers himself for re-appointment and is eligible to be re-appointed.

DIRECTORS’ INTERESTS

The Directors in office at the end of the year who have interests in the shares of the Company and of its related corporations

other than wholly owned subsidiaries (including the interests of the spouses and/or children of the Director who themselves

are not Director of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each in the Company

NameBalance at

1.1.2014 Bought SoldBalance at31.12.2014

Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM1.00 each in KLCC Property Holdings Berhad

Name

At appointment

date Bought SoldBalance at31.12.2014

Datuk Manharlal Ratilal 5,000 – – 5,000

pg 187

DIRECTORS’ INTERESTS (continued)

Number of ordinary shares of RM0.50 each in Malaysia Marine and Heavy Engineering Holdings Berhad

NameBalance at

1.1.2014 Bought SoldBalance at31.12.2014

Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM0.10 each in PETRONAS Chemicals Group Berhad

Name

Balance at1.1.2014/

appointmentdate Bought Sold

Balance at31.12.2014

Datuk Manharlal Ratilal 20,000 – – 20,000

Datuk Rosli bin Boni 6,000 6,000 – 12,000

Ir. Pramod Kumar Karunakaran 6,000 – – 6,000

Dato’ Ab. Halim bin Mohyiddin

– own 5,000 – – 5,000

– others 5,000 – – 5,000

Yusa’ bin Hassan 14,000 – – 14,000

None of the other Directors holding office at 31 December 2014 had any interest in the ordinary shares of the Company and

of its related corporations during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any

benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by Directors

as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations),

by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director

is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the

Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body

corporate.

ISSUE OF SHARES

There were no changes in the issued and paid up capital of the Company during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.




OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to

ascertain that:

i) there are no bad debts to be written off and no provision need to be made for doubtful debts; and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an

amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

i) that would render it necessary to write off any bad debts or provide for any doubtful debts; or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company

misleading; or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and

of the Company misleading or inappropriate; or

iv) not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial

statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which

secures the liabilities of any other person; or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become

enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will

or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31

December 2014 have not been substantially affected by any item, transaction or event of a material and unusual nature nor

has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this

report.

pg 189

SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

Shareholders Agreement for the development of Liquefied Natural Gas (LNG) Regasification Terminal in Pengerang Deep Water Terminal, Johor.

On 14 November 2014, the Company entered into a Shareholders Agreement with Dialog LNG Sdn. Bhd. (Dialog) and

Pengerang LNG (Two) Sdn. Bhd. (PLNG2) for the establishment of a company to undertake the development of an LNG

Regasification Terminal located at the Pengerang Deep Water Terminal, Johor. PLNG2 is the special purpose vehicle for the

said company. The information on the acquisition of PLNG2 as a subsidiary of the Group is set out in note 24 on page 236

to the financial statements.

SUBSEQUENT EVENTS

There were no material events subsequent to the end of the financial year.

AUDITORS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors

in accordance with a resolution of the Directors:


Yusa’ bin Hassan

Kuala Lumpur,

17 February 2015




In the opinion of the Directors, the financial statements set out on pages 192 to 259, are drawn up in accordance with

Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia

so as to give a true and fair view of the financial position of the Group and of the Company at 31 December 2014 and of

their financial performance and cash flows for the year ended on that date.

In the opinion of the Directors, the information set out in note 34 on page 259 to the financial statements has been compiled

in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the

Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute

of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors

in accordance with a resolution of the Directors:


Yusa’ bin Hassan

Kuala Lumpur,

17 February 2015

I, Aida Aziza binti Mohd Jamaludin, the officer primarily responsible for the financial management of PETRONAS GAS BERHAD,

do solemnly and sincerely declare that the financial statements set out on pages 192 to 259 are, to the best of my knowledge and

belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of

the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above named

Aida Aziza binti Mohd Jamaludin at Kuala Lumpur in Wilayah Persekutuan on 17 February 2015.

BEFORE ME:

pg 191

STATEMENT BY DIRECTORS

STATUTORY DECLARATION

Note31.12.2014

RM’00031.12.2013

RM’000

ASSETS

Property, plant and equipment 3 10,858,461 10,611,108

Investment in associate 5 132,335 129,047

Investment in joint ventures 6 468,399 201,996

Deferred tax assets 7 511,434 603,049

TOTAL NON-CURRENT ASSETS 11,970,629 11,545,200

Trade and other inventories 8 43,384 38,615

Trade and other receivables 9 608,718 711,471

Fund and other investments 10 – 15,010

Cash and cash equivalents 11 637,746 912,123

TOTAL CURRENT ASSETS 1,289,848 1,677,219

TOTAL ASSETS 13,260,477 13,222,419

EQUITY

Share capital 12 1,978,732 1,978,732

Reserves 13 8,555,146 8,286,998

Total equity attributable to the shareholders of the Company 10,533,878 10,265,730

Non-controlling interests 14 35,125 (183)

TOTAL EQUITY 10,569,003 10,265,547

LIABILITIES

Finance lease liabilities 15 861,223 824,061

Deferred tax liabilities 7 1,033,321 981,000

Deferred income 16 7,798 12,336

TOTAL NON-CURRENT LIABILITIES 1,902,342 1,817,397

Trade and other payables 17 668,185 1,014,437

Finance lease liabilities 15 21,027 17,731

Taxation 99,920 107,307

TOTAL CURRENT LIABILITIES 789,132 1,139,475

TOTAL LIABILITIES 2,691,474 2,956,872

TOTAL EQUITY AND LIABILITIES 13,260,477 13,222,419

The notes set out on pages 201 to 259 are an integral part of these financial statements.



CONSOLIDATED STATEMENT OF FINANCIAL POSITIONat 31 December 2014

Note2014

RM’0002013

RM’000

Revenue 18 4,391,716 3,892,139

Cost of revenue 18 (2,179,498) (1,947,274)

Gross profit 18 2,212,218 1,944,865

Administration expenses (74,843) (120,014)

Other expenses (96,215) (92,001)

Other income 100,899 170,893

Operating profit 19 2,142,059 1,903,743

Financing costs 20 (76,328) (50,117)

Share of profit after tax of equity-accounted associate and joint ventures 288,728 42,793

Profit before taxation 2,354,459 1,896,419

Tax (expense)/income 21 (512,379) 182,457

Profit for the year 1,842,080 2,078,876

Other comprehensive income

Item that may be reclassified subsequently to profit or loss

Share of cash flow hedge of an equity-accounted joint venture 7,950 8,782

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,850,030 2,087,658

Profit/(loss) attributable to:

Shareholders of the Company 1,843,186 2,078,888

Non-controlling interests 14 (1,106) (12)

PROFIT FOR THE YEAR 1,842,080 2,078,876

Total comprehensive income/(expense) attributable to:

Shareholders of the Company 1,851,136 2,087,670

Non-controlling interests (1,106) (12)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,850,030 2,087,658

Basic and diluted earnings per ordinary share (sen) 23 93.1 105.1


pg 193

CONSOLIDATED STATEMENT OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOMEfor the year ended 31 December 2014

Attributable to shareholders of the Company

Non-distributable Distributable

NoteShare

capitalRM’000

Share premium

RM’000

Hedging reserveRM’000

Retained profits

RM’000Total

RM’000

Balance at 1 January 2013 1,978,732 1,186,472 (4,186) 6,006,408 9,167,426

Share of cash flow hedge of an

equity-accounted joint venture – – 8,782 – 8,782

Profit for the year – – – 2,078,888 2,078,888

Total comprehensive income for the year – – 8,782 2,078,888 2,087,670

Dividends – 31.12.2012 final 22 – – – (692,556) (692,556)

Dividends – 31.12.2013 interim 22 – – – (296,810) (296,810)

Total distribution to shareholders of the Company – – – (989,366) (989,366)

Balance at 31 December 2013 1,978,732 1,186,472 4,596 7,095,930 10,265,730

Balance at 1 January 2014 1,978,732 1,186,472 4,596 7,095,930 10,265,730

Share of cash flow hedge of an

equity-accounted joint venture – – 7,950 – 7,950

Profit for the year – – – 1,843,186 1,843,186

Total comprehensive income for the year – – 7,950 1,843,186 1,851,136

Issuance of shares to

non-controlling interest – – – – –

Dividends – 31.12.2013 final 22 – – – (791,494) (791,494)

Dividends – 31.12.2014 interim 22 – – – (791,494) (791,494)

Total transactions with shareholders of the Company – – – (1,582,988) (1,582,988)

Balance at 31 December 2014 1,978,732 1,186,472 12,546 7,356,128 10,533,878

Continue to next page.




CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2014

Note

Non- controlling

interestsRM’000

Total equityRM’000

Balance at 1 January 2013 (171) 9,167,255

Share of cash flow hedge of an equity-accounted joint venture – 8,782

Profit for the year (12) 2,078,876

Total comprehensive income for the year (12) 2,087,658

Dividends – 31.12.2012 final 22 – (692,556)

Dividends – 31.12.2013 interim 22 – (296,810)

Total distribution to shareholders of the Company – (989,366)

Balance at 31 December 2013 (183) 10,265,547

Balance at 1 January 2014 (183) 10,265,547

Share of cash flow hedge of an equity-accounted joint venture – 7,950

Profit for the year (1,106) 1,842,080

Total comprehensive income for the year (1,106) 1,850,030

Issuance of shares to non-controlling interest 36,414 36,414

Dividends – 31.12.2013 final 22 – (791,494)

Dividends – 31.12.2014 interim 22 – (791,494)

Total transactions with shareholders of the Company 36,414 (1,546,574)

Balance at 31 December 2014 35,125 10,569,003

Continue from previous page.


pg 195

Note2014

RM’0002013

RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 4,547,268 3,665,257

Cash paid to suppliers and employees (1,631,831) (1,022,526)

2,915,437 2,642,731

Interest income from fund and other investments 37,056 49,071

Taxation paid (375,830) (458,168)

Net cash generated from operating activities 2,576,663 2,233,634

CASH FLOWS FROM INVESTING ACTIVITIES

Dividends received from associate and joint venture 26,987 29,512

Acquisition of subsidiary, net of cash acquired 24 2,101 –

Purchase of property, plant and equipment (1,254,029) (1,631,094)

Maturity of other investments 15,000 145,000

Proceeds from disposal of property, plant and equipment 268 499

Net cash used in investing activities (1,209,673) (1,456,083)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (1,582,988) (989,366)

Financing costs paid (76,247) (112,671)

Proceeds from shares issued to non-controlling interest 36,414 –

Repayment of finance lease liabilities (18,546) (15,510)

Repayment of term loan to holding company – (454,100)

Net cash used in financing activities (1,641,367) (1,571,647)

NET DECREASE IN CASH AND CASH EQUIVALENTS (274,377) (794,096)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 912,123 1,706,219

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 11 637,746 912,123




CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2014

Note31.12.2014

RM’00031.12.2013

RM’000

ASSETS

Property, plant and equipment 3 7,537,445 7,158,798

Investment in subsidiaries 4 2,514,767 2,420,101

Investment in associate 5 76,466 76,466

Investment in joint ventures 6 192,250 192,250

TOTAL NON-CURRENT ASSETS 10,320,928 9,847,615

Trade and other inventories 8 42,904 38,528

Trade and other receivables 9 613,330 1,083,184

Fund and other investments 10 – 15,010

Cash and cash equivalents 11 492,474 705,846

TOTAL CURRENT ASSETS 1,148,708 1,842,568

TOTAL ASSETS 11,469,636 11,690,183

EQUITY

Share capital 12 1,978,732 1,978,732

Reserves 13 7,732,476 7,621,095

TOTAL EQUITY 9,711,208 9,599,827

LIABILITIES

Deferred tax liabilities 7 1,033,321 981,000

Deferred income 16 7,798 12,336

TOTAL NON-CURRENT LIABILITIES 1,041,119 993,336

Trade and other payables 17 617,390 989,714

Taxation 99,919 107,306

TOTAL CURRENT LIABILITIES 717,309 1,097,020

TOTAL LIABILITIES 1,758,428 2,090,356

TOTAL EQUITY AND LIABILITIES 11,469,636 11,690,183


pg 197

STATEMENT OF FINANCIAL POSITIONat 31 December 2014

Note31.12.2014

RM’00031.12.2013

RM’000

Revenue 18 3,775,496 3,553,948

Cost of revenue 18 (1,871,257) (1,772,560)

Gross profit 18 1,904,239 1,781,388

Administration expenses (73,339) (117,117)

Other expenses (43,389) (8,564)

Other income 327,622 192,513

Operating profit 19 2,115,133 1,848,220

Financing costs 20 – (9,319)

Profit before taxation 2,115,133 1,838,901

Tax expense 21 (420,764) (420,592)

PROFIT FOR THE YEAR REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,694,369 1,418,309




STATEMENT OF PROFIT OR LOSS ANDOTHER COMPREHENSIVE INCOMEfor the year ended 31 December 2014

Attributable to shareholders of the Company

Non-distributable Distributable

Note

Share capital

RM’000

Share premium

RM’000

Retained profitsRM’000

TotalRM’000

Balance at 1 January 2013 1,978,732 1,186,472 6,005,680 9,170,884

Profit for the year – – 1,418,309 1,418,309

Total comprehensive income for the year – – 1,418,309 1,418,309

Dividends – 31.12.2012 final 22 – – (692,556) (692,556)

Dividends – 31.12.2013 interim 22 – – (296,810) (296,810)

Total distribution to shareholders of the Company – – (989,366) (989,366)

Balance at 31 December 2013 1,978,732 1,186,472 6,434,623 9,599,827

Balance at 1 January 2014 1,978,732 1,186,472 6,434,623 9,599,827

Profit for the year – – 1,694,369 1,694,369

Total comprehensive income for the year – – 1,694,369 1,694,369

Dividends – 31.12.2013 final 22 – – (791,494) (791,494)

Dividends – 31.12.2014 interim 22 – – (791,494) (791,494)

Total distribution to shareholders of the Company – – (1,582,988) (1,582,988)

Balance at 31 December 2014 1,978,732 1,186,472 6,546,004 9,711,208


pg 199

STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2014

Note2014

RM’0002013

RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 3,916,009 3,487,100

Cash paid to suppliers and employees (1,427,079) (1,004,181)

2,488,930 2,482,919

Interest income from fund and other investments 28,484 47,773

Taxation paid (375,830) (458,169)

Net cash generated from operating activities 2,141,584 2,072,523

CASH FLOWS FROM INVESTING ACTIVITIES

Repayment from/(advances to) subsidiaries 289,190 (454,903)

Acquisition of subsidiary 24 (94,666) –

Subscription of new shares in existing subsidiaries – (225,916)

Dividends received 226,987 29,512

Purchase of property, plant and equipment (1,208,747) (1,105,619)

Maturity of other investments 15,000 145,000

Proceeds from disposal of property, plant and equipment 268 499

Net cash used in investing activities (771,968) (1,611,427)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (1,582,988) (989,366)

Financing costs paid – (18,003)

Repayment of term loan to holding company – (454,100)

Net cash used in financing activities (1,582,988) (1,461,469)

NET DECREASE IN CASH AND CASH EQUIVALENTS (213,372) (1,000,373)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 705,846 1,706,219

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 11 492,474 705,846




STATEMENT OF CASH FLOWSfor the year ended 31 December 2014

PETRONAS GAS BERHAD is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the

Main Market of Bursa Malaysia Securities Berhad. The address of the principal place of business and registered office of the

Company is as follows:

Tower 1, PETRONAS Twin Towers


50088 Kuala Lumpur

The Company is principally engaged in separating natural gas into its components and storing, transporting and distributing

such components thereof for a fee and the sale of industrial utilities. The principal activities of its subsidiaries, associate and

joint ventures are as stated in note 4, note 5 and note 6 to the financial statements respectively.

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (PETRONAS), a company

incorporated in Malaysia.

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2014 comprises

the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate and joint

ventures.

1. BASIS OF PREPARATION

1.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian

Financial Reporting Standards (MFRS), International Financial Reporting Standards and the Companies Act, 1965 in

Malaysia.

These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of

Bursa Malaysia Securities Berhad.

As of 1 January 2014, the Group and the Company have adopted amendments to MFRS, and IC Interpretations

(collectively referred to as “pronouncements”) that have been issued by the Malaysian Accounting Standards Board

(MASB) as described fully in note 31.

MASB has also issued new pronouncements which are not yet effective for the Group and the Company and

therefore, have not been adopted for in these financial statements. These new pronouncements including their

impact on the financial statements in the period of initial application are set out in note 32. New pronouncements

and revised pronouncements that are not relevant to the operation of the Group and of the Company are set out

in note 33.

These financial statements were approved and authorised for issue by the Board of Directors on 17 February 2015.

1.2 Basis of measurement

The financial statements of the Group and the Company have been prepared on historical cost basis except that,

as disclosed in the accounting policies below, certain items are measured at fair value.

1.3 Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary

economic environment in which the entity operates (“the functional currency”). The Group’s and the Company’s

financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency.

All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

pg 201

NOTES TO THE FINANCIAL STATEMENTS– 31 December 2014

1. BASIS OF PREPARATION (continued)

1.4 Use of estimates and judgments

The preparation of the financial statements in conformity with MFRS requires management to make judgments,

estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,

liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about significant areas of estimation, uncertainty and critical judgments in applying

accounting policies that have the most significant effect on the amounts recognised in the financial statements are

described in the following notes:

i) Note 3 : Property, plant and equipment;

ii) Note 5 : Investment in associate;

iii) Note 6 : Investment in joint ventures;

iv) Note 7 : Deferred tax; and

v) Note 29 : Financial instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial

statements and have been applied consistently by the Group and the Company, unless otherwise stated.

2.1 Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. The Group controls an entity when it is exposed to, or has

rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its

power over the entity. Potential voting rights are considered when assessing control only when such rights are

substantive. The Group considers it has de facto power over an investee when, despite not having the majority of

voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s

return.

The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the

date that control commences until the date that control ceases.

All inter-company transactions are eliminated on consolidation and revenue and profits are related to external

transactions only. Unrealised losses resulting from inter-company transactions are also eliminated unless cost cannot

be recovered.




2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of consolidation (continued)

Business combinations

A business combination is a transaction or other event in which an acquirer obtains control of one or more

businesses. Business combinations are accounted for using the acquisition method. The identifiable assets acquired

and liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is

measured as the aggregate of the fair value of the consideration transferred and the amount of any non-controlling

interests in the acquiree. Non-controlling interests are stated either at fair value or at the proportionate share of the

acquiree’s identifiable net assets at the acquisition date.

When a business combination is achieved in stages, the Group remeasures its previously held non-controlling equity

interest in the acquiree at fair value at the acquisition date, with any resulting gain or loss recognised in the profit

or loss. Increase in the Group’s ownership interest in an existing subsidiary is accounted for as equity transactions

with differences between the fair value of consideration paid and the Group’s proportionate share of net assets

acquired, recognised directly in equity.

The Group measures goodwill as the excess of the cost of an acquisition as defined above and the fair values of

any previously held interest in the acquiree over the fair value of the identifiable assets acquired and liabilities

assumed at the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in

profit or loss.

Transaction costs, other than those associated with the issuance of debt or equity securities that the Group incurs

in connection with a business combination, are expensed as incurred.

Non-controlling interests

Non-controlling interests at the reporting period, being the portion of the net assets of subsidiaries attributable to

equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are

presented in the consolidated statement of financial position and statement of changes in equity within equity,

separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the

results of the Group are presented in the consolidated statement of profit or loss and other comprehensive income

as an allocation of the profit or loss and other comprehensive income for the year between non- controlling

interests and shareholders of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even

if doing so causes the non-controlling interests to have a deficit balance.

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity

transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share

of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group

reserves.

Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary,

any non-controlling interests and the other components of equity related to the former subsidiary from the

consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in

profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value

at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-

for-sale financial asset depending on the level of influence retained.

pg 203


2.2 Associate

An associate is an entity in which the Group has significant influence including representation on the Board of

Directors, but not control or joint control, over the financial and operating policies of the investee company.

Associate is accounted for in the consolidated financial statements using the equity method. The consolidated

financial statements include the Group’s share of post-acquisition profits or losses and other comprehensive income

of the equity accounted associate, after adjustments to align the accounting policies with those of the Group, from

the date that significant influence commences until the date that significant influence ceases.

The Group’s share of post-acquisition reserves and retained profits less losses is added to the carrying value of the

investment in the consolidated statement of financial position. These amounts are taken from the latest audited

financial statements or management financial statements of the associate.

When the Group’s share of post-acquisition losses exceeds its interest in an equity accounted associate, the carrying

amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses

is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the

associate.

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire

interest in that associate, with the resulting gain or loss being recognised in profit or loss. Any retained interest in

the former associate at the date when significant influence is lost is re-measured at fair value and this amount is

regarded as the initial carrying amount of a financial asset.

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any

retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or

loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately

to the profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the

related assets and liabilities.

Unrealised profits arising from transactions between the Group and its associate are eliminated to the extent of the

Group’s interests in the associate. Unrealised losses on such transactions are also eliminated partially, unless cost

cannot be recovered.

2.3 Joint arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring

unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified as either joint operation or joint venture. A joint arrangement is classified as joint

operation when the Group or the Company has rights to the assets and obligations for the liabilities relating to an

arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions,

including its share of those held or incurred jointly with the other investors, in relation to the joint operation. A joint

arrangement is classified as joint venture when the Group has rights only to the net assets of the arrangements.

The Group accounts for its interest in the joint venture using the equity method as described in note 2.2.





2.4 Property, plant and equipment and depreciation

Freehold land and projects-in-progress are measured at cost less any accumulated impairment losses and are not

depreciated. Other property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses.

Cost includes expenditure that are directly attributable to the acquisition of the assets and any other costs directly

attributable to bringing the assets to working condition for their intended use, and the costs of dismantling and

removing the items and restoring the site on which they are located. The cost of self-constructed assets also

includes the cost of materials and direct labour. Purchased software that is integral to the functionality of the related

equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted

for as separate items (major components) of property, plant and equipment.

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying

amount of the item if it is probable that the future economic benefits embodied within the component will flow to

the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component

is derecognised in the profit or loss. The costs of the day-to-day servicing of property, plant and equipment are

recognised in the profit or loss as incurred.

Buildings are depreciated over 50 years or over the remaining land lease period, whichever is shorter.

Depreciation for property, plant and equipment other than freehold land and projects-in-progress is recognised in

the profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property,

plant and equipment. Property, plant and equipment are not depreciated until the assets are ready for their intended

use.

Lease properties are depreciated over the lease term or the estimated useful lives, whichever is shorter. Leasehold

land is depreciated over the lease term.

The estimated useful lives of the other property, plant and equipment are as follows:

Plant and pipelines 5 – 55 years

Office equipment, furniture and fittings 6 – 7 years

Other plant and equipment 3 – 7 years

Computer hardware and software 5 years

Motor vehicles 4 years

Plant turnaround/major inspection 3 – 7 years

The depreciable amount is determined after deducting residual value. The residual value, useful life and depreciation

method are reviewed at each financial year end to ensure that the amount, period and method of depreciation are

consistent with previous estimates and the expected pattern of consumption of the future economic benefits

embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are

expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying

amount is recognised in the profit or loss.

pg 205


2.5 Leased assets

When the fulfilment of an arrangement is dependent on the use of a specific asset and the arrangement conveys

a right to use the asset, it is accounted for as a lease although the arrangement does not take the legal form of a

lease. A lease arrangement is accounted for as finance or operating lease in accordance with the accounting policy

stated below.

Finance lease

A lease is recognised as a finance lease if it transfers substantially to the Group and the Company all the risks and

rewards incidental to ownership. Upon initial recognition, the leased asset is measured at an amount equal to the

lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the

asset is accounted for in accordance with the accounting policy applicable to that asset. The corresponding liability

is included in the statement of financial position as financial lease liabilities.

Minimum lease payments made under finance leases are apportioned between the finance costs and the reduction

of the outstanding liability. The finance costs, which represent the difference between the total leasing commitments

and the fair value of the assets acquired, are recognised in the profit or loss and allocated over the lease term so

as to produce a constant periodic rate of interest on the remaining balance of the liability for each accounting

period.

Contingent lease payments, if any, are accounted for by revising the minimum lease payments over the remaining

term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

Operating lease

All leases that do not transfer substantially to the Group and the Company all the risks and rewards incidental to

ownership are classified as operating leases and, the leased assets are not recognised on the Group’s and the

Company’s statement of financial position.

Payments made under operating leases are recognised as an expense in the profit or loss on a straight-line basis

over the term of the lease. Lease incentives received are recognised as a reduction of rental expense over the lease

term on a straight-line basis. Contingent rentals are charged to profit or loss in the reporting period in which they

are incurred.

Leasehold land which in substance is an operating lease is classified as prepaid lease payments.

2.6 Investments

Long term investments in subsidiaries, associate and joint ventures are stated at cost less impairment loss, if any, in

the Company’s financial statements, unless the investment is classified as held for sale. The cost of investment

includes transaction costs.

The carrying amount of these investments includes fair value adjustments on shareholder’s loans and advances, if any.





2.7 Intangible asset – goodwill

Goodwill arising from business combinations is initially measured at cost as described in note 2.1. Following the

initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill is not amortised

but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate

that the carrying value may be impaired.

In respect of equity accounted associate, the carrying amount of goodwill is included in the carrying amount of the

investment. The entire carrying amount of the investment is reviewed for impairment when there is objective

evidence of impairment.

2.8 Financial instruments

A financial instrument is recognised in the statement of financial position when, and only when, the Group or the

Company becomes a party to the contractual provisions of the instrument.

i) Financial assets

Initial recognition

Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-

to-maturity investments or available-for-sale financial assets, as appropriate. The Group and the Company

determine the classification of financial assets at initial recognition.

Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of

financial assets not at fair value through profit or loss, any directly attributable transaction costs.

Purchases or sales that require delivery of financial assets within a timeframe established by regulation or

convention in the marketplace concerned (regular way purchases) are recognised on the trade date, i.e. the

date that the Group and the Company commit to purchase or sell the financial asset.

Fair value adjustments on shareholder’s loans and advances at initial recognition, if any, are added to the

carrying value of investments in the Company’s financial statements.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including

derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging

instrument) and financial assets that are specifically designated into this category upon initial recognition.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value with

gains or losses recognised in the profit or loss. The methods used to measure fair value are stated in note 2.21.

Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market. Subsequent

to initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using

the effective interest rate method as described in note 2.8(vi).

Held-to-maturity investments

The Group and the Company did not have any held-to-maturity investments during the year ended 31

December 2014 and the year ended 31 December 2013.

pg 207


2.8 Financial instruments (continued)

i) Financial assets (continued)

Available-for-sale financial assets

Available-for-sale category comprises investment in equity and debt securities instruments that are not held for

trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair

value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale

are subsequently measured at fair value with unrealised gains and losses recognised directly in other

comprehensive income and accumulated under available-for-sale reserve in equity until the investment is

derecognised or determined to be impaired, at which time the cumulative gain or loss previously recorded in

equity is recognised in the profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for

impairment (see note 2.9(i)).

ii) Financial liabilities

Initial recognition

Financial liabilities are classified as financial liabilities at fair value through profit or loss, or financial liabilities

measured at amortised cost as appropriate. The Group and the Company determine the classification of

financial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value less, in the case of financial liabilities measured at

amortised cost, any directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a

derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial

liabilities that are specifically designated into this category upon initial recognition.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values

with the gain or loss recognised in profit or loss.

Financial liabilities measured at amortised cost

Subsequent to initial recognition, financial liabilities measured at amortised cost are measured at amortised cost

using the effective interest rate method as described in note 2.8(vi).

Gains and losses are recognised in the profit or loss when the liabilities are derecognised, as well as through

the amortisation process.






iii) Hedge accounting

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk

associated with a recognised asset or liability or a highly probable forecast transaction and could affect the

profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined

to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised

in profit or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity

into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or

loss. If the hedge item is a non-financial asset or liability, the associated gain or loss recognised in other

comprehensive income is removed from equity and included in the initial amount of the asset or liability.

However, loss recognised in other comprehensive income that will not be recovered in one or more future

periods is reclassified from equity into profit or loss.

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold,

terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected

to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or

loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast

transaction is no longer expected to occur, any related cumulative gain or loss recognised in other

comprehensive income on the hedging instrument is reclassified from equity into profit or loss.

iv) Derivative financial instruments

The Group and the Company uses derivative financial instruments such as forward currency contracts to

manage certain exposures to fluctuations in foreign currency exchange rates.

Such derivative financial instruments are initially recognised at fair value on the date on which a derivative

contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial

assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains and losses arising from changes in fair value on derivatives during the year, other than those

accounted for under hedge accounting as described in note 2.8(iii), are recognised directly to the profit or loss.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if,

and only if, it is not closely related to the economic characteristics and risks of the host contract and the host

contract is not categorised as at fair value through profit or loss. The host contract, in the event an embedded

derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the

host contract.

In general, contracts to sell or purchase non-financial items to meet expected own use requirements are not

accounted for as financial instruments. However, contracts to sell or purchase commodities that can be net

settled or which contain written options are required to be measured at fair value, with gains and losses

recognised in the profit or loss.

pg 209



v) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial

position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there

is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

vi) Amortised cost of financial instruments

Amortised cost is computed using the effective interest rate method. This method uses effective interest rate

that exactly discounts estimated future cash receipts or payments through the expected life of the financial

instrument to the net carrying amount of the financial instrument. Amortised cost takes into account any

transaction costs and any discount or premium on settlement.

vii) Derecognition of financial instruments

Financial assets

A financial asset is derecognised when the rights to receive cash flows from the asset have expired, or the

Group and the Company have transferred their rights to receive cash flows from the asset or have assumed

an obligation to pay the received cash flows in full without material delay to a third party under a “pass-

through” arrangement without retaining control of the asset or substantially all the risks and rewards of the

asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the

consideration received (including any new asset obtained less any new liability assumed) and any cumulative

gain or loss that had been recognised in equity is recognised in the profit or loss.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.

On derecognition of a financial liability, the difference between the carrying amount of the financial liability

extinguished or transferred to another party and the consideration paid, including any non-cash assets

transferred or liabilities assumed, is recognised in the profit or loss.

2.9 Impairment

i) Financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investment in

subsidiaries, investment in associate and investment in joint ventures) are assessed at each reporting date to

determine whether there is any objective evidence of impairment as a result of one or more events having an

impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter

how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged decline in

the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists, then

the impairment loss of the financial asset is estimated.

An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the

difference between the asset’s carrying amount and the present value of estimated future cash flows discounted

at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of

an allowance account.





2.9 Impairment (continued)

i) Financial assets (continued)

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is

measured as the difference between the asset’s acquisition cost (net of any principal repayment and

amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline

in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income,

the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or

loss and is measured as the difference between the financial asset’s carrying amount and the present value of

estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available

for sale is not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively

related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is

reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have

been had the impairment not been recognised at the date the impairment is reversed. The amount of the

reversal is recognised in profit or loss.

ii) Other assets

The carrying amounts of other assets, other than inventories, deferred tax assets and financial assets, are

reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised if

the carrying amount of an asset or the cash-generating-unit to which it belongs exceeds its recoverable

amount. Impairment losses are recognised in the profit or loss.

A cash-generating-unit is the smallest identifiable asset group that generates cash flows from continuing use

that are largely independent from other assets and groups. An impairment loss recognised in respect of a cash-

generating-unit is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then

to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

The recoverable amount of an asset or cash-generating-unit is the greater of its value in use and its fair value

less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present

value using a pre-tax discount rate that reflects current market assessments of the time value of money and

the risks specific to the asset or cash-generating-unit. For an asset that does not generate largely independent

cash inflows, the recoverable amount is determined for the cash-generating-unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed in the subsequent period. In respect of other assets,

impairment losses recognised in prior periods are assessed at the end of each reporting period for any

indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a

change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the

extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,

net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses

are credited to the profit or loss in the year in which reversals are recognised.

pg 211


2.10 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank balances, and deposits with licensed financial

institutions and highly liquid investments which have an insignificant risk of changes in value. For the purpose of

statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and deposits restricted,

if any.

2.11 Inventories

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling

price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost of maintenance material and spares consists of the invoiced value from suppliers and import duty charges

and is determined on a weighted average basis.

Cost of liquefied gases and water is determined on a weighted average basis.

2.12 Provisions

A provision is recognised if, as a result of a past event, the Group and the Company have a present legal or

constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will

be required to settle the obligation. Provisions are determined by discounting the expected future net cash flows

at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the

liability. Where discounting is used, the accretion in the provision due to the passage of time is recognised as

finance cost.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present

obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to reflect the current

best estimate.

Possible obligations whose existence will only be confirmed by the occurrence or non-occurrence of one or more

future events, not wholly within the control of the Group, are not recognised in the financial statements but are

disclosed as contingent liabilities unless the possibility of an outflow of economic resources is considered remote.

2.13 Employee benefits

Short term benefits

Wages and salaries, bonuses and social security contributions are recognised as an expense in the year in which

the associated services are rendered by employees of the Group and of the Company.

Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees

Provident Fund (EPF).





2.14 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit

or loss except to the extent it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using the statutory tax rates at the

reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is provided for, using the liability method, on temporary differences at the reporting date between

the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred

tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all

deductible temporary differences, unabsorbed capital allowances, unutilised reinvestment allowances, unutilised

investment tax allowances, unutilised tax losses and unutilised tax credits to the extent that it is probable that

future taxable profit will be available against which the deductible temporary differences, unabsorbed capital

allowances, unutilised reinvestment allowances, unutilised investment tax allowances, unutilised tax losses and

unutilised tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the assets is realised or

the liability is settled, based on the laws that have been enacted or substantively enacted by the end of the

reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and

assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different

tax entities, where they intend to settle current tax liabilities and assets on a net basis or their tax assets and

liabilities will be realised simultaneously.

Deferred tax asset is reviewed at each reporting date and is reduced to the extent that it is no longer probable

that the future taxable profits will be available against which related tax benefit will be realised.

Unutilised reinvestment allowance and unutilised investment tax allowance, being tax incentives that is not a tax

base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits

will be available against which the unutilised tax incentive can be utilised.

2.15 Foreign currency transactions

In preparing the financial statements of individual entities in the Group, transactions in currencies other than the

entity’s functional currency (foreign currencies) are translated to the functional currencies at rates of exchange

ruling on the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at reporting date are retranslated to the functional

currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at reporting date, except

for those that are measured at fair value, are retranslated to the functional currency at the exchange rate at the

date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in

foreign currency are not retranslated.

Gains and losses on exchange arising from retranslation are recognised in the profit or loss.

pg 213


2.16 Revenue

Revenue from gas processing services is recognised in the profit or loss based on actual and estimates of work

done in respect of services rendered for separating natural gas into its components.

Revenue from gas transportation services is recognised in the profit or loss based on services rendered for

transporting and distributing the processed gas.

Revenue from sale of industrial utilities is recognised in the profit or loss based on utilities distributed to the buyer

at pre-determined rates.

Revenue from regasification of liquefied natural gas is recognised in the profit or loss based on actual and

estimates of work done in respect of services rendered for conversion of natural gas from liquid to gas.

2.17 Financing costs

Finance costs comprise interest payable on borrowings.

All interest and other costs incurred in connection with borrowings are expensed as incurred. The interest

component of finance lease payments is accounted for in accordance with the policy set out in note 2.5.

2.18 Deferred income

Deferred income is recognised in the profit or loss on a time proportion basis over the agreed contract period or

applicable period.

2.19 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the

weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted

average number of ordinary shares outstanding during the period, for the effects of potential ordinary shares, if

any.

2.20 Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s

other components, and for which discrete financial information is available. All operating segment’s operating

results are reviewed regularly by entity’s chief operating decision maker to make decisions about resources to be

allocated to the segment and to assess its performance.





2.21 Fair value measurements

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes

place either in the principal market or in the absence of a principal market, in the most advantageous market.

Financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by

reference to quoted market bid prices at the close of business at reporting date. For financial instruments where

there is no active market, fair value is determined using valuation techniques. Such techniques may include using

recent arm’s length market transactions; reference to the current fair value of another instrument that is

substantially the same; discounted cash flow analysis or other valuation models.

Non-financial assets

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate

economic benefits by using the asset in its highest and best use or by selling it to another market participant that

would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group/Company uses observable market data as far

as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the

valuation technique as follows:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 – Inputs for the asset or l iabi l i ty that are not based on observable market data

(unobservable input).

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in

circumstances that caused the transfer.

pg 215

3. PROPERTY, PLANT AND EQUIPMENT

Group31.12.2014

At 1.1.2014RM’000

AdditionsRM’000

Acquisitionof a

subsidiaryRM’000

Disposals/ write-offs

RM’000

Transfers/ adjustment

RM’000

At 31.12.2014

RM’000

At costFreehold land 4,544 – – – (40) 4,504

Leasehold land 541,287 4,589 – – (7,000) 538,876

Buildings 241,532 130 – – 22,899 264,561

Plant and pipelines 17,671,585 8,062 – (131,338) 905,277 18,453,586

Office equipment, furniture

and fittings 39,629 69 – (3,942) 562 36,318

Other plant and equipment 187,734 14,679 – (967) 42,115 243,561

Computer hardware and

software 84,564 41 – (405) 8,708 92,908

Motor vehicles 29,014 909 – (1,008) – 28,915

Plant turnaround/major

inspection 457,952 – – (72,946) 147,154 532,160

Projects-in-progress 1,697,329 1,058,423 94,294 – (1,222,190) 1,627,856

20,955,170 1,086,902 94,294 (210,606) (102,515)* 21,823,245

*Relates to adjustments upon finalisation of cost previously accrued amounting to RM102,515,000.

Group31.12.2014

At 1.1.2014RM’000

Charge forthe yearRM’000

ImpairmentRM’000


RM’000


RM’000

At 31.12.2014

RM’000

Accumulated depreciation & impairment losses:

Freehold land – – – – – –

Leasehold land 109,827 6,856 – – – 116,683

Buildings 87,533 6,102 – – – 93,635

Plant and pipelines 9,645,397 671,628 30,850 (124,851) – 10,223,024


and fittings 25,236 2,971 – (830) – 27,377

Other plant and equipment 83,736 10,865 – (742) – 93,859


software 67,771 7,061 – (405) – 74,427

Motor vehicles 20,938 3,080 – (840) – 23,178


inspection 303,624 78,372 – (69,395) – 312,601

Projects-in-progress – – – – – –

10,344,062 786,935 30,850 (197,063) – 10,964,784




3. PROPERTY, PLANT AND EQUIPMENT (continued)

Group31.12.2013

At 1.1.2013RM’000

AdditionsRM’000


RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000

At costFreehold land 4,069 475 – – 4,544

Leasehold land 541,004 – – 283 541,287

Buildings 239,306 – – 2,226 241,532

Plant and pipelines 13,751,831 910 (177,539) 4,096,383 17,671,585

Office equipment, furniture and fittings 26,617 369 (44) 12,687 39,629

Other plant and equipment 173,752 5,900 (463) 8,545 187,734

Computer hardware and software 81,040 375 (646) 3,795 84,564

Motor vehicles 25,066 5,782 (2,108) 274 29,014

Plant turnaround/major inspection 413,521 – (13,474) 57,905 457,952

Projects-in-progress 4,334,323 1,546,206 (1,102) (4,182,098) 1,697,329

19,590,529 1,560,017 (195,376) – 20,955,170

Group31.12.2013

At 1.1.2013RM’000


ImpairmentRM’000


RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000



Leasehold land 102,951 6,876 – – – 109,827

Buildings 82,115 5,418 – – – 87,533

Plant and pipelines 9,220,126 601,382 – (176,174) 63 9,645,397


and fittings 22,784 2,494 – (42) – 25,236

Other plant and equipment 78,383 5,861 – (445) (63) 83,736


software 61,690 6,233 – (152) – 67,771

Motor vehicles 20,342 2,703 – (2,107) – 20,938


inspection 224,199 92,899 – (13,474) – 303,624


9,812,590 723,866 – (192,394) – 10,344,062

pg 217


Company31.12.2014

At 1.1.2014RM’000

AdditionsRM’000


RM’000


RM’000

At 31.12.2014

RM’000

At costFreehold land 4,544 – – (40) 4,504

Leasehold land 541,287 4,589 – (7,000) 538,876

Buildings 241,532 130 – 22,899 264,561

Plant and pipelines 14,189,248 701 (131,338) 998,807 15,057,418

Office equipment, furniture and fittings 30,901 69 (3,942) 562 27,590



Motor vehicles 29,012 819 (1,008) – 28,823


Projects-in-progress 1,627,601 1,014,251 – (1,204,649) 1,437,203

17,394,379 1,035,247 (210,606) (7,368)* 18,211,652

*Relates to adjustments upon finalisation of cost previously accrued amounting to RM7,368,000.

Company31.12.2014

At 1.1.2014RM’000


ImpairmentRM’000


RM’000


RM’000

At 31.12.2014

RM’000



Leasehold land 109,827 6,856 – – – 116,683

Buildings 87,533 6,102 – – – 93,635

Plant and pipelines 9,537,681 496,762 30,850 (124,851) – 9,940,442


and fittings 24,471 1,662 – (830) – 25,303

Other plant and equipment 83,736 8,447 – (742) – 91,441


software 67,771 7,059 – (405) – 74,425

Motor vehicles 20,938 3,078 – (840) – 23,176


inspection 303,624 74,873 – (69,395) – 309,102


10,235,581 604,839 30,850 (197,063) – 10,674,207





Company31.12.2013

At 1.1.2013RM’000

AdditionsRM’000


RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000

At costFreehold land 4,069 475 – – 4,544

Leasehold land 541,004 – – 283 541,287

Buildings 239,306 – – 2,226 241,532

Plant and pipelines 13,751,832 910 (177,540) 614,046 14,189,248

Office equipment, furniture and fittings 26,617 369 (44) 3,959 30,901



Motor vehicles 25,066 5,780 (2,108) 274 29,012


Projects-in-progress 1,333,165 986,154 (685) (691,033) 1,627,601

16,589,373 999,966 (194,960) – 17,394,379

Company31.12.2013

At 1.1.2013RM’000


ImpairmentRM’000


RM’000

Transfers/ reclass

RM’000

At 31.12.2013

RM’000



Leasehold land 102,951 6,876 – – – 109,827

Buildings 82,115 5,418 – – – 87,533

Plant and pipelines 9,220,127 493,665 – (176,174) 63 9,537,681


and fittings 22,784 1,729 – (42) – 24,471

Other plant and equipment 78,383 5,861 – (445) (63) 83,736


software 61,690 6,233 – (152) – 67,771

Motor vehicles 20,342 2,703 – (2,107) – 20,938


inspection 224,199 92,899 – (13,474) – 303,624


9,812,591 615,384 – (192,394) – 10,235,581

pg 219


GroupCarrying amount

CompanyCarrying amount

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Freehold land 4,504 4,544 4,504 4,544

Leasehold land 422,193 431,460 422,193 431,460

Buildings 170,926 153,999 170,926 153,999

Plant and pipelines 8,230,562 8,026,188 5,116,976 4,651,567

Office equipment, furniture and fittings 8,941 14,393 2,287 6,430

Other plant and equipment 149,702 103,998 153,695 104,002

Computer hardware and software 18,481 16,793 18,451 16,793

Motor vehicles 5,737 8,076 5,647 8,074

Plant turnaround/major inspection 219,559 154,328 205,563 154,328

Projects-in-progress 1,627,856 1,697,329 1,437,203 1,627,601

10,858,461 10,611,108 7,537,445 7,158,798

Restrictions of land title

The titles of certain lands are in the process of being registered in the Company’s name.

Projects-in-progress

Included in the previous year’s additions to the projects-in-progress of the Group is financing costs arising from finance

lease liabilities capitalised amounting to RM34,576,000.

The financing rate on finance lease liabilities capitalised is 8.9% per annum.

Leased floating storage unit

The Group leases certain plant and pipelines under a finance lease agreement with a net book value of RM812,804,000

(2013: RM850,048,000).

Leasehold land

Included in the carrying amounts of leasehold land are:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Leasehold land with unexpired lease period of

more than 50 years 292,063 306,694 292,063 306,694

Leasehold land with unexpired lease period of less

than 50 years 130,130 124,766 130,130 124,766

422,193 431,460 422,193 431,460




4. INVESTMENT IN SUBSIDIARIES

Note

Company

2014RM’000

2013RM’000

Investment at cost:

– unquoted shares

At beginning of the year 2,420,101 2,000,101

Conversion of advances made:

– during the year – 225,916

– in prior year – 194,084

Total conversion of advances made – 420,000

Acquisition during the year 24 94,666 –

At end of the year 2,514,767 2,420,101

Details of the subsidiaries are as follows:

Name of entity Principal activities Country of incorporationEffective ownership and voting interest

2014%

2013%

Regas Terminal (Sg. Udang)

Sdn. Bhd.

Manage and operate LNG

regasification terminal

Malaysia 100 100

Regas Terminal (Pengerang)

Sdn. Bhd.

Intended to manage and operate

LNG regasification terminal

Malaysia 100 100

Regas Terminal (Lahad Datu)

Sdn. Bhd.



Malaysia 99 99

Pengerang LNG (Two) Sdn.

Bhd. (PLNG2)



Malaysia 72* –

* The Company’s intended equity shareholding in PLNG2 is 65%. This shall be achieved upon further subscription of

ordinary shares by the Company and other non-controlling parties, which is expected in 2015.

pg 221

5. INVESTMENT IN ASSOCIATE

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Investment at cost:

– quoted shares in Malaysia 76,466 76,466 76,466 76,466

Share of post-acquisition profits and reserves 55,869 52,581 – –

132,335 129,047 76,466 76,466

Market value of quoted shares 611,832 735,339 611,832 735,339

Details of the associate are as follows:


2014%

2013%

Gas Malaysia Berhad Selling, marketing, distribution and

promotion of natural gas

Malaysia 14.8 14.8

Although the Group has less than 20% of the ownership in the equity interest of Gas Malaysia Berhad, the Group has

determined that it has significant influence over the financial and operating policy of the associate through representation

on the associate’s board of directors.

2014RM’000

2013RM’000

Group’s share of results

Share of total comprehensive income for the year 26,773 27,263

Other information


6. INVESTMENT IN JOINT VENTURES

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Investment at cost:

– unquoted shares 192,250 192,250 192,250 192,250

Share of post-acquisition profits and reserves 276,149 9,746 – –

468,399 201,996 192,250 192,250

The Group’s involvement in joint arrangements are structured through separate vehicles which provide the Group rights

to the net assets of these entities. Accordingly, the Group has classified these investments as joint ventures.




6. INVESTMENT IN JOINT VENTURES (continued)

Group’s share of the net assets and results is significantly contributed by Kimanis Power Sdn. Bhd.

2014RM’000

2013RM’000

Group’s summarised financial information

As at 31 December

Non-current assets 1,855,127 1,054,404

Current assets 295,143 537,417

Non-current liabilities (1,118,883) (1,152,476)

Current liabilities (248,461) (100,316)

Net assets 782,926 339,029

Included in the net assets are:

Cash and cash equivalents 200,901 489,240

Non-current liabilities (excluding trade and other payables and provisions) (1,118,883) (1,152,332)

Current liabilities (excluding trade and other payables and provisions) (34,788) –

Year ended 31 December

Profit for the year 436,932 26,054

Other comprehensive income for the year 13,250 14,636

Total comprehensive income 450,182 40,690

Included in the total comprehensive income are:

Revenue 1,744,096 82,303

Depreciation and amortisation (368) (230)

Interest income 40,091 484

Interest expense (4,987) –

Tax (income)/expenses 291,179 (3,045)

Group’s share of net assets 468,399 201,996

Group’s share of results

Share of profit for the year 261,955 15,530

Share of other comprehensive income for the year 7,950 8,782

Share of total comprehensive income 269,905 24,312

Other information


pg 223

6. INVESTMENT IN JOINT VENTURES (continued)

Details of the joint ventures are as follows:


2014%

2013%

Kimanis Power Sdn. Bhd.

(KPSB)

Generation and sale of electricity Malaysia 60 60

Kimanis O&M Sdn. Bhd. Provision of operation and

maintenance services to KPSB

Malaysia 60 60

Industrial Gases Solutions

Sdn. Bhd.

Selling, marketing, distribution and

promotion of industrial gas

Malaysia 50 50

Although the Group has more than 50% of the ownership in the equity interest of Kimanis Power Sdn. Bhd. and Kimanis

O&M Sdn. Bhd., the Group has determined that it does not have sole control over these investees considering that

strategic and financial decisions of the relevant activities of these investees require unanimous consent by all shareholders.

Contingent liabilities

Group

2014RM’000

2013RM’000

Group’s share of claim against a joint venture – 5,040




7. DEFERRED TAX

The components and movements of deferred tax liabilities and assets during the year prior to and after offsetting are as

follows:

Group

At 1.1.2014RM’000

Charged/ (credited) to

profit or lossRM’000

At 31.12.2014

RM’000

31.12.2014

Deferred tax liabilities

Property, plant and equipment 1,020,751 89,450 1,110,201

Financial instrument valuation – – –

1,020,751 89,450 1,110,201

Deferred tax assets

Deferred income (2,325) 19,009 16,684

Foreign currency translation (14,080) 14,080 –

Unutilised investment tax allowance (626,395) 21,397 (604,998)

(642,800) 54,486 (588,314)

Net deferred tax 377,951 143,936 521,887

31.12.2013


Property, plant and equipment 1,006,762 13,989 1,020,751

Financial instrument valuation 29,892 (29,892) –

1,036,654 (15,903) 1,020,751

Deferred tax assets

Deferred income (4,573) 2,248 (2,325)

Foreign currency translation (28,081) 14,001 (14,080)

Unutilised investment tax allowance – (626,395) (626,395)

(32,654) (610,146) (642,800)

Net deferred tax 1,004,000 (626,049) 377,951

pg 225

7. DEFERRED TAX (continued)

Company

At 1.1.2014RM’000

Charged/ (credited) to

profit or lossRM’000

At 31.12.2014

RM’000

31.12.2014


Property, plant and equipment 983,325 33,312 1,016,637

Financial instrument valuation – – –

983,325 33,312 1,016,637

Deferred tax assets

Deferred income (2,325) 19,009 16,684

Foreign currency translation – – –

(2,325) 19,009 16,684

Net deferred tax 981,000 52,321 1,033,321

31.12.2013


Property, plant and equipment 1,006,762 (23,437) 983,325

Financial instrument valuation 29,892 (29,892) –

1,036,654 (53,329) 983,325

Deferred tax assets

Deferred income (4,573) 2,248 (2,325)

Foreign currency translation (28,081) 28,081 –

(32,654) 30,329 (2,325)

Net deferred tax 1,004,000 (23,000) 981,000




7. DEFERRED TAX (continued)

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against

current tax liabilities and when the deferred taxes relate to the same tax authority. The amounts determined after

appropriate offsetting are as follows:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Deferred tax assets

Deferred tax liabilities 93,564 37,425 – –

Deferred tax assets (604,998) (640,474) – –

(511,434) (603,049) – –


Deferred tax liabilities 1,035,419 983,325 1,035,419 983,325

Deferred tax assets (2,098) (2,325) (2,098) (2,325)

1,033,321 981,000 1,033,321 981,000

Net deferred tax 521,887 377,951 1,033,321 981,000

8. TRADE AND OTHER INVENTORIES

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Liquefied gases and water 1,931 1,694 1,931 1,694

Maintenance materials and spares 41,453 36,921 40,973 36,834

43,384 38,615 42,904 38,528

pg 227

9. TRADE AND OTHER RECEIVABLES

Group Company

Note2014

RM’0002013

RM’0002014

RM’0002013

RM’000

Trade receivables 22,580 19,909 22,580 19,909

Other receivables 9.1 46,063 40,725 45,405 36,034

Deposits 1,030 1,022 1,030 1,022

Prepayments 15,964 25,706 360 253

Amount due from:

Holding company 9.2 287,551 306,394 235,668 253,348

Subsidiaries 9.3 – – 72,760 454,903

Related companies 9.4 200,793 288,346 200,790 288,346

Joint ventures 9.5 16,323 11,212 16,323 11,212

Related parties 9.6 18,414 18,157 18,414 18,157

608,718 711,471 613,330 1,083,184

9.1 Included in other receivables of the Group and of the Company is interest receivable of RM Nil (2013: RM161,000).

9.2 The amount due from holding company relates to:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Trade 287,036 305,965 235,156 252,919

Non-trade 515 429 512 429

287,551 306,394 235,668 253,348

9.3 The amount due from subsidiaries are non-trade in nature. Included in these receivables are accrual of payment to

be made on behalf of subsidiaries amounting to RM2,194,000 (2013: RM Nil).




9. TRADE AND OTHER RECEIVABLES (continued)

9.4 The amount due from related companies relates to:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Trade 110,104 142,218 110,104 142,218

Non-trade 90,689 146,128 90,686 146,128

200,793 288,346 200,790 288,346

9.5 The amount due from joint ventures relates to:

Group/Company2014

RM’0002013

RM’000

Trade 3,452 893

Non-trade 12,871 10,319

16,323 11,212

9.6 The amount due from related parties are trade in nature and is in relation to associates and joint ventures of the

holding company.

10. FUND AND OTHER INVESTMENTS

Group/Company2014

RM’0002013

RM’000

Fair value through profit or loss Designated upon initial recognition Corporate private debt securities – 15,010

pg 229

11. CASH AND CASH EQUIVALENTS

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Cash with PETRONAS Integrated

Financial Shared Services Centre 550,010 856,993 407,648 650,716

Cash and bank balances 87,736 55,130 84,826 55,130

637,746 912,123 492,474 705,846

The Group’s and the Company’s cash and bank balances are held in the In-House Account (IHA) managed by

PETRONAS Integrated Financial Shared Service Centre (IFSSC) to enable more efficient cash management for the Group

and the Company.

Included in cash with IFSSC and cash and bank balances are interest-bearing balances amounting to RM637,594,000

(2013: RM911,989,000) for the Group and RM492,322,000 (2013: RM705,712,000) for the Company.

12. SHARE CAPITAL

Company

2014RM’000

2013RM’000

Authorised:

2,000,000,000 ordinary shares of RM1 each 2,000,000 2,000,000

Issued and fully paid:

1,978,732,000 ordinary shares of RM1 each 1,978,732 1,978,732

13. RESERVES

Share Premium

Share premium comprises the premium paid on subscription of shares in the Company over and above the par value

of the shares.

Hedging Reserve

This reserve records the portion of the gain or loss on hedging instruments in a cash flow hedge that is determined

to be an effective hedge in accordance with accounting policy stated in note 2.8(iii).




14. NON-CONTROLLING INTERESTS

This consists of the non-controlling interests’ proportion of share capital and reserves of partly-owned subsidiaries.

15. FINANCE LEASE LIABILITIES

Finance lease liabilities are payable as follows:

2014 2013

Group

Minimumlease

paymentsRM’000

InterestRM’000

PrincipalRM’000

Minimumlease

paymentsRM’000

InterestRM’000

PrincipalRM’000

Less than one year 100,744 79,717 21,027 94,501 76,770 17,731

Between 1 – 2 years 101,020 77,693 23,327 94,501 75,059 19,442

Between 2 – 5 years 302,232 219,036 83,196 283,762 213,361 70,401

More than 5 years 1,275,446 520,746 754,700 1,290,908 556,690 734,218

1,779,442 897,192 882,250 1,763,672 921,880 841,792

The finance lease liabilities are in relation to charter hire of floating storage units from a related company. Included in

minimum lease payments is a reduction amounting to RM7,035,000 upon finalisation of capital expenditure cost.

16. DEFERRED INCOME

Group/Company Note2014

RM’0002013

RM’000

At beginning of the year 27,656 10,693

Addition 540 17,968

Less: recognised in the profit or loss (15,319) (1,005)

At end of the year 12,877 27,656

Analysis of deferred income:

Current 17 5,079 15,320

Non-current 7,798 12,336

12,877 27,656

Deferred income mainly relates to the payments received in advance or the right to receive payments from third party

amounting to RM540,000 (2013: RM Nil), a related company amounting to RM3,594,000 (2013: RM17,968,000) and a

related party amounting to RM8,743,000 (2013: RM9,688,000) for the rights given to these parties to use the Company’s

properties over a period of time or early termination of supply contract with the Company. The deferred income is

subsequently recognised in the profit or loss on a time apportionment basis over the specified period.

pg 231

17. TRADE AND OTHER PAYABLES

Group Company

Note2014

RM’0002013

RM’0002014

RM’0002013

RM’000

Other payables and accruals 17.1 523,034 795,974 504,503 772,266

Amount due to:

Holding company 17.2 119,859 115,326 102,204 114,874

Related companies 17.2 20,213 87,817 5,604 87,254

Deferred income 16 5,079 15,320 5,079 15,320

668,185 1,014,437 617,390 989,714

17.1 Included in other payables and accruals are amounts owing to suppliers and contractors for purchase of property,

plant and equipment for the Group of RM244,788,000 (2013: RM514,430,000) and for the Company of

RM238,415,000 (2013: RM419,283,000). Also included in other payables is interest payable of RM6,677,000 (2013:

RM6,596,000) for the Group.

17.2 The amount due to holding company and related companies are non-trade in nature. These payables arose from

the normal course of business.

18. REVENUE AND GROSS PROFIT

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Revenue

– gas processing fees 1,480,247 1,497,435 1,480,247 1,497,435

– gas transportation fees 1,286,690 1,189,269 1,286,690 1,189,269

– sale of industrial utilities 1,008,559 867,244 1,008,559 867,244

– regasification fees 616,220 338,191 – –

Total 4,391,716 3,892,139 3,775,496 3,553,948

Cost of revenue

– cost of gas processing (778,579) (746,126) (778,579) (746,126)

– cost of gas transportation (280,024) (286,916) (280,024) (286,916)

– cost of industrial utilities (812,654) (739,518) (812,654) (739,518)

– cost of regasification (308,241) (174,714) – –

Total (2,179,498) (1,947,274) (1,871,257) (1,772,560)

Gross profit 2,212,218 1,944,865 1,904,239 1,781,388




19. OPERATING PROFIT

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Included in operating profit are the following charges:

Audit fees 376 310 249 235

Depreciation of property, plant and equipment 786,935 723,866 604,839 615,384

Impairment losses on property, plant and equipment 30,850 – 30,850 –

Loss on changes in fair value of other

investments 10 412 10 412

Loss on realised foreign exchange 1,264 7,341 572 5,631

Loss on unrealised foreign exchange 51,969 58,595 2 3

Property, plant and equipment

– expensed off 592 1,656 592 673

– written off 13,362 2,982 13,362 2,566

Rental of

– equipment and motor vehicles 7,131 9,104 6,482 9,104

– land and buildings 9,199 7,463 8,032 6,597

Staff costs

– wages, salaries and others 318,315 323,030 309,986 315,970

– contributions to Employees Provident Fund 49,696 51,497 48,662 50,459

and crediting:

Dividend income in Malaysia from

– subsidiary (unquoted) – – 200,000 –

– associate (quoted) – – 23,485 26,012

– joint venture (unquoted) – – 3,502 3,500

Gain on disposal of property, plant and

equipment 87 493 87 493

Interest income from fund and other investments 36,895 41,789 28,323 40,491

Recovery from early termination of electricity and

utilities agreements – 78,261 – 78,261

Rental income on land and buildings 3,484 3,664 3,945 3,957

pg 233

20. FINANCING COSTS

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Interest expense:

– Term loan – 9,319 – 9,319

– Finance lease liabilities 76,328 75,374 – –

76,328 84,693 – 9,319

Recognised in profit or loss:

– Term loan – 9,319 – 9,319

– Finance lease liabilities 76,328 40,798 – –

76,328 50,117 – 9,319

Capitalised into projects-in-progress:

– Finance lease liabilities – 34,576 – –

76,328 84,693 – 9,319

21. TAX EXPENSE/(INCOME)

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Current tax expense

– current year 365,441 443,592 365,441 443,592

– prior year 3,002 – 3,002 –

Total current tax expense 368,443 443,592 368,443 443,592

Deferred tax expenses/(income)

– origination and reversal of temporary

differences 121,101 (628,421) 52,321 (25,372)

– under provision in prior year 22,835 2,372 – 2,372

Total deferred tax expenses/(income) 143,936 (626,049) 52,321 (23,000)

Total tax expense/(income) recognised in

profit or loss 512,379 (182,457) 420,764 420,592

Tax expense on share of profit of associate 7,333 7,401 – –

Tax (income)/expense on share of profit

of joint ventures (174,765) 2,024 – –

Total tax expense/(income) 344,947 (173,032) 420,764 420,592




21. TAX EXPENSE/(INCOME) (continued)

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to total tax

expense at the effective income tax rate of the Group and of the Company is as follows:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Profit for the year 1,842,080 2,078,876 1,694,369 1,418,309


Profit excluding tax 2,187,027 1,905,844 2,115,133 1,838,901

Taxation at Malaysian statutory tax rate of 25%

(2013: 25%) 546,757 476,461 528,783 459,725

Non-deductible expenses 36,502 29,535 9,934 14,910

Effect of unabsorbed capital allowance and

unutilised tax losses recognised (77,817) – – –

Income not subject to tax (1,772) (2,356) – –

Tax exempt income (8,799) (8,410) (63,402) (13,149)

Tax incentives (175,761) (627,368) (57,553) –

Effect of changes in tax rates – (40,894) – (40,894)

319,110 (173,032) 417,762 420,592

Under provision in prior year 25,837 – 3,002 –


22. DIVIDENDS

Company

2014RM’000

2013RM’000

Ordinary

Final paid:

2013 – Final dividend of 40 sen per ordinary share under single tier system. 791,494 –

2012 – Final dividend of 35 sen per ordinary share under single tier system. – 692,556

Interim paid:

2014 – First interim dividend of 20 sen per ordinary share under single tier system. 395,747 –

2014 – Second interim dividend of 20 sen per ordinary share under single tier system. 395,747 –

2013 – First interim dividend of 15 sen per ordinary share under single tier system. – 296,810

1,582,988 989,366

The Directors had on 17 February 2015 declared a third interim dividend of 15 sen per ordinary share under single tier

system amounting to RM296,810,000 in respect of the financial year ended 31 December 2014.

pg 235

22. DIVIDENDS (continued)

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend, will

be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year

ending 31 December 2015.

The net dividend per ordinary share for the financial year ended 31 December 2014 takes into account the total interim

dividends paid and declared for the financial year as follows:

Company

2014Sen

2013Sen

Final dividend per ordinary share paid – net 40 35

First interim dividend per ordinary share paid – net 20 15

Second interim dividend per ordinary share paid – net 20 –

80 50

23. EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per ordinary share (EPS) at 31 December 2014 was based on the Group’s net profit

attributable to shareholders of the Company of RM1,843,186,000 (2013: RM2,078,888,000), over the number of

ordinary shares outstanding during the year of 1,978,732,000 (2013: 1,978,732,000).

Diluted earnings per share

The Company has not issued any dilutive potential ordinary shares, hence, the diluted EPS is the same as the basic

EPS.

24. ACQUISITION OF SUBSIDIARY

On 14 November 2014, the Company entered into a Shareholders Agreement with Dialog LNG Sdn. Bhd. (Dialog) and

Pengerang LNG (Two) Sdn. Bhd. (PLNG2) for the establishment of a company to undertake the development of an

LNG Regasification Terminal. PLNG2 is the special purpose vehicle for the said company.

Pursuant to the terms of the Shareholders Agreement, the Company had on 12 December 2014 subscribed 780,000

ordinary shares of RM1 each representing 72% of the issued and paid-up capital of PLNG2 and 93,886 redeemable

preference shares of RM1 each with premium of RM999 each for a total consideration of RM94,666,000. Upon

subscription of the ordinary shares, PLNG2 becomes a subsidiary of the Group. PLNG2 is incorporated in Malaysia

under the Companies Act, 1965.

The Company’s intended equity shareholding of 65% in PLNG2 shall be achieved upon further subscription of ordinary

shares by the Company and Dialog and full subscription by State Secretary Johor Incorporated of its 10% shareholding,

which is expected in 2015.

During the post-acquisition period, the subsidiary contributed revenue of RM Nil and a net loss of RM3,969,000 to the

Group’s results for the year.




24. ACQUISITION OF SUBSIDIARY (continued)

The effect of acquisitions on the cash flows and fair value of assets and liabilities acquired are as follows:

At initial recognition/

fair value RM’000

Property, plant and equipment 94,294

Current assets 96,767

Current liabilities (96,395)

Net identifiable assets and liabilities/purchase consideration 94,666

Less: Cash and cash equivalents of PLNG2 acquired (96,767)

Cash flow on acquisition, net of cash acquired (2,101)

25. CAPITAL COMMITMENTS

Outstanding commitments in respect of capital expenditure at the end of the financial year not provided for in the

financial statements are:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Property, plant and equipmentApproved and contracted for

Less than one year 557,028 158,073 171,371 153,081

Between one and five years 2,070,742 498,453 44,013 481,259

2,627,770 656,526 215,384 634,340

Approved but not contracted forLess than one year 798,122 555,013 703,689 537,448

Between one and five years 1,268,096 5,080,177 919,332 869,981

2,066,218 5,635,190 1,623,021 1,407,429

4,693,988 6,291,716 1,838,405 2,041,769

Share of capital expenditure of joint venturesApproved and contracted for

Less than one year 30,432 137,167 – –

Between one and five years – 84,485 – –

30,432 221,652 – –

Approved but not contracted forLess than one year 960 108,123 – –

Between one and five years 518 159 – –

1,478 108,282 – –

31,910 329,934 – –

Total commitments 4,725,898 6,621,650 1,838,405 2,041,769

pg 237

26. RELATED PARTY DISCLOSURES

Related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if

the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise

significant influence over the party in making financial and operating decisions, or vice versa or where the Group or

the Company and the party are subject to common control. Related parties may be individuals or other entities.

The Group’s and the Company’s related parties include subsidiaries, associate, joint ventures as well as the holding and

the ultimate holding company, Petroliam Nasional Berhad (PETRONAS) and its related entities. The Group’s related

parties also include:

i. Government of Malaysia and its related entities as the Company’s holding company, PETRONAS is wholly-owned

by the Government of Malaysia; and

ii. Key management personnel defined as those persons having authority and responsibility for planning, directing

and controlling the activities of the Group either directly or indirectly. Key management personnel includes all

Directors of the Group.

Key management personnel compensation

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Directors

Fees 568 543 568 543

Other short term employee benefits (including

estimated monetary value of benefits-in-kind) 27 25 27 25

595 568 595 568

The Company paid management fee to the holding company in relation to services of key management personnel of

the Company as disclosed below.




26. RELATED PARTY DISCLOSURES (continued)

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the

following transactions with related parties during the financial year:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Government of Malaysia’s related entities:

Tenaga Nasional Berhad

Purchase of electricity (78,484) (88,940) (59,209) (88,940)

Sales of industrial utilities 78,269 76,204 78,269 76,204

Johor Bahru Valuation and

Property Services Department

Land premium – (75,063) – (75,063)

POIC Sabah Sdn. Bhd.

Land reclamation and study – (2,320) – –

Bendahari Negeri Melaka

Land lease rental, ex gratia & fisherman fund (1,185) – – –

TNB Repair and Maintenance Sdn. Bhd.

Provision of repair and maintenance services (49,391) (21,541) (49,391) (21,541)

Holding company:

Gas processing fee income 1,480,247 1,497,435 1,480,247 1,497,435

Gas transportation fee income 1,286,690 1,189,269 1,286,690 1,189,269

Regasification fee income 616,220 338,191 – –

Interest income 35,196 24,383 26,624 23,085

Purchase of fuel gas (487,563) (402,423) (487,563) (402,423)

Insurance expense (15,387) (28,479) (12,502) (12,695)

Information, communication and

technology charges (32,848) (18,601) (32,517) (18,601)

Interest expense – (9,319) – (9,319)

Corporate security charges (14,045) (15,028) (13,833) (14,978)

Rental of office premises (8,032) (6,597) (8,032) (6,597)

Supply chain and management services (14,813) (7,063) (14,005) (6,468)

Management fees (737) (737) (737) (737)

Internal audit services (766) (710) (607) (710)

Fees for representation on the

Board of Directors (250) (240) (250) (240)

pg 239


Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Related companies:PETRONAS Chemicals Aromatics Sdn. Bhd.

Sale of industrial utilities 47,103 43,142 47,103 43,142

Vinyl Chloride (Malaysia) Sdn. Bhd.


Recovery from early termination of electricity

and utilities agreements – 78,261 – 78,261

PETRONAS Chemicals Ammonia Sdn. Bhd.


PETRONAS Chemicals MTBE Sdn. Bhd.


PETRONAS Chemicals LDPE Sdn. Bhd.


Bekalan Air KIPC Sdn. Bhd.

Purchase of treated water (15,933) (14,531) (15,933) (14,531)

Management fee income 930 500 930 500

PETRONAS Carigali Sdn. Bhd.

Project management fee income 2,104 22,854 2,104 22,854

Overbilling of project management fees (5,095) (51,270) (5,095) (51,270)

Operations and maintenance services income 24,887 17,367 24,887 17,367

CEFS Response

Contribution for emergency response services (7,898) (9,620) (7,898) (9,620)

PETRONAS Chemicals Derivatives Sdn. Bhd.


PETRONAS Chemicals Ethylene Sdn. Bhd.


PETRONAS Management Training Sdn. Bhd.

Training and development related costs (2,656) (3,041) (2,656) (3,041)

PETRONAS Technical Training Sdn. Bhd.

Training and development related costs (5,773) (3,087) (5,609) (3,087)

PETRONAS Technical Services Sdn. Bhd.

Technical consultancy fees (22,466) (47,999) (22,025) (34,622)

PETRONAS Penapisan (Melaka) Sdn. Bhd.

Lease of land for pipeline route (76) (76) – –

Rental of office premises (75) (82) – –

Lease of land for office building (11) (11) – –

Facilities usage charges (169) – – –

Gas Asia Terminal (L) Pte. Ltd.

Time charter services (154,147) (148,730) – –

Lease and rental of building (789) (590) – –

Repair and maintenance (78) – – –

PrimeSourcing International Sdn. Bhd.

Supply of parts and materials (108,551) (10,104) (108,551) (10,104)

PETRONAS Penapisan (Terengganu) Sdn. Bhd.

Marine facilities income 1,505 1,459 1,505 1,459

Sungai Udang Port Sdn. Bhd.

Fresh Water Transfer Services (221) – – –

Marine services (6,706) (3,005) – –





Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Subsidiaries:

Regas Terminal (Sg. Udang) Sdn. Bhd.

Management fee income – – 5,627 5,726

Rental income of warehouse – – 104 103

Pipeline maintenance fee income – – 1,161 612

Lab sampling fee income – – 31 19

Annual access right fee income – – 357 190

Regas Terminal (Pengerang) Sdn. Bhd.

Management fee income – – 2,261 1,027

Regas Terminal (Lahad Datu) Sdn. Bhd.

Management fee income – – 128 307

Pengerang LNG (Two) Sdn. Bhd.

Management fee income – – 205 –

Joint venture:

Industrial Gases Solutions Sdn. Bhd.


Associates and joint ventures of the holding company:

Kertih Terminals Sdn. Bhd.


BASF PETRONAS Chemicals Sdn. Bhd.


BP PETRONAS Acetyls Sdn. Bhd.


Trans Thai-Malaysia (Malaysia) Sdn. Bhd.

Access right of way fee income 2,095 2,025 2,095 2,025

Annual operations and maintenance fee income 5,856 3,722 5,856 3,722

The Directors of the Company are of the opinion that the above transactions have been entered into in the normal

course of business and have been established on a commercial basis. The above has been stated at transacted amount.

Included in the management fees paid to the holding company is payment for services of certain key management

personnel of the Company.

Included in the fees for representation on the Board of Directors are fees paid directly to holding company in respect

of certain directors who are appointees of the holding company.

Information regarding outstanding balances at reporting date arising from related party transactions are disclosed in

note 9, note 15, note 16 and note 17.

pg 241

27. OPERATING SEGMENTS

The Group has four reporting segments, as described below, which are the Group’s strategic business units. The

strategic business units offer different products and services, and are managed separately because they require

different technology and marketing strategies. For each of the strategic business units, the Group’s Chief Operating

Decision Maker which is the Board of Directors, reviews internal management reports at least on a quarterly basis. The

following summary describes the operations in each of the Group’s reportable segments:

• Gas processing – activities include processing of natural gas from gas fields offshore the East Coast of

Peninsular Malaysia into sales gas and other by-products such as ethane, propane and

butane.

• Gas transportation – activities include transportation of the processed gas to PETRONAS’ end customers

throughout Malaysia and export to Singapore.

• Utilities – activities include manufacturing, marketing and supplying of industrial utilities to the

petrochemical complexes in the Kerteh and Gebeng Industrial Area.

• Regasification – activities include regasification of liquefied natural gas (LNG) for PETRONAS.

Performance is measured based on segment operating profit. Segment operating profit is used to measure performance

as management believes that such information is the most relevant in evaluating the results of the segments.

GroupBusiness segments

Gas Processing

RM’000

Gas Transportation

RM’000UtilitiesRM’000

RegasificationRM’000

TotalRM’000

31.12.2014

Revenue 1,480,247 1,286,690 1,008,559 616,220 4,391,716

Segment results 701,668 1,006,666 195,905 307,979 2,212,218

Unallocated expenses (70,159)

Operating profit 2,142,059

Financing costs (76,328)

Share of profit after tax of equity-

accounted associate and joint

ventures 288,728

Profit before taxation 2,354,459

Tax expense (512,379)

Profit for the year 1,842,080

Included in the measure of segment profit are:

Depreciation and amortisation (341,833) (82,296) (180,368) (182,096) (786,593)

Unallocated depreciation and

amortisation – – – – (342)




27. OPERATING SEGMENTS (continued)


Gas Processing

RM’000

GasTransportation



TotalRM’000

31.12.2013

Revenue 1,497,435 1,189,269 867,244 338,191 3,892,139

Segment results 751,309 902,353 127,726 163,477 1,944,865

Unallocated expenses (41,122)

Operating profit 1,903,743

Financing costs (50,117)

Share of profit after tax of equity-

accounted associate and joint

ventures 42,793

Profit before taxation 1,896,419

Tax income 182,457

Profit for the year 2,078,876

Included in the measure of segment profit are:

Depreciation and amortisation (332,348) (98,195) (184,554) (108,481) (723,578)

Unallocated depreciation and

amortisation – – – – (288)


Gas Processing

RM’000

GasTransportation



TotalRM’000

31.12.2014

Segment assets 4,292,276 2,437,755 1,265,132 4,046,346 12,041,509

Investment in associate 132,335

Investment in joint ventures 468,399

Unallocated assets 618,234

Total assets 13,260,477

Included in the measure of segment assets are:

Capital expenditure 803,863 134,809 77,301 51,066 1,067,039

Unallocated capital expenditure – – – – 19,863

pg 243



Gas Processing

RM’000

GasTransportation



TotalRM’000

31.12.2013

Segment assets 3,847,724 2,255,332 1,420,851 4,344,914 11,868,821

Investment in associate 129,047

Investment in joint ventures 201,996

Unallocated assets 1,022,555

Total assets 13,222,419

Included in the measure of segment assets are:

Capital expenditure 747,806 198,710 43,378 560,051* 1,549,945

Unallocated capital expenditure – – – – 10,072

* Capital expenditure for Regasification segment includes leased assets amounting to RM Nil (2013: RM34,576,000)

which are accounted for as assets of the Group.

Segment results

The total segment results include items directly attributable to a segment as well as those that can be allocated on a

reasonable basis. Unallocated income/(expenses) mainly comprises finance income, other corporate income and

expenses.

Segment assets

The total of segment assets are measured based on all assets of a segment, excluding interest bearing assets and

corporate assets as these are managed on a group basis.

The segmental information in respect of the associate and joint ventures is not presented as the contribution of the

associate and joint ventures and the carrying amounts of investment in the associate and joint ventures have been

reflected in the statement of profit or loss and other comprehensive income and statement of financial position of the

Group. Details of the associate and joint ventures are disclosed in note 5 and note 6 to the financial statements

respectively.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected

to be used for more than one period.





Products and services segments

Group2014

RM’0002013

RM’000

Gas processing fee 1,480,247 1,497,435

Gas transportation fee 1,286,690 1,189,269

Utilities

– Electricity 484,387 392,260

– Steam 292,160 260,007

– Industrial gases 173,880 148,750

– Others 58,132 66,227

Regasification fee 616,220 338,191

4,391,716 3,892,139

Geographical information for revenue and non-current assets is not presented as the Group is pre-dominantly

operating in Malaysia.

28. HOLDING AND ULTIMATE HOLDING COMPANY

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (PETRONAS), a company

incorporated in Malaysia.

pg 245

29. FINANCIAL INSTRUMENTS

Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

i. Loans and receivables (L&R);

ii Fair value through profit or loss (FVTPL);

- Designated upon initial recognition (DUIR); and

iii Financial liabilities measured at amortised cost (FL).

Group Note

L&R/(FL)

RM’000

FVTPL-DUIR

RM’000

Total carrying amountRM’000

2014

Financial assets

Trade and other receivables (excluding prepayments) 9 592,754 – 592,754

Cash and cash equivalents 11 637,746 – 637,746

1,230,500 – 1,230,500


Finance lease liabilities 15 (882,250) – (882,250)

Trade and other payables (excluding deferred income) 17 (663,106) – (663,106)

(1,545,356) – (1,545,356)

2013

Financial assets


Fund and other investments 10 – 15,010 15,010


1,597,888 15,010 1,612,898


Finance lease liabilities 15 (841,792) – (841,792)


(1,840,909) – (1,840,909)




29. FINANCIAL INSTRUMENTS (continued)

Categories of financial instruments (continued)

Company Note

L&R/(FL)

RM’000

FVTPL-DUIR

RM’000

Total carrying amountRM’000

2014

Financial assets



1,105,444 – 1,105,444



(612,311) – (612,311)

2013

Financial assets

Trade and other receivables (excluding prepayments) 9 1,082,931 – 1,082,931

Fund and other investments 10 – 15,010 15,010


1,788,777 15,010 1,803,787



(974,394) – (974,394)

In 2013, certain fund and other investments have been designated upon initial recognition as fair value through profit

or loss as management internally monitors these investments on fair value basis.

The fair value movements for financial assets categorised as fair value through profit or loss are mainly attributable to

changes in market prices.

pg 247


Financial risk management

The Group and the Company are exposed to various risks that are particular to its core business which consists of

separating natural gas into its components and storing, transporting and distributing such components thereof for a

fee, the sale of industrial utilities and the regasification of liquefied natural gas for a fee. These risks, which arise in the

normal course of the Group’s and the Company’s business, comprise credit risk, liquidity risk and market risk relating

to interest rates and foreign currency exchange rates.

The Group has policies and guidelines in place that sets the foundation for a consistent approach towards establishing

an effective financial risk management across the Group.

The Group’s and the Company’s goal in risk management is to ensure that the management understands, measures

and monitors the various risks that arise in connection with their operations. Policies and guidelines have been

developed to identify, analyse, appraise and monitor the dynamic risks facing the Group and the Company. Based on

this assessment, the Group and the Company adopt appropriate measures to mitigate these risks in accordance with

their view of the balance between risk and reward.

Credit risk

Credit risk is the potential exposure of the Group and of the Company to losses in the event of non-performance by

counterparties. The Group’s and the Company’s exposure to credit risk arise from its operating activities, primarily from

trade receivables and from its investing activities, primarily from fund and other investments. The credit risk arising

from the Group’s and the Company’s normal operations are controlled by individual operating units in line with

PETRONAS’ policies and guidelines.

Receivables

The Group and the Company minimise credit risk by entering into contracts with highly credit rated counterparties.

Potential counterparties are subject to credit assessment and approval prior to any transaction being concluded and

existing counterparties are subject to regular reviews, including re-appraisal and approval of granted limits. The

creditworthiness of counterparties is assessed based on an analysis of all available quantitative and qualitative data

regarding business risks and financial standing, together with the review of any relevant third party and market

information. Reports are prepared and presented to the management that cover the Group’s overall credit exposure

against limits and securities.

Depending on the types of transactions and counterparty’s creditworthiness, the Group and the Company further

mitigate and limit risks related to credit by requiring other credit enhancements such as cash deposits and bank

guarantees. No collateral or other credit enhancement is required for amounts due from related parties.

As at the reporting date, the maximum exposure to credit risk arising from receivables is represented by the carrying

amounts in the statement of financial position. The ageing of trade receivables as at the reporting date is analysed on

page 249.





Credit risk (continued)

Receivables (continued)

Group Company

Note2014

RM’0002013

RM’0002014

RM’0002013

RM’000

Current 380,392 475,278 328,512 422,232

Past due 1 to 30 days 55,581 7,392 55,581 7,392

Past due 31 to 60 days 678 1,739 678 1,739

Past due 61 to 90 days 590 1,319 590 1,319

Past due more than 90 days 4,345 1,414 4,345 1,414

441,586 487,142 389,706 434,096

Representing:

Trade receivables 9 22,580 19,909 22,580 19,909

Amounts due from holding company 9.2 287,036 305,965 235,156 252,919

Amounts due from related companies 9.4 110,104 142,218 110,104 142,218

Amounts due from joint ventures 9.5 3,452 893 3,452 893

Amounts due from related parties 9.6 18,414 18,157 18,414 18,157

441,586 487,142 389,706 434,096

As at the reporting date, significant receivables relate to amounts due from holding company and amounts due from

related companies.

Fund and other investments

The Group and the Company are also exposed to counterparty credit risk from financial institutions through fund

investment activities comprising primarily money market placement. These exposures are managed in accordance with

existing policies and guidelines that define the parameters within which the investment activities shall be undertaken

in order to achieve the Group’s investment objective of preserving capital and generating optimal returns above

appropriate benchmarks within allowable risk parameters.

Investments are only made with approved counterparties who met the appropriate rating and other relevant criteria,

and within approved credit limits, as stipulated in the policies and guidelines. The treasury function is governed by a

counterparty credit risk management framework.

As at the reporting date, the maximum exposure to credit risk arising from fund and other investments is represented

by the carrying amounts in the statement of financial position.

The fund and other investments are unsecured, however, in view of the sound credit rating of counterparties,

management does not expect any counterparty to fail to meet its obligation.

pg 249


Liquidity risk

Liquidity risk is the risk that suitable sources of funding for the Group’s and the Company’s business activities may not

be available. In managing its liquidity risk, the Group and the Company maintain sufficient cash and liquid marketable

assets.

Maturity analysis

The table below summarises the maturity profile of the Group’s and of the Company’s financial liabilities as at the

reporting date based on undiscounted contractual payments:

Group

Carrying amountRM’000

Contractualinterest/

profit rates per annum

%

Contractual cash flow*

RM’000

Within1

yearRM’000

1 – 2years

RM’000

2 – 5years

RM’000

More than

5 yearsRM’000

2014

Finance lease liabilities 882,250 9.1 1,779,442 100,744 101,020 302,232 1,275,446

Trade and other

payables (excluding

deferred income) 663,106 – 663,106 663,106 – – –

1,545,356 2,442,548 763,850 101,020 302,232 1,275,446

2013

Finance lease liabilities 841,792 8.9 1,763,672 94,501 94,501 283,762 1,290,908

Trade and other

payables (excluding

deferred income) 999,117 – 999,117 999,117 – – –

1,840,909 2,762,789 1,093,618 94,501 283,762 1,290,908

*The contractual cash flow is inclusive of the principal and interest payments.





Liquidity risk (continued)

Maturity analysis (continued)

Company

Carrying amountRM’000

Contractualinterest/

profit rates per annum

%

Contractual cash flow*

RM’000

Within1

yearRM’000

1 – 2years

RM’000

2 – 5years

RM’000

More than

5 yearsRM’000

2014

Trade and other

payables (excluding

deferred income) 612,311 – 612,311 612,311 – – –

612,311 612,311 612,311 – – –

2013

Trade and other

payables (excluding

deferred income) 974,394 – 974,394 974,394 – – –

974,394 974,394 974,394 – – –

*The contractual cash flow is inclusive of the principal and interest payments.

Market risk

Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of

the business. The market price changes that the Group and the Company are exposed to include interest rates, foreign

currency exchange rates and other indices that could adversely affect the value of the Group’s and of the Company’s

financial assets, liabilities or expected future cash flows.

Interest rate risk

The Group’s and the Company’s investments in fixed rate debt instruments are exposed to a risk of change in their

fair value due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest

rate risk.

All interest rate exposures are monitored and managed proactively in line with PETRONAS’ policies and guidelines.

pg 251


Market risk (continued)

Interest rate risk (continued)

The interest rate profile of the Group’s and of the Company’s interest-bearing financial instruments based on carrying

amounts as at reporting date is as follows:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Fixed rate instruments

Financial assets 637,594 926,999 492,322 720,722

Financial liabilities (882,250) (841,792) – –

(244,656) 85,207 492,322 720,722

Since most of the Group’s and the Company’s interest-bearing financial assets and liabilities are fixed rate instruments

measured at amortised cost, a change in interest rate is not expected to have material impact on the Group’s and the

Company’s profit or loss.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because

of changes in foreign currency exchange rates.

The Group and the Company are exposed to varying levels of foreign currency risk when they enter into transactions

that are not denominated in the respective companies’ functional currencies or when foreign currency monetary assets

and liabilities are translated at the reporting date.

The Group and the Company operate predominantly in Malaysia and transact mainly in Ringgit Malaysia. As such, it is

not exposed to any significant foreign currency exposures.

The Group’s and the Company’s foreign currency management policy is to minimise economic and significant

transactional exposure arising from currency movements. For major capital projects, the Group and the Company

perform assessment of potential foreign currency risk exposure at the investment decision phase to determine the

appropriate foreign currency risk management strategy. When deemed necessary and appropriate, the Group and the

Company will enter into derivative financial instruments to hedge and minimise their exposure to the foreign currency

movements.






Foreign currency risk (continued)

The Group’s and the Company’s exposure to foreign currency risk, based on carrying amounts as at the reporting date

are as follows:

GroupDenominated in

CompanyDenominated in

USDRM’000

GBPRM’000

USDRM’000

GBPRM’000

2014

Financial assets

Trade and other receivables 16,566 – – –


Finance lease liabilities (882,250) – – –

Trade and other payables (93,585) (109) (72,493) (109)

(975,835) (109) (72,493) (109)

Net exposure (959,269) (109) (72,493) (109)

2013

Financial assets

Trade and other receivables 15,975 – – –


Finance lease liabilities (841,792) – – –

Trade and other payables (141,310) (6,068) (127,513) (6,068)

(983,102) (6,068) (127,513) (6,068)

Net exposure (967,127) (6,068) (127,513) (6,068)

pg 253



Currency risk sensitivity analysis

Sensitivity analysis for a given market variable provided in this note, discloses the effect on profit or loss as at

31 December 2014 assuming that a reasonably possible change in the relevant market variable had occurred at

31 December 2014 and had been applied to the risk exposures in existence at that date to show the effects of

reasonably possible changes in price on profit or loss and equity to the next annual reporting date. Reasonably possible

changes in market variables used in the sensitivity analysis are based on implied volatilities, where available, or historical

data for equity and commodity prices and foreign exchange rates where relevant. Reasonably possible changes in

interest rates are based on management judgment and historical experience.

The sensitivity analysis is hypothetical and should not be considered to be predictive of future performance because

the Group’s actual exposure to market prices is constantly changing with changes in the Group’s portfolio of among

others, debt and foreign currency contracts where relevant. Changes in fair values or cash flows based on a variation

in a market variable cannot be extrapolated because the relationship between the change in market variable and the

change in fair value or cash flows may not be linear. In addition, the effect of a change in a given market variable is

calculated independently of any change in another assumption and mitigating actions that would be taken by the

Group. In reality, changes in one factor may contribute to changes in another, which may magnify or counteract the

sensitivities.

The following table demonstrates the indicative pre-tax effects on the profit or loss of applying reasonably foreseeable

market movements in the following currency exchange rates:

Appreciation in foreign

currency rate%

Group

Effect on profit/(loss)

RM’000

Company

Effect on profit/(loss)

RM’000

2014

USD 5 (47,963) (3,625)

GBP 5 (5) (5)

2013

USD 5 (48,356) (6,376)

GBP 7 (425) (425)

A depreciation in the above foreign currency rates would have had equal but opposite effect, on the basis that all

other variables remain constant.






Fair value information

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings

reasonably approximate their fair values due to the relatively short term nature of these financial instruments.

The following table analyses financial instruments carried at fair value and those not carried at fair value for which fair

value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position.

Fair value offinancial

instruments carried at fair

valueLevel 2RM’000

Fair value offinancial

instruments not carried at

fair valueLevel 3

RM’000

Total fairvalue

RM’000

Carrying amounts

RM’000

Group

2014


Finance lease liabilities – 882,250 882,250 882,250

– 882,250 882,250 882,250

2013

Financial assets

Corporate private debt securities 15,010 – 15,010 15,010

15,010 – 15,010 15,010


Finance lease liabilities – 841,792 841,792 841,792

– 841,792 841,792 841,792

Company

2013

Financial assets

Corporate private debt securities 15,010 – 15,010 15,010

15,010 – 15,010 15,010

The fair value of finance lease liabilities has been estimated using the discounted cash flows method.

pg 255


Income/(expense), net gains and losses arising from financial instruments

Interest incomeRM’000

Interest expenseRM’000

OthersRM’000

TotalRM’000

Group

2014

Financial instruments at fair value

through profit or loss

– Designated upon initial recognition – – (10) (10)

Loans and receivables 36,895 – 2,265 39,160

Financial liabilities at amortised cost – (76,328) (55,498) (131,826)

Total 36,895 (76,328) (53,243) (92,676)

2013



– Designated upon initial recognition 3,702 – (118,819) (115,117)

Loans and receivables 38,087 – 110 38,197

Financial liabilities at amortised cost – (50,117) 52,361 2,244

Total 41,789 (50,117) (66,348) (74,676)

Company

2014



– Designated upon initial recognition – – (10) (10)

Loans and receivables 28,323 – – 28,323

Financial liabilities at amortised cost – – (574) (574)

Total 28,323 – (584) 27,739

2013



– Designated upon initial recognition 3,702 – (118,819) (115,117)

Loans and receivables 36,789 – – 36,789

Financial liabilities at amortised cost – (9,319) 112,773 103,454

Total 40,491 (9,319) (6,046) 25,126




30. CAPITAL MANAGEMENT

The Group and the Company define capital as its total equity and debt. The objective of the Group’s and the

Company’s capital management is to maintain an optimal capital structure and ensure availability of funds in order to

meet financial obligations, support business growth and maximise shareholder’s value. As a subsidiary of PETRONAS,

the Group’s and the Company’s approach in managing capital is set out in the PETRONAS Group Corporate Financial

Policy.

The Group and the Company monitor and maintain a prudent level of total debt to total asset ratio and ensure

compliance with all covenants under debt and shareholders’ agreements and regulatory requirements, if any.

There were no changes in the Group’s and the Company’s approach to capital management during the year.

31. ADOPTION OF NEW AND REVISED PRONOUNCEMENTS

As of 1 January 2014, the Group and the Company have adopted the following pronouncements that have been issued

by the MASB as listed below.

Effective for annual periods beginning on or after 1 January 2014

Amendments to MFRS 10 Consolidated Financial Statements: Investment Entities

Amendments to MFRS 12 Disclosure of Interests in Other Entities: Investment Entities

Amendments to MFRS 127 Consolidated Separate Financial Statements: Investment Entities

Amendments to MFRS 136 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets

Amendments to MFRS 139 Financial Instruments: Recognition and Measurement – Novation of Derivatives and

Continuation of Hedge Accounting

IC Interpretation 21 Levies

The adoption of the above amendments to MFRSs and IC Interpretation did not have material impact to the financial

statements of the Group and the Company.

32. PRONOUNCEMENTS YET IN EFFECT

The following pronouncements that have been issued by the MASB will become effective in future financial reporting

periods and have not been adopted by the Group and the Company in these financial statements.

Effective for annual periods beginning on or after 1 July 2014

Amendments to MFRS 3 Business Combinations (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)

Amendments to MFRS 8 Operating Segments (Annual Improvements 2010-2012 Cycle)

Amendments to MFRS 13 Fair Value Measurement (Annual Improvements 2011-2013 Cycle)

Amendments to MFRS 116 Property, Plant and Equipment (Annual Improvements 2010-2012 Cycle)

Amendments to MFRS 119 Employee Benefits - Defined Benefit Plans: Employee Contributions

Amendments to MFRS 124 Related Party Disclosures (Annual Improvements 2010-2012 Cycle)

pg 257

32. PRONOUNCEMENTS YET IN EFFECT (continued)


Amendments to MFRS 5 Non-current Assets Held for Sa le and Discont inued Operat ions

(Annual Improvements 2012-2014 Cycle)

Amendments to MFRS 7 Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle)

Amendments to MFRS 10 Consolidated Financial Statements: Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture

Amendments to MFRS 10 Consolidated Financial Statements: Investment Entities: Applying the

Consolidation Exception

Amendments to MFRS 11 Joint Arrangement: Accounting for Acquisitions of Interests in Joint Operations

Amendments to MFRS 12 Disclosure of Interest in Other Entities: Investment Entities: Applying the


Amendments to MFRS 101 Presentation of Financial Statements: Disclosure Initiative

Amendments to MFRS 116 Property, Plant and Equipment: Clarification of Acceptable Methods of

Depreciation and Amortisation

Amendments to MFRS 119 Employee Benefits (Annual Improvements 2012-2014 Cycle)

Amendments to MFRS 127 Separate Financial Statements: Equity Method in Separate Financial Statements

Amendments to MFRS 128 Investments in Associates and Joint Ventures: Sale or Contribution of Assets

between an Investor and its Associate or Joint Venture

Amendments to MFRS 128 Investments in Associates and Joint Ventures: Investment Entities: Applying the


Amendments to MFRS 134 Interim Financial Reporting (Annual Improvements 2012-2014 Cycle)


MFRS 15 Revenue from Contracts with Customers


MFRS 9 Financial Instruments (2014)

The Group and the Company are expected to apply the abovementioned pronouncements beginning from the

respective dates the pronouncements become effective. The initial application of the abovementioned pronouncements

are not expected to have any material impacts to the financial statements of the Group and the Company except as

mentioned below:

i. MFRS 15 Revenue from Contracts with Customers

MFRS 15 replaces the guidance in MFRS 111 Construction Contracts, MFRS 118 Revenue, IC Interpretation 13

Customer Loyalty Programmes, IC Interpretation 15 Agreements for Construction of Real Estate, IC Interpretation

18 Transfers of Assets from Customers and IC Interpretation 131 Revenue – Barter Transactions Involving

Advertising Services. The Group is currently assessing the financial impact that may arise from the adoption of

MFRS 15.

ii. MFRS 9 Financial Instruments

MFRS 9 replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on the

classification and measurement of financial assets and financial liabilities, and on hedge accounting. The Group is

currently assessing the financial impact that may arise from the adoption of MFRS 9.




33. NEW PRONOUNCEMENTS NOT APPLICABLE TO THE GROUP AND THE COMPANY

The MASB has issued amendments which are not yet effective, but for which are not relevant to the operations of the

Group and of the Company and hence, no further disclosure is warranted.

Effective for annual periods beginning on or after 1 July 2014

Amendments to MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements

2011-2013 Cycle)

Amendments to MFRS 2 Share-based Payment (Annual Improvements 2010-2012 Cycle)

Amendments to MFRS 138 Intangible Assets (Annual Improvements to MFRSs 2010-2012 Cycle)

Amendments to MFRS 140 Investment Property (Annual Improvements to MFRSs 2011-2013 Cycle)


MFRS 14 Regulatory Deferral Accounts

Amendments to MFRS 116 Property, Plant and Equipment Agriculture: Bearer Plants

Amendments to MFRS 138 Intangible Assets: Clarification of Acceptable Methods of Depreciation and

Amortisation

Amendments to MFRS 141 Agriculture – Agriculture: Bearer Plants

34. DISCLOSURE OF REALISED AND UNREALISED PROFITS

The retained profits as at the end of reporting period consist of:

Group Company

2014RM’000

2013RM’000

2014RM’000

2013RM’000

Total retained profits/(accumulated losses) of the Company and its subsidiaries:

– realised 7,609,990 7,471,893 7,578,575 7,412,879

– unrealised (574,622) (433,875) (1,032,571) (978,256)

7,035,368 7,038,018 6,546,004 6,434,623

Total share of retained profits/(accumulated losses) from associated company:

– realised 80,340 77,794 – –

– unrealised (24,471) (25,214) – –

55,869 52,580 – –

Total share of retained profits/(accumulated losses) from joint ventures:

– realised 84,820 (7,686) – –

– unrealised 178,782 12,835 – –

263,602 5,149 – –

Consolidation adjustments 1,289 183 – –

Total retained profits 7,356,128 7,095,930 6,546,004 6,434,623

The realised and unrealised profits are compiled based on the Guidance on Special Matter No.1, Determination of

Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad

Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

pg 259

Report on the Financial Statements

We have audited the financial statements of PETRONAS GAS BERHAD, which comprises the Statements of Financial Position

as at 31 December 2014 of the Group and of the Company, and the Statements of Profit or Loss and Other Comprehensive

Income, Changes in Equity and Cash Flows of the Group and of the Company for the year then ended, and a summary of

significant accounting policies and other explanatory information, as set out on pages 192 to 259.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in

accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of

the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine

is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud

or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in

accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of

the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control

relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company

as of 31 December 2014 and of their financial performance and cash flows for the year then ended in accordance with

Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies

Act, 1965 in Malaysia.



INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF PETRONAS GAS BERHAD(Company No. 101671-H) (Incorporated in Malaysia)

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and

its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial

statements are in form and content appropriate and proper for the purposes of the preparation of the financial

statements of the Group and we have received satisfactory information and explanations required by us for those

purposes.

(c) Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made

under Section 174(3) of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information

set out in note 34 on page 259 to the financial statements has been compiled by the Company as required by the Bursa

Malaysia Securities Berhad Listing Requirements and is not required by the Malaysian Financial Reporting Standards or

International Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation

of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with

the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures

Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and

presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies

Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this

report.

KPMG ADRIAN LEE LYE WANGFirm Number: AF 0758 Approval Number: 2679/11/15(J)

Chartered Accountants Chartered Accountant

Petaling Jaya,

Date: 17 February 2015

pg 261

CategoryNo. of

Shareholders% of Total

Shareholders No. of Shares% of Total

Shareholdings

Less than 100 263 2.67 2,140 0.00*

100 – 1,000 6,931 70.44 6,440,207 0.33

1,001 – 10,000 1,934 19.66 6,468,821 0.33

10,001 – 100,000 426 4.33 15,719,951 0.79

100,001 to less than 5% of issued shares 282 2.87 412,927,696 20.87

5% and above of issued shares 3 0.03 1,537,173,100 77.68

Total 9,839 100.00 1,978,731,915 100.00

*Insignificant % shareholding

CLASSIFICATION OF SHAREHOLDERS

No. of Shareholders No. of Shares Shares Percentage

Category Malaysian Foreigner Malaysian Foreigner Malaysian Foreigner

INDIVIDUAL 8,321 86 12,429,047 299,745 0.63 0.02

BODY CORPORATE

Banks/finance companies 75 2 305,474,600 11,600 15.44 0.00

Investments trusts/

foundation/charities 6 – 139,000 – 0.00 0.00

Other types of companies 190 5 2,516,202 107,000 0.13 0.01

GOVERNMENT AGENCIES/

INSTITUTIONS 6 – 1,435,000 – 0.07 0.00

NOMINEES 644 504 1,510,151,161 146,168,560 76.32 7.39

OTHERS – – – – 0.00 0.00

Total 9,242 597 1,832,145,010 146,586,905 92.59 7.41

LIST OF DIRECTORS' SHAREHOLDINGS

No. Name No. of Shares% of Total

Shareholdings

1. Datuk Manharlal Ratilal – –

2. Yusa’ bin Hassan – –

3. Dato’ N. Sadasivan N.N. Pillay – –

4. Datuk Rosli bin Boni – –

5. Ir. Pramod Kumar Karunakaran – –

6. Dato’ Ab. Halim bin Mohyiddin 5,000 0.00*

7. Lim Beng Choon – –

8. Habibah binti Abdul – –

*Insignificant % shareholding



ANALYSIS OF SHAREHOLDINGSas at 27 February 2015

LIST OF SUBSTANTIAL SHAREHOLDERS


Shareholdings

1. CIMB Group Nominees (Tempatan) Sdn Bhd

(Exempt AN for Petroliam Nasional Berhad)

1,200,304,400 60.66

2. Employees Provident Fund Board 238,169,000 12.04

3. Kumpulan Wang Persaraan (Diperbadankan) 110,663,400 5.59

Company

2014 2013

Authorised:

2,000,000,000 ordinary shares of RM1.00 each 2,000,000,000 2,000,000,000

Issued and fully paid:

1,978,731,915 ordinary shares of RM1.00 each 1,978,731,915 1,978,731,915

pg 263

AUTHORISED & ISSUED SHARE CAPITAL

LIST OF TOP 30 SHAREHOLDERS


Shareholdings

1 CIMB GROUP NOMINEES (TEMPATAN) SDN BHD(EXEMPT AN FOR PETROLIAM NASIONAL BERHAD)

1,199,768,000 60.63

2 CITIGROUP NOMINEES (TEMPATAN) SDN BHD(EMPLOYEES PROVIDENT FUND BOARD)

228,627,200 11.55

3 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 108,777,900 5.50

4 AMANAHRAYA TRUSTEES BERHAD (SKIM AMANAH SAHAM BUMIPUTERA)

78,270,700 3.96

5 AMANAHRAYA TRUSTEES BERHAD(AMANAH SAHAM WAWASAN 2020)

21,542,200 1.09

6. AMANAHRAYA TRUSTEES BERHAD(AS 1MALAYSIA)

19,113,500 0.97

7. CARTABAN NOMINEES (ASING) SDN BHD (EXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67))

19,013,460 0.96

8. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM MALAYSIA)

15,000,000 0.76

9. HSBC NOMINEES (ASING) SDN BHD (BBH AND CO BOSTON FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND)

14,781,096 0.75

10. CARTABAN NOMINEES (TEMPATAN) SDN BHD (EXEMPT AN FOR EASTSPRING INVESTMENTS BERHAD)

14,767,900 0.75

11. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD (GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1)

13,665,000 0.69

12. AMSEC NOMINEES (TEMPATAN) SDN BHD (AMTRUSTEE BERHAD FOR CIMB ISLAMIC DALI EQUITY GROWTH FUND (UT-CIMB-DALI))

8,850,400 0.45

13. AMANAHRAYA TRUSTEES BERHAD (AMANAH SAHAM DIDIK)

7,224,800 0.37

14. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC DIVIDEND FUND)

7,041,200 0.36

15. CITIGROUP NOMINEES (TEMPATAN) SDN BHD (EMPLOYEES PROVIDENT FUND BOARD (NOMURA))

6,451,500 0.33

16. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.S.A.))

6,363,914 0.32

17. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC SELECT ENTERPRISES FUND)

5,629,400 0.28

18. PERMODALAN NASIONAL BERHAD 5,086,000 0.26

19. MAYBANK NOMINEES (TEMPATAN) SDN BHD (MAYBANK TRUSTEES BERHAD FOR PUBLIC REGULAR SAVINGS FUND (N14011940100))

4,897,500 0.25



LIST OF TOP 30 SHAREHOLDERS


Shareholdings

20. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR THE BANK OF NEW YORK MELLON (MELLON ACCT))

4,254,321 0.22

21. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC SECTOR SELECT FUND)

4,204,900 0.21

22. HSBC NOMINEES (ASING) SDN BHD (HSBC BK PLC FOR ABU DHABI INVESTMENT AUTHORITY (AGUS))

4,136,015 0.21

23. MAYBANK NOMINEES (TEMPATAN) SDN BHD (MAYBANK TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240))

3,950,000 0.20

24. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (BVI))

3,891,100 0.20

25. CARTABAN NOMINEES (ASING) SDN BHD (GIC PRIVATE LIMITED FOR GOVERNMENT OF SINGAPORE (C))

3,371,000 0.17

26. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC EQUITY FUND)

3,362,400 0.17

27. CITIGROUP NOMINEES (ASING) SDN BHD (LEGAL & GENERAL ASSURANCE (PENSIONS MANAGEMENT) LIMITED (A/C 1125250001))

3,248,263 0.16

28. HSBC NOMINEES (ASING) SDN BHD (HSBC BK PLC FOR ABU DHABI INVESTMENT AUTHORITY (TRANG))

3,185,565 0.16

29. AMANAHRAYA TRUSTEES BERHAD (PUBLIC ISLAMIC OPTIMAL GROWTH FUND)

2,972,300 0. 15

30. HSBC NOMINEES (ASING) SDN BHD (EXEMPT AN FOR J.P. MORGAN BANK (IRELAND) PUBLIC LIMITED COMPANY)

2,946,800 0.15

TOTAL 1,824,394,334 92.23

pg 265

A summary of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at

31 December 2014

LocationAcquisitionDate Tenure

Descriptionand Usage

Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)

Net Book Value as at

31 December2014

(RM’000)

TERENGGANU

Gas Processing Plants,

Kertih

Km 105

Jalan Kuantan-Kuala

Terengganu

24300 Kertih, Kemaman

Terengganu Darul Iman

Leasehold

Expiry:

Leasehold

land

1,747,023

Lot No. 1903 30.09.1991 28.02.2043

(Sub-Lease

60 years)

Plant

GPP 1

GPP 2

GPP 3

87.9

30.3

22.4

22.1

95,998

123,310

123,310

Lot No. 3541 30.09.1991 03.04.2050

(60 years)

GPP 4/

DPCU 2

Compressor

station

34.6 20.5

23.1

266,400

65,010

Lot No. 1902 30.09.1991 26.02.2082

(99 years)

Office

Administration

building 1

Administration

building 2

Fire station

2.7

29.4

24.7

26.8

1,282

6,892

3,248

Gas Processing Plants,

Santong

Km 8, Kg. Tok Arun

Off Jalan Santong

23100 Paka, Dungun


Leasehold

Expiry:

Leasehold

land

926,105

Lot No. 7346 03.08.1997 13.07.2058

(60 years)

Plant

GPP 5

GPP 6

DPCU 3

Office

Administration

building

189.6

15.9

15.0

16.3

17.2

200,000

220,000

60,000

12,220

Lot No. 7220 03.08.1997 20.06.2058

(60 years)

(Vacant) 26.9



SUMMARY OF LANDED PROPERTY,PLANT AND EQUIPMENTas at 31 December 2014



Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

Export Terminal Operation

Tanjung Sulong

24000 Kemaman


Leasehold

Expiry:

Leasehold

land

180,258

Lot No. 1314 24.07.1993 19.03.2025

(40 years)

Plant

Unit 1, 2, 3, 4

Office

Administration

building

9.7

30.1 1,146

Lot No. 1333 24.07.1993 11.03.2027

(40 years)

Marine

facility

Breakwater

jetty

2.8 30.1

Centralised Utility

Facilities (CUF) Operations,

Kertih Integrated

Petrochemical Complex

Km 105, Jalan Kuantan

Kuala Terengganu



Leasehold

Expiry:

Leasehold

land

Plant

CGN B

CGN C

CGN D, E, F

Water plant

CGN G

ASU

Lab &

workshop

15.1

15.1

14.6

14.6

14.7

13.8

13.8

667

667

2,000

2,000

667

15,451

729

588,065

Lot No. 8065 21.12.1999 19.08.2060

(60 years)

Control room

Office

Administration

building

37.1 13.6

13.9

1,820

514


31 December 2014 (continued)

pg 267



Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

PAHANG

Kuantan Regional

Operations Office

Lot 1, Sector 1

Bandar Indera Mahkota

25200 Kuantan

Pahang Darul Makmur

Leasehold

Expiry:

Leasehold

land

7,958

Lot No. PT16756 04.01.1989 04.01.2088

(99 years)

Office

Regional

office

11.2

23.2 2,428

Kuantan Compressor

Station

Kampung Mahkota

Km 19 Jalan Gambang

26070 Kuantan

Pahang Darul Makmur

Leasehold

Expiry:

Leasehold

land

141,991

Lot No. 104462 04.01.1989 26.08.2101

(99 years)

Plant

Compressor

station

Compressor

station

20.1

21.1

5.2

1,142

4,378

Centralised Utility Facilities

(CUF) Operations, Gebeng

Lot 139A

Gebeng Industrial Area

Phase III

26080 Kuantan

Pahang Darul Makmur

17.11.1999 Leasehold

Expiry:

08.01.2100

(99 years)

Leasehold

land

Plant

CGN A

CGN B

CGN C

N2GEN

Water plant

18.8

15.1

15.1

15.1

15.1

14.6

667

667

667

360

2,000

286,540

Lot No. PT15127 Office

Maintenance

building

Warehouse

13.6

13.6

1,015

1,004










Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

JOHOR

Segamat Operation Centre

Gas Transmission System

Km 10, Lebuhraya

Segamat-Kuantan

85000 Segamat

Johor Darul Takzim

Leasehold

Expiry:

Leasehold

land

61,632

Lot No. PTD564 22.09.1991 18.02.2102

(99 years)

Plant

Compressor

station

Office

Operation

centre

61.3

17.0

22.4

2,792

8,080

Pasir Gudang Regional

Operations Office

PLO 332, Jalan Perak 4

Pasir Gudang Industrial

Area, 81700 Pasir Gudang

Johor Darul Takzim

Leasehold

Expiry:

Leasehold

land

7,535

Lot No. PTD84942 23.04.1989 22.04.2088

(99 years)

Office

Regional

office

4.1

22.5 2,428

NEGERI SEMBILAN

Seremban Regional

Operations Office, Km 11

Jalan Seremban – Tampin

71450 Sungai Gadut,

Seremban

Negeri Sembilan

Darul Khusus

Freehold land 6,652

Lot No. 21958 16.02.1994 Freehold Office

Regional

office

14.0

23.4 2,428

pg 269





Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

SELANGOR

Shah Alam Regional

Operations Office

Lot 1, Jalan Jemuju Lima

16/13E, Shah Alam

Industrial Area, Section 16

40200 Shah Alam

Selangor Darul Ehsan

Leasehold

Expiry:

Leasehold

land

7,348

Lot No. PT606 12.10.1990 11.10.2089

(99 years)

Office

Regional

office

2.9

23.1 2,428

Meru Compressor Station

Lot 1586 (G3907)

Mukim of Jeram

45000 District of

Kuala Selangor


Leasehold

Expiry:

Leasehold

land

(Vacant)

5.4 N/A N/A 1,051

Lot No. PT6875 04.08.1998 10.08.2107

(99 years)

PERAK

Sitiawan Regional

Operations Office

Lot 33263

Jalan Dato’ Ahmad Yunus

32000 Sitiawan

Perak Darul Ridzuan

Leasehold

Expiry:

Leasehold

land

4,903

Lot No. PT4535 04.11.1997 27.06.2101

(99 years)

Office

Regional

office

3.2

17.2 1,604

KEDAH

Gurun Regional

Operations Office

PO Box 31

Km 1, Jalan Jeniang

08300 Gurun

Kedah Darul Aman

Leasehold

Expiry:

Leasehold

land

5,538

Lot No. 8173 18..12.1997 22.04.2102

(99 years)

Office

Regional

office

2.9

16.3 1,604








Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

TTM Pipeline land at

District of Kubang Pasu

Kuala Muda, Pendang, and

Pokok Sena

Kedah Darul Aman

1.11.2006 Leasehold

Expiry:

31.10.2105

(99 years)

Leasehold

land

Pipeline

Pipeline across

8.0 km

24.7

9.8 N/A

932

SARAWAK

Miri Operations Office

Lot 2075, Block 4

Jalan Cattleya 2B

Piasau Industrial Area

98008 Miri, Sarawak

N/A Pipeline

Meter Station

Pipeline across

42.2 km

N/A

– located

along

road

reserve

area

24.8 2,066

15,465

Bintulu Gas Meter Station

Kidurong Industrial Area

Part of Lot 155

Block 20

Kemena Land District

97007 Bintulu, Sarawak

Pipeline

Meter Station

Pipeline across

4.2 km

0.1 18.2 630

88

Lot No. 1646 21.10.2004 16.07.2067

(60 years)

MELAKA

LNG Regasification

Terminal

Sungai Udang PSR-1/MG3

Retrofit Site Office

Revamp PETRONAS

Penapisan Sungai Udang,

Melaka

N/A N/A Regasification

Floating

Storage Units

Facilities

Jetty

N/A N/A N/A 3,076,356

PIPELINES

PGU I – total gas pipeline

comprises 6 km from

Kertih to Paka,

Terengganu & 32 km

from Kertih to Teluk

Kalong, Terengganu and

two 40 km of lateral lines

from the GPPs to the

Export Terminal in

Tanjung Sulong,

Terengganu


Expiry:

(40, 60 and

99 years)

Pipelines

Pipelines in

leasehold

land

Terengganu:43 lots

Terengganu: 237.3

30.3 N/A

33,454

pg 271



Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

PGU II – total gas

pipeline comprises

Sector 1 – 233 km from

Teluk Kalong, Terengganu

to Segamat, Johor,


Segamat, Johor to Kapar,

Selangor &

Sector 3 - 211 km from

Segamat, Johor to

Singapore


Expiry:

(99 years)

PipelinesPipelines in

leasehold

land

Terengganu:19 lots

Pahang:338 lots

Johor:644 lots

(Inclusive

Loop 1 &

Loop 2)

Melaka:139 lots

Negeri Sembilan:263 lots

Selangor:138 lots

Terengganu:79.8

Pahang:559.7

Johor:902.9

Melaka:191.0

Negeri Sembilan:

463.9

Selangor:295.7

23.1 N/A

528,785

PGU III – total gas pipeline

comprises


Meru, Selangor to Lumut,

Perak,


Lumut, Perak to Gurun,

Kedah,

Sector 3 – 90 km of NPS

36" mainline from Gurun

to Pauh, Perlis Indera

Kayangan


Expiry:

(99 years)

PipelinesPipelines in

leasehold land

Selangor:93 lots

WP Kuala Lumpur:14 lots

Perak:362 lots

Penang:100 lots

Kedah:261 lots

Perlis:77 lots

Selangor:184.6

WP Kuala Lumpur:

17.9

Perak:543.9

Penang:119.5

Kedah:468.8

Perlis:87.3

Sector 1:

19.1

Sector

2 & 3:

17.2

N/A

N/A

508,356










Land Area(hectare)

Age ofPlant

and Building

(years)

Build-up

Area(sq. m)


31 December2014

(RM’000)

PGU Loop 1 – total gas

pipeline of

265 km from Kertih,

Terengganu to Segamat,

Johor Darul Takzim

04.10.1999 PipelinesPipelines in

leasehold land

Terengganu:77 lots

Pahang:315 lots

Terengganu:158.9

Pahang:104.6

15.4 N/A

317,168

PGU Loop 2 – total gas

pipeline of

226 km from Segamat,

Johor to Meru,


01.11.2000 PipelinesPipelines in

leasehold land

(Part of PGU’s

document of

title)

Melaka:4 lots

Negeri Sembilan:4 lots

Melaka:1.3

Negeri Sembilan:

1.1

14.4 N/A

337,678

TOTAL 8,790,881

Abbreviations:

CGN : Cogeneration Plant

DPCU : Dew Point Control Unit Plant

GPP : Gas Processing Plant

N2GEN : Nitrogen Generator

ASU : Air Separation Unit

PGU : Peninsular Gas Utilisation

pg 273

Name of Facilities and Location DescriptionNet Book Value

(RM'000)

LNG Regasification Terminal, Sungai Udang Floating Storage Units, Regasification Jetty

and Pipelines

3,076,356

Gas Processing Plants, Kertih Leasehold land, Plant and Office Buildings 1,747,023

Gas Processing Plants, Santong Leasehold land, Plant and Office Buildings 926,105

Utilities Plants, Kertih Leasehold land, Plant and Office Buildings 588,065

PGU II Leasehold land and Pipelines 528,785

PGU III Leasehold land and Pipelines 508,356

PGU Loop 2 Leasehold land and Pipelines 337,678

PGU Loop 1 Leasehold land and Pipelines 317,168

Utilities Plants, Gebeng Leasehold land, Plant and Office Buildings 286,540

Export Terminal Leasehold land, Plant and Marine Facility 180,258



TOP 10 LANDED PROPERTY, PLANT AND EQUIPMENT

PETRONAS GAS BERHAD

Level 49 – 51, Tower 1

PETRONAS Twin Towers


50088 Kuala Lumpur

Telephone : + 6 03 2051 5000

Fax : + 6 03 2051 6992 (General)

: + 6 03 2051 6555 (Company Secretary)

GAS PROCESSING AND UTILITIES DIVISION

Gas Processing Plants, Kertih

Km 105, Jalan Kuantan-Kuala

Terengganu



Telephone : + 6 09 831 2345

Fax : + 6 09 827 1710

Gas Processing Plants, Santong

Km 8, Kg. Tok Arun, Off Jalan Santong

23100 Paka, Dungun


Telephone : + 6 09 831 2345

Fax : + 6 09 827 4578

Utilities Plants, Kertih

Kertih Integrated Petrochemical Complex

Km 105, Jalan Kuantan/Kuala

Terengganu



Telephone : + 6 09 830 5500

Fax : + 6 09 830 5514

Utilities Plants, Gebeng

Lot 139A, Gebeng Industrial Area Fasa III

26080 Kuantan

Pahang Darul Makmur

Telephone : + 6 09 586 3300

Fax : + 6 09 586 3311

Tanjung Sulong Export Terminal

Tanjung Sulong 24000 Kemaman


Telephone : + 6 09 831 2345

Fax : + 6 09 827 1710

GAS TRANSMISSION & REGASIFICATION DIVISION

PETRONAS Gas Berhad Segamat

Km 10, Lebuhraya Segamat-Kuantan

85000 Segamat

Johor Darul Takzim

Telephone : + 6 07 935 3000

Fax : + 6 07 931 6521

Gurun Regional Office

Km 1, Jalan Jeniang

08300 Gurun

Kedah Darul Aman

Telephone : + 6 04 468 5518

Fax : + 6 04 468 5519

Bintulu Operations Centre

S/L No. 169, Lot 7748, Block 31

Jalan Sultan Iskandar Assyakirin

Commerce Square

97000 Bintulu, Sarawak

Telephone : + 6 086 31 6517

Fax : + 6 086 31 1960

Miri Operation Centre

Lot 1590 & 1591

Eastwood Valley Industrial Area

Jalan Miri By Pass

98008 Miri, Sarawak

Telephone : + 6 085 42 2811

Fax : + 6 085 41 6410

Sitiawan Regional Office

Lot 33263

Jalan Dato’ Ahmad Yunus

32000 Sitiawan

Perak Darul Ridzuan

Telephone : + 6 05 692 5611/12/13/14

Fax : + 6 05 692 5615

Shah Alam Regional Office

Lot 1, Jalan Jemuju Lima 16/13E

Kawasan Perindustrian Seksyen 16

40200 Shah Alam


Telephone : + 6 03 5510 6222

Fax : + 6 03 5510 1528

Seremban Regional Office

Km 11, Jalan Seremban, Tampin

71450 Sungai Gadut

Negeri Sembilan Darul Khusus

Telephone : + 6 06 677 6777

Fax : + 6 06 677 7799

Pasir Gudang Regional Office

PLO 332, Jalan Perak 4

Kawasan Perindustrian Pasir Gudang

81700 Pasir Gudang

Johor Darul Takzim

Telephone : + 6 07 251 0333

Fax : + 6 07 251 0400

Kuantan Regional Office

Lot 1, Sektor 1, Bandar Indera Mahkota

25200 Kuantan, Pahang Darul Makmur

Telephone : + 6 09 573 2811

Fax : + 6 09 573 2813

Kertih Regional Office

Aras 1, Kompleks Pejabat PETRONAS

Wilayah Pantai Timur (PWPT)



Telephone : + 6 09 867 3500

Fax : + 6 09 864 0375

Kimanis Operation Centre

Lot 2, Block A, Ground Floor

Membakut Jaya

89728 Membakut Sabah

Telephone : + 6 087 88 6217/224

Fax : + 6 087 88 6219

pg 275

CORPORATE DIRECTORY

NOTICE IS HEREBY GIVEN THAT the Thirty Second (32nd) Annual General

Meeting of the Company will be held at Emerald Room, Mandarin Oriental

Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Thursday, 30

April 2015 at 10.00 a.m. to consider the following matters:

AGENDA

As Ordinary Business

1. To receive the Audited Financial Statements for the financial year ended 31

December 2014 together with the Reports of the Directors and Auditors thereon. (Resolution 1)

2. To re-elect the following Directors pursuant to Article 93 of the Company’s

Articles of Association:

(a) Datuk Rosli bin Boni

(b) Dato’ Ab. Halim bin Mohyiddin

(Resolution 2) (Resolution 3)

3. To re-elect the following Director pursuant to Article 96 of the Company’s

Articles of Association:

(a) Datuk Manharlal Ratilal (Resolution 4)

4. To approve the Directors’ fees of up to RM986,000 in respect of the financial

year ending 31 December 2015. (Resolution 5)

5. To re-appoint Messrs KPMG as Auditors of the Company until the conclusion of

the next Annual General Meeting and to authorise the Directors to fix their

remuneration. (Resolution 6)

As Special Business

6. To consider and, if thought fit, to pass the following Ordinary Resolution with or

without modifications:

“THAT Dato’ N. Sadasivan N.N. Pillay, retiring in accordance with Section 129(6) of

the Companies Act, 1965, Malaysia, is hereby re-appointed as a Director of the

Company to hold office until the conclusion of next Annual General Meeting of the

Company.” (Resolution 7)

7. To transact any other business for which due notice has been given.

By Order of the Board

Intan Shafinas (Tuty) Hussain (LS0009774)Yeap Kok Leong (MAICSA 0862549) Company Secretaries

Kuala Lumpur

7 April 2015



NOTICE OFANNUAL GENERAL MEETING

Notes:

1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming Thirty Second (32nd) Annual General Meeting of

the Company, the Company shall be requesting the Record of Depositories as at 23 April 2015. Only a depositor whose name appears on the Record of

Depositors as at 23 April 2015 shall be regarded as a member entitled to attend, speak and vote at the meeting as well as for appointment of proxy(ies)

to attend and vote on his/her stead.

2. A member may appoint not more than two proxies to attend the same meeting. A proxy may but need not be, a member of the Company and a member

may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965, Malaysia, shall not apply to

the Company. There shall be no restriction as to the qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (SICDA), it may appoint

at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares of the Company standing to the

credit of the said securities account.

4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the omnibus account, there is no

limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised

nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies, or where an exempt authorised nominee appoints two or more proxies, the proportion

of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointer or if the member is a corporation,

either under seal or under the hand of an officer or attorney duly authorised and shall be deposited at the office of the Company’s Share Registrar,

Symphony Share Registrars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, at

least 48 hours before the meeting or if the meeting is adjourned at least 48 hours before the time fixed for the adjourned meeting.

7. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer

under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed by an attorney duly

appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice

of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws

of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

8. Explanatory Notes:

i) Resolution 3 – Re-election of Independent Director

(Note on re-election of Independent Director pursuant to Recommendation 3.1 of Malaysian Code on Corporate Governance 2012)

The Board has conducted assessment on the independence of Dato’ Ab. Halim bin Mohyiddin as Independent Director who is seeking for re-election

at the forthcoming Thirty Second (32nd) Annual General Meeting of the Company and is satisfied that the incumbent has complied with the

independence criteria as set out in the Paragraph 1.01 of the Main Market Listing Requirements.

ii) Resolution 5 – Directors’ Fees for financial year ending 31 December 2015

The Directors’ fees approved for the financial year ended 31 December 2014 was RM986,000 The actual Directors’ fees for the Non-Executive

Directors paid during the financial year ended 31 December 2014 was RM817,000.

The Directors’ fees proposed for the financial year ending 31 December 2015 (FYE 2015) are calculated based on the number of scheduled Board’s

and Board Committees’ meetings and assumption that all the Non-Executive Directors will remain office until the end of the FYE 2015. This resolution

is to facilitate payment of Directors’ fees in FYE 2015. The Board will seek shareholders’ approval at the next annual general meeting in the event

the Directors’ fees proposed is insufficient due to increase in number of Board’s and Board Committees’ meetings and/or increase in Board size.

iii) Resolution 7 – Section 129(6) of the Companies Act, 1965

(Note on re-appointment of Independent Director pursuant to Recommendation 3.1 of Malaysian Code on Corporate Governance 2012)

Pursuant to Section 129(6) of the Companies Act, 1965, Malaysia, the proposed Resolution 7 is to seek shareholders’ approval on the re-appointment

of Dato’ N. Sadasivan N.N. Pillay as a Director who is over the age of 70 and has served as an Independent Director for more than nine years.

The Board has conducted assessment on the independence of Dato’ N. Sadasivan N.N. Pillay as an Independent Director who is seeking for re-election

at the forthcoming Thirty Second (32nd) Annual General Meeting of the Company. Apart from meeting independence criteria as set out in the Paragraph

1.01 of the Main Market Listing Requirements, the Board is satisfied with the active participation in the Board and Board Audit Committee deliberations

particularly on the quarterly financial report and audited financial statements notwithstanding his tenure has reached 19 years.

pg 277

Jalan Pinang, Kuala Lumpur City Centre, 50088 Kuala Lumpur,

Wilayah Persekutuan Kuala Lumpur

REGISTRATION

1) Registration will start at 8.00 a.m. on 30 April 2015 in front of the Emerald Room, Mandarin Oriental Kuala Lumpur.

2) Please produce your original Identification Card (IC) to the staff at the registration counter for verification. Please make sure

you collect your IC thereafter.

3) Upon verification, you are required to write your name and sign on the Attendance List placed on the registration counter.

4) You will also be given an identification tag. No person will be allowed to register on behalf of another person even with

the original IC of that person.

5) The registration counter will handle only verification of identity and registration.

HELP DESK

1) Please proceed to the Help Desk for any clarification or enquiry.

2) The help desk will also handle revocation of proxy’s appointment.

PARKING

1) Please take note that PETRONAS Gas Berhad (PGB) will not be providing cash reimbursement for parking. Instead, you

are advised to park at P2 or P4 of Mandarin Oriental Hotel, Kuala Lumpur or Suria KLCC. Please bring your parking ticket

for validation at the counter near the Emerald Room.

2) By validating the parking ticket, you will not be charged for parking when you leave. Please be advised, that the parking

ticket will expire by 4.00 p.m. on 30 April 2015. Any additional cost incurred for parking after 4.00 p.m. will not be borne

by PGB.

3) Please be advised that PGB will not reimburse any parking costs incurred at any other location. As such, please observe

the abovementioned parking area.

SITE VISIT

1) Please take note that there will be a registration booth available for the Shareholders’ Visitation Programme, which will

take place at a later date, to be informed by PGB.



ADMINISTRATIVE DETAILS FOR THE 32ND ANNUAL GENERAL MEETING

No. of Shares Held

CDS Account No.

PROXY FORMPETRONAS GAS BERHAD (101671-H)

I/We (Full Name In Capital Letters)

of (Full Address)

being a *Member/Members of PETRONAS GAS BERHAD, do hereby appoint (Full Name In Capital Letters)

of (Full Address)

or failing him (Full Name In Capital Letters)

of (Full Address)

or failing him, the CHAIRMAN OF MEETING, as *my/our proxy to vote for *me/us and on *my/our behalf at the Thirty Second

(32nd) Annual General Meeting to be held at Emerald Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala

Lumpur on Thursday, 30 April 2015 at 10.00 a.m. and at any adjournment thereof.

Please indicate with an “X” in the space provided below how you wish your votes to be casted. If no specific direction as to

voting is given, the Proxy will vote or abstain from voting at his discretion.

No. Resolutions For Against

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended

31 December 2014 together with the Reports of the Directors and Auditors thereon.

2. To re-elect Datuk Rosli bin Boni as a Director pursuant to Article 93 of the Company's

Articles of Association.

3. To re-elect Dato’ Ab. Halim bin Mohyiddin as a Director pursuant to Article 93 of the

Company's Articles of Association.

4. To re-elect Datuk Manharlal Ratilal as a Director pursuant to Article 96 of the Company's

Articles of Association.

5. To approve the Directors’ fees of up to RM986,000 in respect of the financial year ending

31 December 2015.

6. To re-appoint Messrs KPMG as Auditors of the Company until the conclusion of the next

Annual General Meeting and to authorise the Directors to fix their remuneration.

SPECIAL BUSINESS

7. To re-appoint Dato’ N. Sadasivan N.N. Pillay as a Director of the Company to hold office

until the conclusion of next Annual General Meeting of the Company in accordance with

Section 129(6) of the Companies Act, 1965.

8. To transact any other business for which due notice has been given.

* Strike out whichever not applicable.

As witness my/our hand this day 2015.

Signature of Member/Common Seal

Symphony Share Registrars Sdn BhdLevel 6, Symphony House,Pusat Dagangan Dana 1,Jalan PJU 1A/46, 47301 Petaling Jaya,Selangor Darul Ehsan, Malaysia

fold here

fold here

AffixStamp

Notes:1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming Thirty Second (32nd) Annual General Meeting of the Company,

the Company shall be requesting the Record of Depositories as at 23 April 2015. Only a depositor whose name appears on the Record of Depositors as at 23 April 2015 shall be regarded as a member entitled to attend, speak and vote at the meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead.

2. A member may appoint not more than two proxies to attend the same meeting. A proxy may but need not be, a Member of the Company and a Member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965, Malaysia, shall not apply to the Company. There shall be no restriction as to the qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (SICDA), it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the omnibus account, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies, or where an exempt authorised nominee appoints two or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointer or if the Member is a corporation, either under seal or under the hand of an officer or attorney duly authorised and shall be deposited at the office of the Company’s Share Registrar, Symphony Share Registrars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, at least 48 hours before the meeting or if the meeting is adjourned at least 48 hours before the time fixed for the adjourned meeting.

7. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed by an attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

www.petronasgas.com


Tower 1, PETRONAS Twin Towers


50088 Kuala Lumpur

T +603 2051 5000

F +603 2051 6555

TRANSFORMATION - MalaysiaStock.Biz

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