lng regasification terminal sungai udang, melaka 1. health, safety, security & environment...

LNG Regasification Terminal Sungai Udang, Melaka

05

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW126 Gas Processing

136 Gas Transportation

144 Utilities

154 Regasification

C

GAS PROCESSINGA visual of our Gas Processing segment (GP)’s achievements, contributions and milestones during the year.

LTIF2 FATALITY

7.51982 million safe manhours

achieved

HUMAN CAPITAL

OPERATIONAL PERFORMANCE

1 Inclusive of safe manhours achieved after LTI incident.2 LTIF – Lost time injury frequency is defined as loss of productive work

time due to injury suffered, relative to total hours worked during the year.

98.6% 100.0% 100.0% 100.0%97.7% 99.2%

1,120

96.6% 96.6%

C1 Salesgas C2 Ethane C3 Propane C4 Butane

‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16

99

.1

96

.5

96

.5

95

.5

99

.2

95

.6

95

.6

95

.199

.4

91.

3

91.

3

89

.1

99

.9

91.

7

91.

7

90

.1

99

.9

99

.1

98

.8

99

.2

1,015 (90.6%)

105 (9.4%)

Technical Non-Technical

PRODUCTIVITY CAPITAL

OVERALL EQUIPMENT EFFECTIVENESS (OEE) PRODUCT DELIVERY RELIABILITY (PDR)

Reliability (%)

C1 C1

142 MT/hr 138 MT/hr

C2 C2C3

10,100

C3C4 C4

0.4 1

Ethane (C2) Performance

Total Manpower

Strength

Production 2016 Delivery 2016

Highest since 2012 (135 MT/hr) despite of lower C2

composition in feedgas (6.2% in 2016 vs 6.9% in 2012)

Highest since 2011 (128 MT/hr) contributed

by highest demand from petrochemicals business

M

PAGE : 126

PETRONAS GAS BERHAD

BUSINESS REVIEW

YEAR IN REVIEW

mandays of training

and development

138F

HEALTH, SAFETY, SECURITY & ENVIRONMENT (HSSE)

‘12

‘12

‘13

‘13

‘14

‘14

‘15

‘15

1,5

33

.66

97.0

1,5

57.2

64

8.4

1,4

80

.270

1.7

1,4

97.4

75

1.3

1,5

11.2

76

8.7

higher by 1.5% attributed to Performance

Based Structure (PBS) income on the back of higher

liquid plant reliability and availability.

RM1.6REVENUE

billion

’16

’16

Revenue (RM million)

Gross Profit (RM million)

FINANCIAL PERFORMANCE

7.0% lower due to higher operating costs

RM648.4GROSS PROFIT million

68.4%

31.4%

contribution to

PGB Group

31.4%Gas Processing

Gross Profit

• Surpassed world benchmark for salesgas reliability at

99.2%.

• Best reliability performance for ethane, propane and

butane in the last five years at 98.8%, 99.1% and 99.1%

respectively, which contributed to PGB’s highest

achievement in Performance Based Structure (PBS) income

for FY2016.

• Gas Processing Plant (GPP) performed better in Overall Equipment Effectiveness (OEE) for salesgas (98.6%), ethane

(97.7%), propane (96.6%) and butane (96.6%).

• GPP Ethane Recovery Improvement initiative contributed to

the highest ethane production and delivery and

subsequently improvement to the PETRONAS value chain.

• 100% completion of Key Results Area (KRA) activities which

have led to excellent reliability performance for each

liquid products.

• Revenue surged by RM23.6 million from RM1,533.6 million

in 2015, attributable to the higher PBS income received for

ethane (RM64.0 million), propane (RM2.5 million) and butane

(RM2.3 million).

• Contribution to the Group’s gross profit decreased by

RM48.6 million (7.0%) due to higher operating costs in line

with the Company’s effort in improving asset integrity.

HIGHLIGHTS OF THE YEAR

Other business segments

PAGE: 127

ANNUAL REPORT 2016

GP is one of PGB’s primary business segments, and is operated

by our Gas Processing and Utilities (GPU) Division. Our six

plants in Terengganu are divided into two complexes, namely

Gas Processing Kertih (GPK) and Gas Processing Santong (GPS).

In the beginning, GPP1 and Tanjung Sulong Export Terminal

(TSET) were commissioned and both commenced operations

in 1984. In view of increasing national gas demand, GPP2,

GPP3 and GPP4 were constructed and commissioned in 1992

and 1994 respectively at GPK, followed by GPP5 and GPP6 in

1998 at GPS.

With total salesgas processing capacity of over 2,000 million

standard cubic feet per day (mmscfd), these plants currently

process feedgas (raw gas) from offshore of East Peninsular

Malaysia on behalf of PETRONAS into salesgas (C1) and

other by-products, such as ethane (C2), propane (C3) and

butane (C4). These products are then supplied to PETRONAS’

customers in power and non-power sectors via PGB’s

Peninsular Gas Utilisation (PGU) pipeline network.

In return for the gas processing services, PGB receives gas

processing fees comprising mainly fixed reservation charges

under the 20-year Gas Processing Agreement (GPA). The

agreement also provides for PBS income, if GP exceeds the

liquid extraction performance target set by our customer.

BUTANE

STABILISED CONDENSATE

TERENGGANU CRUDE OIL TERMINAL

PROPANE ETHANE SALESGAS

PGU LINE

DE-BUTANISERCOLUMN

DE-PROPANISERCOLUMN

DE-ETHANISERCOLUMN

DE-METHANISERCOLUMN

PRODUCT RECOVERY UNIT

Seperate feedgas to salesgas

LOW TEMPERATURESEPARATION UNIT

Water & chloride CO2 MoistureH2S Mercury

45

CONDENSATE STRIPPER

6

FEED GAS

Gas

Liquid

Product

Contaminants

By-product

FEED LIQUID

70 barg

(300C)

1 to 59 barg

(30 to 1200C)

Remove water and chloride

Remove lighter components in feed liquid

Remove moisture

ACID GASREMOVAL

UNIT

DEHYDRATION &MERCURY REMOVAL

UNIT

FEEDPRE-TREATMENT

UNIT

1 3

Remove hydrogen sulphide and carbon dioxide

5 barg

(48 to 1280C)

15 barg

(46 to 1220C)

27 barg

(5 to 950C)

23 to 55 barg

(-101 to 250C)

155 barg

(250C)

Simplified Flow Diagram of Gas Processing Plants

Separate feedgas to liquid products

PE

TR

ON

AS

UP

ST

RE

AM

2

PAGE: 128

PETRONAS GAS BERHAD

BUSINESS REVIEW – GAS PROCESSING

WHO WE ARE

Petrochemical plants

Large industries

REVENUE STRUCTURE

• Reservation charges which

are intended to recover all

capital expenditure and

operating expenditure for

making available capacity

up to 1,750 mmscfd.

• Flow rate charges which

are intended to recover

additional variable cost for

gas processing.

• PBS income for

performance of plant

liquid extraction exceeding

targets as governed by

our GPA.

COST STRUCTURE

• Operating costs

– repair and maintenance,

materials and supplies

and professional and

purchased services.

• Depreciation costs.

ASSETS

• GPP1, GPP2, GPP3, GPP4

in Gas Processing Kertih.

• GPP5, GPP6 in Gas

Processing Santong.

• Tanjung Sulong Export

Terminal.

ACTIVITIES

• Processing PETRONAS’

feedgas from offshore

Peninsular Malaysia.

KEY RESOURCES

• 1,120 employees from

both technical and

non-technical.

• 88% of male and 12% of

female employees.

OUTPUT*

• Salesgas (C1)

• Ethane (C2)

• Propane (C3)

• Butane (C4)

CUSTOMER

• PETRONAS, which is the

main aggregator of gas

from upstream in

Peninsular Malaysia.

– The output is

subsequently distributed

to PETRONAS’ power

and non-power

customers, including

petrochemical plants.

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

* Output belong to customer

PAGE: 129

ANNUAL REPORT 2016

BUSINESS MODEL

1. HEALTH, SAFETY, SECURITY & ENVIRONMENT (HSSE)

Robust HSSE governance and assurance

GP is committed to exhibit

leadership in the area of safety

and ensuring our compliance with

the various HSSE governance and

assurance frameworks as well as

the PETRONAS Mandatory Control

Framework at all times to

safeguard lives, assets and our

overall business continuity.

Institutionalisation of process and behavioural safety

GP is determined to increase its

efforts to instil safety-at-heart in

all members of our workforce, to

achieve safe operationalisation of

the Company’s assets.

Strengthening HSSE culture

through implementation of the

Hearts and Minds programme

which integrates and complements

all other ongoing efforts in

uplifting GP to a generative safety

culture and providing process as

well as tools to facilitate lasting

behavioural change.

2. OPERATIONAL EXCELLENCE

Superior product delivery and reliability

GP strives to elevate its reliability

and availability of its assets which

would ultimately translate into

higher OEE, world class salesgas

reliability and 100% product

delivery reliability to our

customers.

Sustainable improvement of key operational indicators

GP is committed to improve and

sustain its plant operational

performance in optimising the

value delivered to our

stakeholders.

GP is accredited with national and

international awards and

certifications consistent with its

high standards in operations.

3. VALUE OPTIMISATION & GROWTH

Optimum cost control and asset utilisation

GP is dedicated to minimise value

leakages and improving overall

asset utilisation, which would

translate into higher returns to its

shareholders.

Improved energy efficiency

GP is committed to utilise energy

efficient technologies to reduce

energy per unit cost of gas

processing, which would translate

into lower production cost and a

reduction in overall energy

intensity and carbon footprint.

Value optimisation and strategic growth in gas infrastructure

GP is determined to optimise its

current business and to pursue,

explore and execute new business

ventures within the core areas of

the Company’s expertise to

establish new revenue streams and

value for its shareholders.

Excellence in project delivery

GP is focused on implementing

seamless project execution

strategy for all of its projects to

improve its asset reliability and

enhancing PETRONAS’ value chain

which translates into timely and

within budget project delivery.

PAGE: 130

PETRONAS GAS BERHAD

BUSINESS STRATEGY


Safe, Reliable & Efficient

Cost Reduction

4. PGB TRANSFORMATION PROGRAMME

In line with the PGB

Transformation Programme, GP is

committed to undertake activities

under Key Strategic Thrusts –

Assets, System & Process and

People & Culture.

GP is committed to improve asset

reliability and availability through

the implementation of KRA to

eliminate the Bad Actors.

In FY2016, GP completed various

KRA activities to improve its asset

integrity, higher plant load initiative

to maximise ethane production and

higher product recovery at GPK and

GPS. These activities contributed

positively to the liquid plant

performance, consistently exceeding

the OEE target in FY2016 which in

turn resulted in the achievement of

12 months PBS income.

Improved GP performance and

greater collaboration between

upstream, PGB and PETRONAS

Chemicals Group Berhad (PCG)

have also contributed to the

GP MANAGED ITS RISKS

VIA ENTERPRISE RISK

MANAGEMENT (ERM) AND

PLANT & FACILITIES RISK

MANAGEMENT (PFRM).

UNDER ERM AND PFRM,

RISKS RELEVANT TO THE

DIVISION ARE ASSESSED,

MONITORED AND

REPORTED TO THE

DIVISION PLANT

LEADERSHIP TEAM (PLT)

AND PGB’S RISK

COMPLIANCE

COMMITTEE (RCC).

General key risk areas facing by GP are

mainly in relation to HSSE such as

fatality and incidences and GPP

reliability issues resulting in interruption

of ethane supply to the petrochemical

business.

Mitigations for each high and medium

risks have been assigned to the

respective key risk owners in reducing

and eliminating the risks associated with

the business, HSSE and operations. The

mitigations have been implemented

through HSSE and Process Safety

Management (PSM) enhancement

programmes such as Mechanical

Integrity (MI) and Loss of Potential

Containment (LOPC) framework,

improvements in Confined Space Entry

(CSE) process as well as further

strengthening on implementation of the

Balance of Consequence Management

together with KRA improvement

activities which are continuation efforts

from 2015.

highest ethane volume production

and delivery in 2016 since the last

highest in 2012 and 2011

respectively.

GP aspire to improve and sustain

workforce productivity through

structured work management with

implementation of standardised

Work Process (WP) and Operational

Excellence Management System

(OeXMS) at all GP area.

The GP Barometer Survey 2016

score showed improvement in the

staff’s commitment and cultural

shift indicating progressive

improvement achieved in the

3ZERO100 Transformation journey.

This has paved the way for the

implementation of 3ZERO100 Beyond initiative which is set to

be achieved by end of 2018. It is

a continuous effort towards

achieving sustainable safe and reliable operations, efficient and empowered organisation at shared leadership level and improved performance in global benchmarking in cost, energy and manpower.

PAGE: 131

ANNUAL REPORT 2016

KEY RISKS & MITIGATIONS

During the year under review,

GP recorded its highest

achievement on OEE

improvement for ethane, propane

and butane. This is in line with PGB’s

Transformation Programme which

focuses on operational excellence,

reflecting PGB’s true performance as

an infrastructure services provider.

The OEE for ethane improved

significantly by 6.9% to 97.7%

contributed by higher product

recovery for ethane extraction

efficiency. Propane and butane

registered 96.6% which was also a

significant improvement by 8.0% and

6.8% respectively.

The reliability of salesgas at 99.2%

consistently surpassed world class

performance benchmark at 98.0%.

Reliability for ethane, propane and

butane achieved its best performance

for the last five years, stood at

98.8%, 99.1% and 99.1% respectively,

mainly contributed by lower

unplanned downtime during the year.

Coupled with improved OEE, GP

sustained its 100% Product Delivery

Reliability (PDR) for salesgas,

propane and butane. PDR for

ethane showed significant

improvement by 2.3% to 99.2%

contributed to the highest

ethylene production of PCG as

compared to previous years.

Ultimately as a result, we have

increased our production volume of

ethane by 5% with total production

volume of 1,239,887 MT which is

the highest since 2012. Production

for propane and butane stood at

1,130,113 MT and 775,835 MT

respectively.

GP RECORDED ITS HIGHEST ETHANE PRODUCTION SINCE 2012 AS A RESULT OF ENHANCED PLANT AVAILABILITY AND RELIABILITY. OUR PLANTS ALSO ACHIEVED THEIR HIGHER OEE PERFORMANCE DURING THE YEAR, ACCOMPANIED BY GREATER PRODUCT RECOVERY IN KERTIH AND SANTONG, WHICH TRANSLATED TO OUR BEST PBS INCOME ACHIEVED SO FAR.

• Plant improvements under KRA activities which have contributed

to enhancing ethane OEE:

– Improvement of Key Rotating, Electrical and Instrument

equipment reliability such as Loop Robustness at GPK and Air

Inlet Filtration System works at GPS.

– Enhancement of Acid Gas Removal Unit (AGRU) pump reliability

at GPS, GPK AGRU and steam system, GPU Special Scheme

Inspection (SSI) implementation, Dehydration Unit (DHU), GPS

Instrument Air system and GPU Inspection Reference Plan (IRP)

& Scheme of Examination (SoE) enhancement.

• Completion of Key Strategic Thrusts on People & Culture such as

Gas Academy and Root Cause Failure Analysis (RCFA) Leaders

Programme.

• Increased productivity with implementation of WP and higher

operating discipline with OeXMS implementation.

WH

AT

WE

DID

TO

AC

HIE

VE

3Z

ERO

100

TR

AN

SFO

RM

AT

ION

TA

RG

ETS

‘15‘15‘15 ‘16

C4

11%13%5%

C3C2

‘16‘16

1,17

9,5

07

1,0

02

,94

3

70

0,9

12

775

,83

5

1,13

0,1

13

1,2

39

,88

7

Liquid Production Volume (MT)

MOHD KABIR NOORDINHead of Gas Processing and Utilities Division

OPERATIONS

Plant Performance

PAGE: 132

PETRONAS GAS BERHAD

REVIEW OF PERFORMANCE FOR THE YEAR


Projects Delivery

• Plant turnaround activities for GPP3

and GPP4 with timely completion

resulted to early start up and

minimum downtime.

• Resolving Bad Actors such as Heat

Exchanger replacement project

which successfully eliminated

unplanned shutdown.

• Reinstatement of the flare system at

TSET improved the reliability of the

flare system and enhancing

PETRONAS’ value chain.

• Improvement of Industrial Effluent

Treatment System (IETS) for Sludge

Dewatering, Chemical Treatment

and Dissolved Air Flotation (DAF)

at GPS.

FINANCIAL

GP continued to deliver commendable

performance during the year and

sustained revenue of RM1.6 billion

contributing about 34.1% to the

Group’s revenue base.

Improvement in revenue by

RM23.6 million (1.5%) was supported

by higher PBS income received

from excellent liquid plant extraction

performance amounting to RM68.8 million from RM44.6 million in

FY2015.

GP contribution to PGB’s gross profit

however decreased by RM48.6 million

as a result of higher operating costs

particularly due to higher repair and

maintenance in line with efforts to

intensify plant reliability and availability.

AWARDS AND RECOGNITIONS

Health, Safety, Security and Environment (HSSE)

GP is recognised at both national and

international levels for its achievements

in commendable safety and health

records and higher improvement in

occupational safety and health

processes through sound management

systems. In 2016, GP received the

following awards:

• Highest awards for RoSPA International Health and Safety Awards (Gold Award) for 2016 by

The Royal Society for the

Prevention of Accidents (RoSPA);

and

• National Level OSH Award & Recognition (MSOSH 2015) Awarded the MSOSH OSH Grand

Award Winner 2015 (Superior OSH

Performance) for GPK. Awarded

MSOSH OSH Gold Class 1 Award

Winner 2015 (Very Good OSH

Performance) for GPS.

Innovation and Improvement

The recognitions garnered from

industry and statutory bodies have

inspired GP to continue to deliver the

best level of performance in the years

to come.

• Gold Award at International Convention on Quality Control Circle (ICQCC) 2016 for the

Particle Analysis in Natural Gas

project held in Bangkok, Thailand

from 23 to 25 October 2016. The

result of the analysis prevented an

opportunity loss of RM2.1 million

from ethane unavailability;

• Consistently attained Gold Award Winners in the Mini Team Excellence Convention, Regional Team Excellence Convention for East Coast Region 2016 and National Team Excellence Convention 2016 under Malaysia

Productivity Corporation (MPC) for

value creation on cost saving of

RM0.1 million, and reduction of

duration for overhaul of Boiler

Feedwater pump from five months

to two months; and

• The IKM (Institut Kimia Malaysia)

2016 LAB Excellence Award

accorded to three GP labs at GPK,

GPS and TSET.

SUSTAINABILITY

Environment

GP acknowledges the additional

responsibility of ensuring its processes

and systems are efficient and safe at all

time to minimise impact to the

environment. This is achieved through

the following:

• Sustenance of Flare Gas Recovery

Unit (FGRU) GPK and GPS to

reduce black smoke.

• Discharging on-specification

industrial effluent in compliance

with Industrial Effluent Regulation

(IER) 2009.

• Keeping abreast with potential

regulation introduced by regulatory

bodies such as Clean Air Regulation

(CAR) 2014 and undertaking

necessary actions to ensure

compliance.

PAGE: 133

ANNUAL REPORT 2016

• GP looks forward to further

improve its high performance

by focusing on sustaining safety

and reliable operations towards

productive, efficient and

competitive assets via

continuous plant improvement,

preventive maintenance and

turnaround activities.

• GP continues to uphold its

obligations under the GPA

which is expected to provide

GP stable income with potential

PBS income to be derived from

excellent plant liquid

performance.

• In line with the 3ZERO100

Beyond, GP will continue to

develop an empowered team by

enhancing leadership

competencies and optimising

cost which is competitive

against other organisations in

global benchmarking.

• Together with the

implementation of WP and

OeXMS, GP is committed to

increase staff productivity,

capability and accountability in

decision making.

• GP is also expected to extract

higher ethane volume

attributable to higher feedgas

composition received from

TGAST facilities, once TGAST

project completed by

PETRONAS Carigali Sdn Bhd.

Community

GP is also responsible for sustaining

cohesive relations with the local

community through its Corporate Social

Investment (CSI) activities such as:

• Continuous support of the “Sayangi

Sungai Paka” programme in

collaboration with Malaysian Nature

Society (MNS), PETRONAS East Cost

Regional Office (ECRO) and

government agencies by sharing

and providing awareness to

surrounding communities during

Hari Alam Sekitar Negara (HASN) on

22 October 2016 and during

Control of Industrial Major Accident

Hazards (CIMAH) Day on 16 May

2016. These events which focus on

environmental awareness and

conservation are part of a CSI

initiative by PGB and undertaken

by GP.

• Various Corporate Social

Responsibility (CSR) activities

conducted throughout the year

with the involvement of local

communities, schools and

authorities including cleaning of

mosques, schools and residential

housing areas.

• Led Occupational Safety and Health

(OSH) Open Day in collaboration with

other PETRONAS subsidiaries to foster

a closer relationship between local

communities and the Terengganu

Department of Occupational Safety

and Health (DOSH).

Workplace

GP is committed to protect the health

of people at our workplace and

provides conducive workplace to staff

and contractors through various

programmes such as:

• Employee driven programmes

through HSSE Action Teams such as

Safety Observation, Safety Audit,

Mega Housekeeping, supporting

Equipment Basic Care and GPU Safe

Raya Campaign.

• Medical counselling carried out by

Occupational Health doctors which

is aimed at promoting healthy

lifestyle to employees.

• Series of “Hari Bertemu Pelanggan”

with its objective to increase health

awareness among staff including

carrying out medical screening at

GPK, GPS and TSET.

• Healthy lifestyle programme such as

Biggest Loser, Mountain Bike (MTB)

Competition, Green Run, Zumba

exercise, Body Measured Index

(BMI), Blood Donation Drive and

others.

Marketplace

GP’s focus was on further

strengthening its relationship with

stakeholders through various activities

which included:

• Recreational activities consisting of

bowling tournaments and friendly

futsal engagements with GP’s

customers and suppliers.

• Management engagement and

networking such as the Gas

Customers Annual Focus Engagement

with PETRONAS Ethylene Sdn Bhd

(PCESB), Plant Leadership Team visit

to PETRONAS Penapisan (Melaka) Sdn

Bhd (PP(M)SB), PETRONAS Chemicals

Olefins Glycols and Derivates Sdn

Bhd (PCOGD) and PCESB.

• Contractors Forum 2016 which

provided GP and contractors a

platform for a two way

communications and engagement

with each other.

OUTLOOK

PAGE: 134

PETRONAS GAS BERHAD


PAGE: 135

ANNUAL REPORT 2016

GAS TRANSPORTATION

A visual of our Gas Transportation segment (GT)’s achievements, contributions and milestones during the year.

HUMAN CAPITAL


417

Reliability Availability

‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16

99

.87

99

.92

99

.85

99

.92

99

.95

99

.98

99

.99

99

.99

99

.90

99

.96

57 (13.7%)

360 (86.3%)

Technical Non-technical

PRODUCTIVITY CAPITALReliability and Availability (%)

PRODUCT DELIVERY RELIABILITY (PDR)

Total Manpower

Strength

PAGE : 136

PETRONAS GAS BERHAD

BUSINESS REVIEW

LTIF2 FATALITY

4.41


million safe manhours

achieved

1 Inclusive of safe manhours achieved after LTI incident.2 LTIF—Lost time injury frequency is defined as loss of productive work


0.5 2

361M

mmscfd salesgas

delivered

56F

YEAR IN REVIEW

4,396

100.0%

2,152

mandays of training

and development

47.2%

Gas Transportation

Gross Profit

3.3% lower due to higher operating costs


contribution to

PGB Group

47.2%

0.6% decrease due to downward revision

of Gas Transportation Sabah tariff


52.8%

PAGE: 137

ANNUAL REPORT 2016

1,3

11.6

1,0

09

.1

1,3

03

.99

75

.3

1,2

86

.71,

00

6.7

1,18

9.4

90

2.4

1,11

9.4

83

9.3

RM1.3REVENUE

billion




• Sustained world class performance in transmission reliability and availability at 99.96% and 99.90% respectively through pipeline integrity assurance and

rectification programmes.

• Stable revenue generation at RM1,303.9 million with only

a slight decrease by RM7.7 million (0.6%) from FY2015.

• Gross profit of RM975.3 million, was lower by RM33.8

million (3.3%) from FY2015, attributed to higher operating

costs.

• Successfully re-commissioned the Sabah-Sarawak Gas

Pipeline (SSGP) in March 2016 with zero HSE incident and

subsequently increase its contribution to GT profitability by

RM24.7 million.


‘12 ‘13 ‘14 ‘15 ’16

‘12 ‘13 ‘14 ‘15 ’16

PAGE: 138

PETRONAS GAS BERHAD

PIPELINE

POWER

NON-POWER

COMPRESSORSTATION

METERINGSTATION

Measure the gas flow rate

Pressurise gas to

transport it from

one location to

another

GT is operated by our Gas Transmission and Regasification

(GTR) Division. We manage gas transmission operations through

pipelines covering much of West Malaysia known as the

Peninsular Gas Utilisation (PGU) pipeline network.

We operate from our main Control Centre located in Segamat,

Johor and the salesgas is transported to PETRONAS’ customers

via our 2,551 km PGU pipeline. Starting off our operations

upon completion of PGU 1 in 1984, our PGU pipeline network

has expanded and currently has the capacity to transport up to

3,000 million standard cubic feet per day (mmscfd) of gas.

In addition, we also transport small volumes of salesgas for

PETRONAS’ customers via our gas distribution system in Miri

and Bintulu, Sarawak, as well as manage the gas pipeline in

Kimanis, Sabah.

In return for the gas transportation services, PGB receives gas

transportation fees which are mainly postage tariff under the

20-year Gas Transportation Agreements (GTA).

GT also acts as the operations and maintenance (O&M)

operator for SSGP and Trans Thai-Malaysia (M) Sdn Bhd’s

pipeline from the northern Malaysian border to Seberang Prai

in Pulau Pinang.

Pipeline Network

Gas Processing

Plants

Tenaga Nasional

Berhad

Gas Malaysia Berhad

Petrochemical Plants

Large Industries

Independent Power

Producers (IPP)

Senoko/Keppel

LNG Regasification

Terminal

Malaysia - Thailand

Joint Development

Area

WHO WE ARE

Salesgas

Salesgas Delivered

to Customer

BUSINESS REVIEW – GAS TRANSPORTATION


PAGE: 139

ANNUAL REPORT 2016

BUSINESS MODEL

REVENUE STRUCTURE

• Capacity reservation

which is based on

capacity booking at tariff

RM per gigajoule (GJ)

governed by the GTA.

COST STRUCTURE

• Operating costs

– Repair and maintenance

(includes preventive),

payroll cost and

benefits, insurance,

taxes and licenses, and

others.


ASSETS

• Transmission pipelines

covering much of West

Malaysia (known as the

PGU pipeline network).

• Smaller distribution

systems in Miri and

Bintulu in East Malaysia.

ACTIVITIES

• Transportation of gas to

PETRONAS’ customers in

Peninsular Malaysia and

Singapore. Source of gas

are through three

injection points:

– Gas processing plants

– Malaysia-Thailand Joint

Development Area

– LNG Regasification

Terminal in Sungai

Udang, Melaka

• Transportation of gas to

PETRONAS’ customers in

Sabah and Sarawak.

KEY RESOURCES

• 417 employees from

both technical and

non-technical

backgrounds.


female employees.

OUTPUT*

• Gas transportation

services consist of mainly

delivery of salesgas as

well as ethane, propane

and butane.

CUSTOMER

• Solely PETRONAS.

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

PAGE: 140

PETRONAS GAS BERHAD



GT is committed to exhibit






Framework at all times to




GT is determined to increase its








which integrates and complements

all ongoing efforts in uplifting GT

to generative safety culture and to

facilitate lasting behavioural

change.



GT strives to sustain its asset

reliability and availability for

superior operational excellence.


GT is committed to improve and

sustain our transmission

operational performance in

optimising the value delivered to

our stakeholders.


Optimum cost control and asset utilisation

GT is dedicated to minimise value

leakages and improve overall asset

reliability, which would translate into

higher returns to its shareholders.


GT is committed to utilise energy


energy per unit cost of

transmission which would translate

into lower transmission cost and a

reduction in overall energy

intensity and carbon footprint.

Value optimisation and strategic growth in gas infrastructure

GT is determined to optimise



ventures within the core

competencies of the Company to




GT is focused on implementing

seamless project execution strategy

across all of its projects to improve

its asset reliability and enhancing

PETRONAS’ value chain which

translates into timely and within

budget project delivery.

BUSINESS STRATEGY



Cost Reduction

PAGE: 141

ANNUAL REPORT 2016


In line with PGB Transformation

programme, GT is committed to

undertake activities under Key

Strategic Thrusts on Assets, System

& Process and People & Culture.

GT is committed to improve asset

reliability and availability by

elimination of Bad Actors through

the implementation of Key Results

Area (KRA) and GTR Taskforce.

In 2016, GT completed various KRA

activities, which have enabled GT in

sustaining its pipeline reliability and

availability, such as:

• Inspection of Above Ground

Piping System

• Enhancement of Equipment

Reliability Strategy (ERS) & Bill

of Material (BOM)

• Pipeline Integrity Enhancement

Programme

• PETRONAS Risk Based

Inspection (PRBI) Enhancement

• Safety Criticality Element (SCE)

Development & Implementation

GT MANAGED ITS RISKS VIA ENTERPRISE RISK MANAGEMENT (ERM) AND PLANT & FACILITIES RISK MANAGEMENT (PFRM). UNDER ERM AND PFRM, RISKS RELEVANT TO THE DIVISION ARE ASSESSED, MONITORED AND REPORTED TO THE DIVISION PLANT LEADERSHIP TEAM (PLT) AND PGB RISK COMPLIANCE COMMITTEE

(RCC).

General key risk areas facing by GT are


fatality, incidences, loss of primary

containment and supply interruption

due to external factors such as geo-

technical instability and third party

activities.

GT is also exposed on the risk of

implementation of the new Gas Supply

(Amendment) Act (GSA) 2016, in

particular on increased competition and

economic regulation.




and eliminating the risk associated with

business, HSSE and operations. The

mitigations have been implemented



programmes and further strengthening

Balance of Consequence Management,

as well as to conduct public awareness

and geo-technical assessment on

regular basis. Other than that, GT will

also ensure compliance with the GSA

and looking into ways to ensure

stability of its revenue and performance

while embarking on various cost

reduction initiatives.

• Quality Assurance/Quality

Control (QA/QC) Scheme

Development

GT also carried out other initiatives

namely:

• Pipeline Weldment Integrity

Assurance

• Kuantan Compressor Station

Reliability Enhancement

The GT Barometer Survey 2016

score showed improvement in


shift indicating progressive

improvement in 3ZERO100

Transformation journey.







PAGE: 142

PETRONAS GAS BERHAD

We have started to reap the

positive impact arising

from the Transformation

programme despite the challenges

and volatile economy outlook.

During the year, GT achieved zero

interruption and sustained world

class performance of reliability and

availability at 99.96% and 99.90%

respectively.

GT achieved zero supply

curtailment through effective

management of the PGU supply

and delivery chain, resulting to

uninterrupted gas delivery to

PETRONAS’ customers. GT

managed to transport and supply a

total of 2,152 mmscfd of salesgas

during the year.

• Pengerang Gas Pipeline project

(PGPP) progressing at 94.4%,

expected to be commissioned

in March 2017 and completed

in June 2017.

• Pipeline Relocation Sungai

Skudai project (PIRESS) has

been completed in December

2016 to resolve operational

risks at that particular area.

GAS TRANSPORTATION CONTINUED TO SUSTAIN WORLD-CLASS PERFORMANCE IN

TRANSMISSION RELIABILITY AND AVAILABILITY, EXCEEDING TARGETS THAT HAD BEEN SET.

THIS, ULTIMATELY, CONTRIBUTES TO THE SECURITY OF GAS SUPPLY TO THE NATION.

BURHAN ABDULLAHHead of Gas Transmission and

Regasification Division

• KRA initiatives, such as:

• Enhancement of Equipment Reliability Strategy (ERS)

• Inspection of Above Ground Piping System

• Pipeline Integrity Enhancement Programme

• Completion of GT Taskforce activities, such as:

• Pipeline Weldment Integrity Assurance

• Kuantan Compressor Station Reliability Enhancement

Programme

• Completion of Key Strategic Thrusts of People & Culture such as

GTR Academy and GTR Root Cause Failure Analysis (RCFA) and

Leaders Development Programme

• Increase productivity with implementation of Work Process (WP)

and higher operating discipline with Operational Excellence

Management System (OeXMS) implementation

WH

AT

WE

DID

TO

AC

HIE

VE

3Z

ERO

100

TR

AN

SFO

RM

AT

ION

TA

RG

ETS


OPERATIONS

Transmission Performance Projects Delivery


FINANCIAL

GT registered revenue of RM1,303.9

million for FY2016, reflecting a marginal

decrease of 0.6% from last year, mainly

due to downward revision of the Gas

Transportation Sabah tariff.

GT contributed RM975.3 million to the

Group’s gross profit, decreased by

RM33.8 million (3.3%) in tandem with

lower revenue and higher operating

costs, particularly land assessment fees

and depreciation expense.

AWARD AND RECOGNITION

GT won Silver Award for Culture

Excellence at the Downstream

Operational Excellence Forum Awards

(DOEFA) 2016.

SUSTAINABILITY

Environment

GT acknowledges the additional

responsibility to ensure its pipeline

network are efficient and safe at all

times to minimise impact to the


compliance towards Clean Air

Regulation (CAR) 2014 that was

gazetted in 2014 by Department of

Environment.

Community

GT is committed to contribute to the

society through PGB Corporate Social

Investment (CSI) programme. In

September 2016, GT completed the

renovation and installation of

equipment for the training center at

Dewan Serbaguna Kampung Air Bah,

Segamat. 20 participants attended the

seven months training on

We expect our Gas Transportation business to continue generating sustainable returns next

year on the back of GTA.

GT will continuously emphasise on the HSSE

implementation to ensure zero HSE

incident at all times.

In line with the 3ZERO100 Beyond, GT is expected to

continue sustaining its assets performance,

enhance WP and the OeXMS implementation to improve productivity and efficiency with lean

and empowered organisation.

entrepreneurship conducted at the

center. A graduation ceremony was

held on 29 September 2016, where the

participants were given graduation

certificates from PETRONAS and Kolej

Komuniti Hulu Langat to recognise and

acknowledge their dedication and

success.

Workplace

GT is committed to protect the health


provides conducive working

environment to staff and contractors

through various programmes such as:

• Health talk and medical checkup by

Segamat District Health Office

which are aimed to promote

healthy lifestyle to employees.

• Healthy lifestyle programme such as

aerobic session, Zumba exercise,

Blood Donation drive and others.

Marketplace

GT focused to further strengthen

relationship with stakeholders through

various activities such as:

• Public awareness session with

factory adjacent to PGB’s Right of

Way (ROW) at KP197, Taman Desa

Cemerlang has been conducted to

address HSSE issue at Ulu Tiram

leak incident.

• Visit from Jabatan Bomba dan

Penyelamat Malaysia Zon Muar in

May 2016, for Disaster Management

Exercise (D’Max).

• Participated in Hari Alam Sekitar

Peringkat Negeri Johor 2016 to give

awareness to local community on

PGB pipeline network at Dataran

Bandaraya Johor Bahru in October

2016.

OUTLOOK

PAGE: 143

ANNUAL REPORT 2016

UTILITIESA visual of our Utilities (UT)’s segment achievements, contributions and milestones during the year.

200

HUMAN CAPITAL


90.5%

100.0%

86.6%

100.0%

212

100.0%

100.0%

Electricity Steam Industrial Gases

‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16

94

.495

.996

.4

99

.0

97.9

97.8

98

.6

98

.1

98

.0

95

.6

94

.9

99

.9

99

.9

94

.5

98

.8

4 (1.9%)

208 (98.1%)



OVERALL EQUIPMENT EFFECTIVENESS (OEE)

Reliability (%)

Electricity

Electricity

Steam

Steam

Industrial Gases

Industrial Gases


Total Manpower

Strength

M

PAGE : 144

PETRONAS GAS BERHAD

BUSINESS REVIEW

LTIF2 FATALITY

1.41 million safe manhours

achieved

1 Inclusive of safe manhours achieved after LTI incident.2 LTIF—Lost time injury frequency is defined as loss of productive work


0.7 0

12F

YEAR IN REVIEW

3,736mandays of training

and development


higher by 9.8% attributed to industrial

gases, steam and electricity sales.


PAGE: 145

ANNUAL REPORT 2016

973

.613

5.8

1,0

69

.115

5.9

1,0

08

.619

5.9

86

7.2

127.7

94

6.2

162

.0RM1.1REVENUE

billion




14.8% increase was contributed by higher revenue


92.5%

7.5%

contribution to

PGB Group

7.5%Utilities

Gross Profit

• UT continued to deliver commendable performance with

reliability at 98.8% for electricity, 94.5% for steam and

99.9% for industrial gases and significantly improvement on PDR at 100% for all products.

• The above achievements were as a result of completion of

Key Results Area (KRA) activities under the 3ZERO100 Transformation and plant improvement project. UT also

recorded higher OEE for electricity at 90.5% and industrial

gases at 100%.

• UT recorded revenue of RM1,069.1 million, an increase of RM95.5 million (9.8%) from FY2015 attributable to higher

sales of industrial gases, steam and electricity in line with

two fuelgas price revisions in FY2016.

• UT contribution to PGB’s gross profit increased by RM20.1 million (14.8%), in tandem with the increase of revenue

but partially negated by higher operating costs.


‘12 ‘13 ‘14 ‘15 ’16

‘12 ‘13 ‘14 ‘15 ’16

FEEDSTOCK UTILITIES CUSTOMERS

GAS TRANSMISSION GRID

WATER SUPPLY

Natural Gas

Treated Water

Effluent Water Waste Water

Ambient Air

DEMIN PLANT

COGENERATION PLANT

COOLING WATER PLANT

EFFLUENT TREATMENT PLANT

AIR SEPARATION/NITROGEN GENERATION UNIT

Electricity

Condensate

UK: 6 GT (5 online + 1 standby)

UG: 3 GT

UK: 2 units (ASU)

UG: 2 units (NGU)

Electricity/LP Steam/ IP Steam/HP Steam/

HHP Steam

Demineralised WaterTreated Water

Fire Water

Low Pressure N2High Pressure N2High Pressure O2

Liquid N2Liquid O2

Liquid Argon

LP : Low Pressure

IP : Intermediate Pressure

HP : High Pressure

HHP : High High Pressure

ASU : Air Separation Unit

NGU : Nitrogen Generation Unit

N2

: Nitrogen

O2

: Oxygen

Product

By-product

PAGE: 146

PETRONAS GAS BERHAD

UT is operated by our Gas Processing and Utilities (GPU)

Division, consisting two complexes of Utilities Kertih (UK) and

Utilities Gebeng (UG).

UT’s operations began in 1998 when PGB expanded into

manufacturing, supplying and marketing a range of industrial

utilities to the various petrochemical businesses and industries

in the Kertih Integrated Petrochemical Complex in Terengganu

and the Gebeng Industrial Area in Pahang.

UK and UG are strategically located and provide a competitive

edge to the petrochemical plants and surrounding industries

with reliable supply of electricity, steam, industrial gases and

other by-products like liquid oxygen, liquid nitrogen,

demineralised water, raw water, cooling water and boiler feed

water. UT’s first delivery of electricity to its customers was in

1999 and it has since increased its customers base to help

PGB maximise shareholders value. Given its size and scale of

facilities, output from UT is cost efficient, allowing customers

to focus on their respective core business.

UT operates on merchant mode where it manufactures,

supplies and markets products to customers and receives

payment based on products delivered in accordance with the

respective sales and purchase agreements.

Simplified Flow Diagram of Utilities Plants

WHO WE ARE

BUSINESS REVIEW – UTILITIES

PAGE: 147

ANNUAL REPORT 2016

REVENUE STRUCTURE

• Based on volume of

products sold to

customers at prices

stipulated in sales

and purchase agreements

with prices comprising

fixed cost, variable cost

and inflation.

COST STRUCTURE

• Operating costs

– fuelgas, repair and

maintenance, materials

and supplies and

professional and

purchased services.


ASSETS

• Cogeneration plant, Air

Separation plant and

Water plant at Utilities

Kertih.

• Cogeneration plant,

Nitrogen Generation plant,

and Water plant at

Utilities Gebeng.

ACTIVITIES

• Manufacturing, supplying

and marketing electricity

and a range of industrial

utilities to the customers.

KEY RESOURCES

• 212 employees comprising

both technical and

non-technical


female employees

OUTPUT

• Electricity

• Steam

• Industrial gases

• Other products such as

liquid oxygen, liquid

nitrogen, demineralised

water, raw water, cooling

water and boiler feed

water

CUSTOMERS

• Petrochemical plants

• Industrial

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

BUSINESS MODEL

PAGE: 148

PETRONAS GAS BERHAD



UT is committed to exhibiting

leadership in the area of safety and

ensuring our compliance with the

various HSSE governance and



Framework at all times to safeguard

lives, assets and our overall business

continuity.


UT is determined to increase its








which is integrated and

complements all other ongoing

efforts in uplifting UT to a

generative safety culture and

providing process as well as tools

to facilitate lasting behavioural

change.



UT strives to elevate its plant

reliability and OEE by

implementing gap identification to

improve equipment reliability and

increase system robustness for

electricity generation, protection

and distribution which would

translate into 100% PDR to our

customers.


UT is committed to improve and

sustain its plant operational

performance in optimising the

value delivered to our

stakeholders.

UT is accredited with national and

international awards and

certifications consistent with its

high standards in operations.


UT is dedicated to minimise value

leakages and improve overall asset

utilisation, which would translate

into higher returns to its

shareholders.


UT is committed to utilise energy


energy per unit cost of production,

which would translate into lower

production cost and a reduction in

overall energy intensity and carbon

footprint.

Value optimisation and strategic growth in utilities business

UT is determined to optimise its



ventures within the core areas of

the Company’s expertise to


creating value for its shareholders.


UT is focused on implementing


strategy for all of its projects to

improve its asset reliability and

enhancing PETRONAS’ value chain



BUSINESS STRATEGY


PAGE: 149

ANNUAL REPORT 2016


In line with the PGB

Transformation programme, UT is

committed to undertake activities

under Key Strategic Thrusts –

Assets, System & Process and

People & Culture.

UT is dedicated to improve overall

asset reliability and availability

through the implementation of

KRA to eliminate Bad Actors.

UT is inspired to improve and

sustain workforce productivity

through structured work

management with implementation

of standardised Work Process (WP)

and Operational Excellence

Management System (OeXMS) at

all UT area.

UT MANAGED ITS RISKS

VIA ENTERPRISE RISK



MANAGEMENT (PFRM).

UNDER ERM AND PFRM,



MONITORED AND

REPORTED TO THE

DIVISION PLANT

LEADERSHIP

TEAM (PLT) AND PGB

RISK COMPLIANCE

COMMITTEE (RCC).

General key risk areas facing UT are


fatality and incidences and interruptions

of utility supply to the customers i.e.

industrial gases, electricity and steam

due to Utilities plant failure.




and eliminating the risks associated

with the business, HSSE and operations.

The mitigations have been implemented



programmes such as Mechanical

Integrity (MI), Loss of Potential

Containment (LOPC) framework,

improvements in Confined Space Entry

(CSE) process as well as further

strengthening on implementation of the

Balance of Consequence Management

and KRA improvement activities which

are continuation efforts from 2015.

The UT Barometer Survey 2016



shift which indicating progressive

improvement in 3ZERO100

Transformation journey, recently

completed.








Cost Reduction

PAGE: 150

PETRONAS GAS BERHAD


UT recorded its highest

achievement on OEE

improvements for electricity and

industrial gases products. This is in

line with the PGB Transformation

programme which focuses on

operational excellence, reflecting

PGB’s true performance as an

infrastructure and utilities gas

services provider. Our UT segment

has shown downward trend in

plant interruption, in addition to

successfully meeting the PDR

target.

Electricity and industrial gases

reliability exceeded the world class

benchmarks, at 98.8% and 99.9% respectively, while steam at 94.5% was only 0.5% below the benchmark.

Better OEE for electricity and

industrial gases were mainly

attributed by intensive maintenance

activities and lower unplanned

activities undertaken during the year.

Ultimately, UT shown improvement from 2015 by 3.4% to 90.5% for electricity and by 7.9% to 100.0% for industrial gases. Coupled with

improved OEE, UT scored 100%

PDR for each products, which were

a significant improvement compared

to 2015.

Utilities products delivery, however,

fell as a result of lower electricity

export in line with fuelgas

optimisation initiative and lower steam

customers offtake caused by

customers internal steam optimisation.

Electricity delivery stood at 1,664 gigawatt hour (GWh); steam at 3,787 kilometric tonnes (KMt); and industrial gases at 677 mega normal cubic meters (MNm3).

UTILITIES MARKED SIGNIFICANT IMPROVEMENT IN ITS PERFORMANCE. RELIABILITY FOR ELECTRICITY AND INDUSTRIAL GASES EXCEEDED THE WORLD CLASS BENCHMARK AS A RESULT OF INTENT FOCUS ON OPERATIONAL TARGETS, COMPLEMENTED BY PREVENTIVE MAINTENANCE WORK AT OUR GAS TURBINES AND AIR SEPARATION UNIT IN KERTIH AND GEBENG.

MOHD KABIR NOORDINHead of Gas Processing and Utilities Division

• Plant improvement activities which have contributed towards enhancing Product Delivery Reliability such as:

• UT KRA activities for improvement of ASU reliability by resolving Main Air Compressor Bad Actors, improving steam efficiency and equipment performance.

• ASU1 and ASU2 Power Supply Segregation (ASPIRE) and Overall Boiler Integrity Management (OBIMA) project to enhanced ASU reliability and upgrading boiler to restore mechanical integrity and eliminate bad actors issues.

• Completion of Key Strategic Thrusts on People & Culture such as Gas Academy and Root Cause Failure Analysis (RCFA) Leaders programme.

• Increase productivity with implementation of WP and higher operating discipline with OeXMS implementation.

WH

AT

WE

DID

TO

AC

HIE

VE

3Z

ERO

100

TR

AN

SFO

RM

AT

ION

TA

RG

ETS

‘15‘15‘15 ‘16

14%7%2%

Electricity (GWh) Steam (KMt) Industrial Gases (MNm3)‘16‘16

1,70

4

4,0

76

59

4

677

3,7

87

1,6

64

Utilities Volume

OPERATIONS

Plant Performance



Projects Delivery

• Completion of plant turnaround

activities for demineralised water

plant at UK, nitrogen plant at UG

and gas turbine major overhaul at

UK and UG.

• Enhancing ASU plant reliability by

segregating power supply to serve

on dedicated basis for ASU1 and

ASU2 equipment under ASPIRE

project.

• OBIMA project to improve capacity

and reliability steam production in

order to support additional steam

supply to BASF PETRONAS

Chemicals Sdn Bhd (BPC) for their

new Aromatic plant effective August

2016.

FINANCIAL

UT registered revenue of RM1.1 billion

for FY2016, reflecting an improvement

of RM95.5 million (9.8%) as compared

to 2015 mainly attributable to higher

sales of industrial gases, steam and

electricity.

The increase was mainly contributed by

higher effective price charged to

industrial gases and steam customers

in line with two fuelgas price revisions

in FY2016.

UT contribution to PGB’s gross profit

increased by RM20.1 million in line

with of higher revenue despite higher,

fuelgas, operations and maintenance

cost during the year to support with

the Company’s effort in improving

plant reliability and availability.

AWARDS AND RECOGNITIONS

Health, Safety, Security and Environment (HSSE)

UT is recognised at both national and

international level for its achievements

in commendable safety and health

records and higher improvement in

occupational safety and health

processes through sound management

systems. In 2016, UT received the

following awards:

• Highest awards for RoSPA International Health and Safety Awards (Gold Award) for 2016 by

The Royal Society for the Prevention

of Accidents (RoSPA).

• National Level OSH Award & Recognition (MSOSH 2015) Awarded the MSOSH OSH Grand

Award Winner 2015 (Excellence

OSH Performance) for UK. Awarded

MSOSH OSH Gold Class 1 Award

Winner 2015 (Very Good OSH

Performance) for UG.

Innovation and Improvement

The recognition garnered from industry

and statutory bodies have inspired UT

to continue to deliver the best level of

performance in the years to come.

• Consistently attained Gold Award Winners in the Regional Team Excellence Convention for East Coast Region 2016 and National Team Excellence Convention 2016

under Malaysia Productivity

Corporation (MPC) for value

creation on Co-generation plant

reliability and uninterrupted power

supply to customers.

• Award Winner under Top 10 Award

for Manufacturing Sector in National

Team Excellence Convention 2016.

• The IKM (Institut Kimia Malaysia)

2016 LAB Excellence Award accorded

to two UT labs namely UK and UG.

SUSTAINABILITY

Environment

UT acknowledges the additional

responsibility of ensuring its processes




the following:

• Discharging on-specification industrial

effluent in compliance with the

Industrial Effluent Regulation (IER)

2009.

• Keeping abreast with potential

regulation introduced by regulatory

bodies such as Clean Air Regulation

(CAR) 2014 and undertaking

necessary actions to ensure

compliance.

Community

UT has also established and sustained

close relationship with local community

through its Corporate Social Investment

(CSI) activity such as:

• Continuous support of the “Sayangi

Sungai Paka” programme in

collaboration with Malaysian Nature

Society (MNS), PETRONAS East Cost

Regional Office (ECRO) and

government agencies by sharing and

providing awareness to surrounding

communities during Hari Alam Sekitar

Negara (HASN) on 22 October 2016

and during Control of Industrial Major

Accident Hazards (CIMAH) Day on 16

May 2016. The events which focus

on environmental awareness and

conservation are part of a CSI

initiative by PGB and undertaken

by UT.

PAGE: 151

ANNUAL REPORT 2016

• Moving foward, UT performance

would be very much dependent

on the demand by Petrochemical

business.

• UT is looking forward to further

improve its high performance

by focusing on sustaining safety

and reliable operations towards

productive, efficient and

competitive assets through

continuous plant improvement

such as UG cogeneration plant

expansion, the Generator and

Turbine Control System

Upgrade (GETS-UP), preventive

maintenance and turnaround

activities.

• In line with the 3ZERO100

Beyond, UT will continue to

develop an empowered team by

enhancing leadership

competencies and optimising

cost which are competitive

against other organisations in

global benchmarking.

• Together with the

implementation of WP and

OeXMS, UT is committed to

increase staff productivity,

capability and accountability in

decision making.

• UT is also committed to pursue

new business opportunities to

maximise utilisation of its assets.

• Various CSR activities conducted

throughout the year with the

involvement of local communities,

schools and authorities including

cleaning of mosques, schools,

welfare, and residential housing

areas.

• Led Occupational Safety and Health

(OSH) open day in collaboration

with other PETRONAS subsidiaries

to foster relationship between local

communities and Terengganu

Department of Occupational Safety

and Health (DOSH).

• Second Runner Up in Gebeng

Emergency Mutual Aid (GEMA)

competition on First Aid category

organised by Polyplastic Sdn Bhd.

Workplace

UT is committed to protect the health


provides conducive workplace to staff

and contractors through various

programmes such as:

• Employee driven programmes

through HSSE Action Teams such as

Safety Observation, Safety Audit,

Mega Housekeeping, Supporting

Equipment Basic Care, and GPU

Safe Raya Campaign.

• Medical counselling carried out by

Occupational Health Doctors aimed

to promote healthy lifestyle to

employees.

• A series of “Hari Bertemu

Pelanggan” to increase health

awareness among staff including

carrying out medical screening at

UK and UG.

• Healthy lifestyle programme for

example achieving First Runner Up

during Football league with

PETRONAS Recreation Club,

Biggest Loser, Mountain Bike (MTB)

Competition, Green Run, Zumba

exercise, Body Measured Index

(BMI), Blood Donation drive and

others.

Marketplace

UT’s focus was on further

strengthening its relationship with

stakeholders through various activities

which included:

• Recreational activities consisting of

bowling tournament and friendly

futsal engagement with UT

customers and suppliers.

• Leadership Team engagement and

networking such as the Gas

Customers Annual Focus Engagement

with PETRONAS Chemical Ethylene

Sdn Bhd (PCESB) and PETRONAS

Chemicals Ammonia Sdn Bhd

(PCASB) and Plant Leadership Team

visit to PETRONAS Penapisan (Melaka)

Sdn Bhd (PP(M)SB), Linde Malaysia

Sdn Bhd (Linde), PETRONAS Chemical

Olefins, Glycol & Derivatives Sdn Bhd

(PCOGD), Air Liquide Melaka Plant

and PCESB.

• Engagement with potential

customers and contractors forum

which provided UT a platform for a

two way communications and

engagement with each other.

PAGE: 152

PETRONAS GAS BERHAD

OUTLOOK


PAGE: 153

ANNUAL REPORT 2016

PETRONAS GAS BERHAD

REGASIFICATIONBUSINESS REVIEW

PETRONAS GAS BERHAD

PAGE: 154

A visual of our Regasification segment (RGT)’s achievements, contributions and milestones during the year.

91


94

Reliability % Availability % OEE %

‘14 ‘15 ‘16 ‘14 ‘15 ‘16 ‘14 ‘15 ‘16

99

.1

83

.1

86

.3

94

.1

73

.079

.2

100

.0

88

.2

98

.4

4 (4.3%)

90 (95.7%)



OVERALL EQUIPMENT EFFECTIVENESS (OEE)

LNG cargoes from

all over the world


Total Manpower

Strength

M

20

3F

LTIF1 FATALITY

656 thousands safe

manhours achieved

1 Lost time injury frequency (LTIF) is defined as loss of productive work time due to injury suffered, relative to total hours worked during the year.

0 0

HUMAN CAPITAL HEALTH, SAFETY, SECURITY & ENVIRONMENT (HSSE)

YEAR IN REVIEW

1,651mandays of training

and development

100.0% 100.0%

Revenue decreased by 0.9% as compared

to previous year.


PAGE: 155

ANNUAL REPORT 2016

‘13

‘13

‘14

‘14

‘15

‘15

29

7.5

63

7.1

63

1.1

28

6.33

07.9

616

.2

33

8.2

163

.5RM631.1REVENUE

million

‘16

‘16




• RGT achieved regasification reliability of 98.4%, an

improvement from 86.3% recorded last year. Availability was

also elevated to 88.2% from 83.1% in FY2015.

• RGT achieved 100% OEE which translated to higher overall

asset reliability and availability through the implementation

of Key Results Area (KRA) under 3ZERO100 Transformation.

• During the year, RGT complex received 20 cargoes from all

over the world. The RGT Minimum Send Out Capability

Improvement (RGTEC) initiative to optimise the overall gas supply chain of PETRONAS and enhance plant reliability and availability was progressing at 96.9% and is expected

to be fully completed by quarter two of 2017.

• RGT recorded revenue of RM631.1 million, slightly

decreased by RM6.0 million (0.9%) from FY2015, attributed

to downward revision of Floating Storage Unit (FSU) OPEX

charter hire which was a pass through to PETRONAS.

• RGT registered gross profit of RM286.3 million, a slight

decline by RM11.2 million (3.8%) from FY2015 as a result of

lower revenue and higher repair and maintenance to

improve the assets integrity.


3.8%RM286.3GROSS

PROFIT million

86.1%

13.9%

contribution to

PGB Group

13.9%Regasification

Gross Profit

decrease in gross profit attributed to lower

revenue and higher operating costs.

BOIL OF GAS COMPRESSOR

SUCTION DRUM

METERING SKID

PROPANE PUMP

RECONDENSOR

HIGH PRESSURE PUMPS A/B

LOW PRESSURE BOOSTER PUMPS

A/B/C

1 2

34

5

LNG FROM

FSU

WITH

130,000M3

CAPACITY

EACH

NATURAL

GAS TO PGU

NATURAL GAS TRIM HEATER

LNG EVAPORATOR

BOIL OF GAS COOLER

PROPANE TANK

PROPANE EVAPORATOR

A/B/C

PROPANE PRE-HEATER

Measure natural

gas quality and

quantity

Acts as buffer tank to

transfer LNG from FSU to

Low Pressure Booster

Pumps.

Transfer LNG to Recondensor

by increasing the pressure.

Transfer LNG to Regas Train

by increasing the pressure.

Convert LNG into natural gas using propane and seawater

Legend

LNG/natural gas

Boil of Gas (BOG)

Sea water

Propane

Propane system

Product

SEA WATER

PAGE: 156

PETRONAS GAS BERHAD

RGT is operated by our Gas Transmission and Regasification

(GTR) Division. We operate and maintain our offshore liquefied

natural gas (LNG) Regasification Terminal in Sungai Udang,

Melaka (RGTSU), which began commercial operations in the

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 into gas before injecting it into the Peninsular Gas

Utilisation (PGU) pipeline network for distribution to PETRONAS

customers.

PGB receives regasification fee based on capacity underwritten

from the 20-year Regasification Services Agreement (RSA) with

PETRONAS.

The commissioning of RGTSU in 2013 paved way for the

importation of LNG to cater the increasing gas demand in

Malaysia.

Regas Terminal (Sg. Udang) Sdn Bhd will also be the operator

of the LNG Regasification Terminal in Pengerang, Johor (RGTP),

which is still under construction and targeted for commercial

operation by quarter four of 2017.

WHO WE ARE

TRAIN 1/2/3

Simplified Flow Diagram of LNG Regasification Facilities

BUSINESS REVIEW – REGASIFICATION


PAGE: 157

ANNUAL REPORT 2016

BUSINESS MODEL

REVENUE STRUCTURE

• Fees governed by our

RSA consist of:

• Regasification fee

• Throughput fee

• Storage fee

COST STRUCTURE

• Operating costs

– repair and maintenance,

material and supplies

and purchased sevices.


ASSETS

• Offshore RGTSU

• A 27 km onshore and

3 km offshore pipeline

• Two leased floating

storage units.

ACTIVITIES

• Receiving vessels carrying

LNG imported by

PETRONAS from around

the world which

subsequently stored into

floating storage units.

• The LNG is then

converted to gas through

regasification process

before being injected into

the PGU pipeline network

for distribution to

PETRONAS’ customers.

KEY RESOURCES

• 94 employees from both

technical and non-

technical background


female employees.

OUTPUT*

• Regasified LNG which is

subsequently injected into

PGU system.

CUSTOMER

• PETRONAS, which fully

underwrites the capacity

of our facilities.

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

PAGE: 158

PETRONAS GAS BERHAD



RGT is committed to exhibit






Framework at all times and to




RGT is determined to increase its

efforts to instill safety-at-heart in

all members of our workforce to


Company’s assets.


through implementation of Hearts

and Minds programme which

integrates and complements all

other ongoing efforts in uplifting

RGT to a generative safety culture

and to facilitate lasting behavioural

change.



RGT strives to elevate its OEE for

equipment reliability, which would

translate into 100% product

delivery reliability to our

customers.


RGT is committed to improve and

sustain our facilities operational

performance in optimising the value

delivered to our stakeholders.


Optimum cost control and asset reliability

RGT is dedicated to minimise

value leakages and improve overall

asset reliability, which would

translate into higher returns to its

shareholders.


RGT is committed to utilise energy


energy per unit cost of

regasification, which would

translate into lower regasification

cost and reduction in overall

energy intensity and carbon

footprint.

Value optimisation on strategic growth in gas infrastructure

RGT is determined to pursue,


ventures within the core

competencies of the Company to




RGT is focused on implementing a


strategy across all of its projects,



BUSINESS STRATEGY



Cost Reduction

PAGE: 159

ANNUAL REPORT 2016


In line with the PGB Transformation

programme, RGT is committed to

undertake activities under Key

Strategic Thrusts on Assets, System

& Process and People & Culture.

RGT is committed to improve

asset reliability and availibilty

through the implementation of

KRA to eliminate the Bad Actors.

In FY2016, RGT completed various

KRA activities, which have enabled

RGT in sustaining its overall asset

reliability and availability, such as:

• Resolution of Low Temperature

and Maximise Capacity

• Enhancement of Propane Pump

Reliability

• Nitrogen Supply and Air

Compressor Enhancement

RGT MANAGED ITS RISKS

VIA ENTERPRISE RISK



MANAGEMENT (PFRM).

UNDER ERM AND PFRM,



MONITORED AND

REPORTED TO THE

DIVISION PLANT

LEADERSHIP TEAM (PLT)

AND PGB’S RISK

COMPLIANCE COMMITTEE

(RCC).

General key risk areas facing by RGT

are mainly in relation to HSSE and

failure of seawater outlet which

affecting RGT operations.

Mitigations for each risks have been

assigned to respective key risk owners

in reducing and eliminating the risks

associated with business, HSSE and

operations. The mitigations have been

implemented through HSSE and

Process Safety Management (PSM)

enhancement programmes and further

strengthening Balance of Consequence

Management and to conduct the study

on overall main seawater system

vibration.

The RGT Barometer Survey 2016


staff’s commitment and cultural shift

indicating progressive improvement

in the 3ZERO100 Transformation

journey recently completed.







PAGE: 160

PETRONAS GAS BERHAD


RGT received 20 LNG

cargoes and RGT OEE stood

at 100%, significantly improved its

performance as compared to

FY2015.

Notwithstanding that, RGT has

eliminated Bad Actors and the

positive impact of this was

reflected in the reduction of

facilities trips. We also

strengthened RGT’s HSSE and

operational compliance through

various assurance programmes.

RGT has successfully completed

internal LNG Regasification

modules under Transmission

Academy encompassing operations,

mechanical, electrical and

instrumentation development for

RGT. A total of eight Competency

Based Training sessions have been

conducted for RGT staff

encompasses of 30 newly

developed RGT specific modules

which contributes to overall 1,651

training mandays recorded for RGT

in 2016.

Projects Delivery

• Resolving Bad Actors such as

Resolution of Low Temperature,

Enhancement of Propane Pump

Reliability as well as Nitrogen

Supply and Air Compressor

Enhancement improved

reliability and availability and

eliminated potential downtime

and tripping numbers.

• RGTEC is progressing at 96.9%,

expected to be completed in

quarter two of 2017.

OUR LNG REGASIFICATION TERMINAL IN SUNGAI UDANG, MELAKA ACHIEVED ITS BEST

EVER PERFORMANCE WITH 98.4% RELIABILITY AND 100% OEE. MEANWHILE, OUR

SECOND LNG REGASIFICATION TERMINAL PROJECT IN PENGERANG IS PROGRESSING

WELL AND IS EXPECTED TO BE COMMISSIONED BY END 2017.

• Completion of Key Strategic Thrusts of People & Culture such

as Transmission Academy and Root Cause Failure Analysis

(RCFA) Leaders Programmes.

• Increased productivity with implementation of Work Process

(WP) and higher operating discipline with Operational Excellence

Management System (OeXMS) implementation.

WHAT WE DID TO ACHIEVE 3ZERO100 TRANSFORMATION TARGETS

OPERATIONS

Regasification Performance



BURHAN ABDULLAHHead of Gas Transmission and

Regasification Division

PAGE: 161

ANNUAL REPORT 2016

FINANCIAL

RGT recorded stable revenue of

RM631.1 million, contributing about

13.8% to the Group’s revenue.

RGT’s gross profit was RM286.3 million,

a decrease of RM11.2 million or 3.8%

from the previous year. The lower

gross profit was mainly due to lower

revenue and higher operating costs

mainly on repair and maintenance to

improve assets integrity.

AWARD AND RECOGNITION

GTR won Silver Award for Culture

Downstream Operational Excellence

Forum Awards (DOEFA) 2016.

SUSTAINABILITY

Environment

RGT acknowledges the additional

responsibility to ensure its processes




its compliance with Environmental

Impact Assessments (EIA) and RGT

Environmental Management Plans such

as third party environmental audit,

quarterly ambient air and noise

boundary monitoring including semi-

annually stack emission monitoring.

Community

RGT is also responsible for sustaining

cohesive relations with the local

community through its Corporate

Social Investment (CSI) activities. RGT

has conducted a social programme in

July 2016 at Tanjung Kling with the

Leadership Team by meeting the

villagers and providing donations to 20

orphanages within Tanjung Kling

vicinity.

We anticipate the revenue for our

Regasification business will contribute

positively to the Group income and remain

sustainable on the back of capacity reservation

by PETRONAS under the RSA.

In line with the PGB Transformation

journey, RGT is expected to

continue improving its assets’

performance and enhancing WP

and OeXMS’ implementation to

improve productivity.

The development of our RGTP is on

track. The commissioning of RGTP

is anticipated in quarter three of

2017 and will be in full operations

by quarter four of 2017. The new

terminal will supplement the

business growth of PETRONAS’

Pengerang Integrated Complex (PIC)

and further strengthen security of

gas supply to the nation.

OUTLOOKWorkplace

RGT is committed to protect the health


provides conducive working

environment to staff and contractors

through various programmes such as:

• HSSE Stand Down to reflect the

HSSE Alert issues by PETRONAS.

• HSSE Programmes including safety

observation by each staff and

Hearts and Minds Programme to

inculcate the safety culture among

staff.

Marketplace

RGT focused to further strengthen its

relationship with stakeholders through

various activities which included a

series of engagement sessions to foster

a good rapport with authorities such as

Melaka State Chief Policies, Director of

Melaka Tengah Health Department and

State Director of Jabatan Bomba dan

Penyelamat Malaysia (JBPM).

06

CORPORATE GOVERNANCE

166 Corporate Governance Statement

181 Status of Observance with The

Principles and Recommendations

of The Malaysian Code on

Corporate Governance 2012

184 Statement on Risk Management

and Internal Control

198 Board Audit Committee Report

204 Nomination and Remuneration

Committee Report

210 Business Continuity Management

212 Internal Policies

THE BOARD OF DIRECTORS

(THE BOARD) OF PETRONAS

GAS BERHAD (PGB OR THE

COMPANY) BELIEVES THAT

EXCELLENCE IN

CORPORATE GOVERNANCE

STANDARDS

DEMONSTRATES THE

COMMITMENT BY THE

BOARD TO ACHIEVE THE

HIGHEST STANDARDS OF

PROFESSIONALISM AND

BUSINESS ETHICS ACROSS

THE COMPANY’S

SPECTRUM OF ACTIVITIES.

THE BOARD

ACKNOWLEDGES THAT

IT IS A FORM OF

SELF-REGULATION WHICH

IS AIMED AT ENHANCING

BUSINESS PROPOSITIONS

AND MAXIMISING

SHAREHOLDERS’

VALUE AND PROTECT

STAKEHOLDERS’ INTERESTS.

This Corporate Governance Statement

seeks to provide investors with vital

insights into the corporate governance

practices of PGB. In this statement, the

Board reports on the manner the

Group has adopted and applied the

principles and best practices as set out

in the Main Market Listing

Requirements (MMLR) of Bursa Malaysia

Securities Berhad (Bursa Malaysia), the

Malaysian Code on Corporate

Governance 2012 (MCCG 2012) and

the Minority Shareholder Watchdog

Group (MSWG).

BOARD OF DIRECTORS

Principal Roles and 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 its shareholders as well as to safeguard the Company’s assets.

In discharging its fiduciary and leadership functions, the roles and responsibilities of

the Board are, inter alia, as follows:

THE BOARD’S MAIN FUNCTIONS

STRATEGY FORMULATION

MONITORING AND SUPERVISING EXECUTIVE ACTIVITIES

POLICY MAKING

PROVIDING ACCOUNTABILITY

• Reviewing, approving and monitoring the strategic business plans, goals and

key policies proposed by the Management to ensure sustainability and

optimisation of long term returns.

• Identifying, continuously assessing and managing the principal risks affecting

PGB Group and the implementation of an effective system of internal controls,

mitigation measures and risk management;

• Overseeing the conduct and the performance of the Management as well as

PGB Group’s businesses;

• Overseeing the appropriate succession plan for members of the Board and

Management; and

• To review the adequacy and integrity of the Company’s internal systems including

systems for compliance with applicable laws, regulations, rules and guidelines.

• To ensure that appropriate policies are in place, adopted effectively and are

regularly reviewed in light of the changing circumstances.

• Policies are normally developed by the Management and where appropriate, be

approved by the Board. In some situations, the Board may set the policies

themselves.

• In other cases, the Board may delegate the policy making to the Managing

Director/Chief Executive Officer (MD/CEO) and the Management.

• The Board is accountable to its members or shareholders. The Board may

have some accountability towards a wider range of stakeholders affected by

PGB’s decision such as employees, suppliers, customers, the local community

and the state where PGB is operating.

IR9 Our Board has exhibited an exemplary responsibility towards promoting good governance as explained

in the Board Charter on page 167.

PAGE: 166

PETRONAS GAS BERHAD

CORPORATE GOVERNANCE STATEMENT

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 Board Charter shall be periodically

reviewed and updated from time to

time to reflect relevant changes to

policies, procedures and processes as

well as amendments to rules and

regulations.

On 2 November 2016, the Board

reviewed and approved revisions to the

Board Charter, which included

delineating the roles of the Chairman

and MD/CEO and updating various

provisions to ensure the document

remains relevant and consistent with

applicable rules and regulations and

recommended best practices.

The Board Charter is accessible to

the public for reference on the

Company’s official website at

www.petronasgas.com.

Composition of the Board

The Board currently comprises seven

members, one of whom holds an

Executive Office, having a dual role as

Managing Director as well as Chief

Executive Officer. There are three

members who are independent and

non-executive and three other non-

independent and non-executive

members, including the Chairman. In

addition, none of the Board Members

is a former MD/CEO of PGB in the last

two years.

In accordance with the Board Diversity

Policy and in line with the Country’s

aspirational target of 30%

representation of women, the Board is

pleased to report that female directors

currently represents 43% of its

composition.

As at the date of this Annual Report,

the Board composition is as follows:

Executive Director(MD/CEO)

1 out of 7

Independent Non-Executive Directors 3 out of 7

Non-Independent Non-Executive Directors(including Chairman)

3 out of 7

14%43%

43%

Board composition

The composition of the Board exceeds

the requirements of Paragraph 15.02 of

the MMLR as more than one-third of

its members are Independent Non-

Executive Directors. This composition

enables an effective and objective

check and balance on the Board’s

deliberation and decision making. The

presence of the Independent Non-

Executive Directors is also crucial in

the mitigation of any possible conflict

of interest in relation to related party

transactions.

During the financial year under review,

the Board underwent a few changes in

its composition following the

retirement of Datuk Rosli Boni and

resignation of Ir Pramod Kumar

Karunakaran. They vacated their

positions as Directors of the Company

effective 1 September 2016. Datuk Rosli

Boni and Ir Pramod Kumar Karunakaran

are succeeded by Emeliana Dallan

Rice-Oxley and Wan Shamilah Wan

Muhammad Saidi, whose profile are

available on pages 45 and 46 of this

Annual Report.

As at the date of this Annual Report

and as announced to Bursa Malaysia,

on 2 November 2016 and 9 December

2016 respectively, Lim Beng Choon,

Dato’ N. Sadasivan N.N. Pillay and Tan

Sri Dato’ Seri Shamsul Azhar Abbas also

ceased to be Directors of the

Company effective 1 January 2017.

IR9

PAGE: 167

ANNUAL REPORT 2016

Lim Beng Choon has been succeeded by an Independent Non-Executive Director, Heng Heyok Chiang @ Heng Hock Cheng

whilst Tan Sri Dato’ Seri Shamsul Azhar Abbas has been succeeded by Datuk Mohd Anuar Taib as the new Chairman on 1

January 2017. PGB is currently evaluating potential candidates to replace Dato’ N. Sadasivan N.N. Pillay. The Board wishes to

extend its gratitude to the outgoing Directors for their outstanding contribution and services during their tenure as Directors

of PGB.

The Directors are selected based on their individual merits and experience. The current Board’s composition comprises

individuals of diverse backgrounds with expertise and skills in the oil and gas industry, economics, engineering/technical,

finance, operations and corporate planning. The current Board’s composition has the adequate size and diversity of age,

gender and ethnicity. These are important to ensure diversity of views, facilitate effective decision making and constructive

Board deliberation during its meetings.

The profile of each Director is presented on page 41 to page 47 of this Annual Report.

Skill and Experience Matrix of The Board of Directors

* Required Skills and/or Experience

Datuk Mohd Anuar Taib

Yusa’ Hassan

Habibah Abdul

Dato’ Ab. Halim

Mohyiddin

Emeliana Dallan

Rice-Oxley

Wan Shamilah

Wan Muhammad

Saidi

Heng Heyok Chiang @

Heng Hock Cheng

Finance/Audit

Economics

Engineering/Technical

Commercial/Marketing

Operations

Corporate Planning

and Development

Human Resource

Oil and Gas

Banking and Finance

Shipping/Logistics

Regional/International

* Includes tertiary and professional experience.

IR9 The Board has an appropriate mix of skills and experience to effectively govern and steer the direction of the Company.


PAGE: 168

PETRONAS GAS BERHAD

The Non-Executive Directors possess

the necessary expertise and experience

to ensure that the strategies proposed

by the Management are fully

deliberated and examined, taking into

account the long term interests of the

shareholders and stakeholders. They

contribute to the formulation of policy

and decision making through their

expertise and experience. They also

provide guidance and promote

professionalism and competence

among Management and employees.

The Independent Non-Executive

Directors do not participate in the

day-to-day management of the Group

and do not engage in any business

dealing or other relationship with any

companies within the Group. The

Independent Non-Executive Directors

play a significant role in providing

unbiased and independent views,

advice and judgment taking into

account the interest of relevant

stakeholders including minority

shareholders of the Group. For the

financial year under review, the


have reaffirmed their independence

based on the criteria of Independent

Non-Executive Directors as provided in

the MMLR.

In accordance with the MMLR, none of

the members of the Board holds more

than five directorships in listed

companies.

Prior to acceptance of any other

appointment for directorships in other

listed companies, the Directors are

required to first notify the Chairman to

ensure that such appointments would

not unduly affect their time

commitments and responsibilities to

the Board.

Chairman and MD/CEO

There is clear demarcation of duties

and responsibilities between the

Chairman, MD/CEO and Non-Executive

Directors to ensure a balance of power

and authority. The positions of

Chairman and MD/CEO are held by

two different individuals.

The Chairman is primarily responsible

for the stewardship and smooth

functioning of the Board, whilst the

MD/CEO is responsible for the overall

operations of the business,

organisational effectiveness and the

implementation of the Group’s

strategies and policies. Given the

Company’s synergetic business

operational integration with Petroliam

Nasional Berhad (PETRONAS), the

Chairmanship of the Company remains

with a Non-Independent Non-Executive

Director.

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

Leadership Team (LT). The LT ensures

that effective systems, controls and

resources are in place to execute

business strategies and decisions taken

by the MD/CEO and/or the Board.

Senior Independent Director

Habibah Abdul who fulfils the criteria

under the definition of Independent

Director pursuant to MMLR is the

Senior Independent Director of the

Company (SID). As a SID, she acts as

the main liaison between the


and the Chairman on matters that may

be deemed sensitive and also provides

an alternative communication avenue

for shareholders and stakeholders to

convey their concerns and raise issues

so that these can be channeled to the

relevant parties.

All queries relating to the Group can

be channeled to the following address:

Habibah AbdulSenior Independent Director

PETRONAS Gas Berhad

Level 51, Tower 1,

PETRONAS Twin Towers

Kuala Lumpur City Centre

50088 Kuala Lumpur

Email address:

[email protected]

PAGE: 169

ANNUAL REPORT 2016

Roles of Chairman, MD/CEO and Senior Independent Director

Chairman

(i) Leading the Board in setting the

values and ethical standards of

PGB.

(ii) Chairing the Board meetings and

stimulating debates on issues and

encouraging positive contributions

from each Director.

(iii) Consulting with the Company

Secretary in setting the agenda for

board meetings and ensuring that

all relevant issues are on the

meetings’ agenda.

(iv) Maintaining a relationship of trust

with and between the MD/CEO

and Non-Executive Directors.

(v) Ensuring the provision of accurate,

timely and clear information to

Directors.

(vi) Ensuring effective communication

with shareholders and relevant

stakeholders.

(vii) Conducting performance

assessment of the Board, its

Committees and individual

directors, including assessment of

the independence of Independent

Non-Executive Directors.

(viii) Facilitating effective contribution of

Non-Executive Directors and

ensuring constructive discussions

at Board meetings.

(ix) Ensuring that all Directors are

properly apprised on issues arising

at Board meetings and there is

sufficient time allowed for

discussion on complex or

contentious issues and where

appropriate, arranging for informal

meetings beforehand to enable

thorough preparations.

(x) Allowing every Board resolution to

be voted on and ensuring the will

of the majority prevails.

(xi) Casting his votes in accordance

with the prescribed Articles in the

Constitution of the Company.

(xii) Ensuring that all Board Members,

upon taking up their office, are

fully-briefed on the terms of their

appointment, time commitment,

duties and responsibilities, and the

business of PGB.

(xiii) Acting as liaison between the

Board and Management, and

between the Board and the

MD/CEO.

MD/CEO

(i) With regard to the Board and PGB:

(a) To develop and recommend

to the Board the long term

strategy and vision for PGB

and/or Group that leads to

the creation of long term

prosperity and stakeholder

value.

(b) To develop and recommend to

the Board the operational plan

and budget that support PGB’s

and/or Group’s long term

strategy.

(c) To foster a corporate culture

that promotes ethical

practices, encourages

individual integrity and the

fulfilment of PGB’s corporate

social responsibilities.

(d) To maintain a positive and

ethical working environment

that is conducive to attracting,

retaining and motivating a

diverse workforce at all levels.

(ii) With regard to the Management

and business operation:

(a) To recommend suitable

management structure and

operating authority levels

which include delegations of

responsibilities to the

Management.

(b) To ensure an effective LT

below the level of the

MD/CEO and to develop an

appropriate succession plan.

c) To formulate and oversee

implementation of major

corporate policies.

d) To be accountable to the

Board for the financial

management and reporting,

including forecasts and

budgets of PGB.

(e) To make reports to the Board

periodically on its financial

positions, key performance

indicators and business

development from time to

time.

(f) To ensure continuous

improvement in quality and

value of PGB’s products and

services.

(g) To serve as spokesperson for

PGB.

IR9 Specific actions and role of the Senior

Management are highlighted above.

PAGE: 170

PETRONAS GAS BERHAD


Senior Independent Director

The SID acts as the point of contact between the Independent Non-Executive Directors and Chairman on sensitive issues

and has been identified as a designated contact to whom shareholders’ concerns or queries may be raised, as an alternative

to the formal channel of communication with shareholders.

Board Diversity

The Board recognises that diversity is one of the key drivers to enhance the Board’s effectiveness as diversity broadens the

debate within the Board. In August 2016, the Board approved the Diversity Policy whose objective is to ensure that the mix

and profiles of the Board Members, in terms of age, ethnicity and gender, provide the necessary range of perspectives,

experience and expertise required to achieve effective stewardship and management.

As at the date of this Annual Report, all of the seven Directors are Malaysian. Of the total, five are Malay; one Chinese and

the other is of an Anglo-Bisaya ethnicity. On the other hand, the Board is made up of four male Directors while the

remaining are females.

The current Board’s age distribution falls within the respective age groups as follows:

The Board Diversity Policy is accessible to the public for reference on PGB’s official website at www.petronasgas.com.

4

1

2AG

E G

RO

UP 40-54

55-64

65-74

Number of Directors

IR9 The Board diversity is highlighted above.

PAGE: 171

ANNUAL REPORT 2016

Board Meetings

The Board meets at least quarterly with additional meetings convened as and when necessary. The Board meetings for the

2016 financial year are scheduled in November 2015 to facilitate the Directors in planning ahead and incorporating the Board

meetings into their respective schedules. This also serves to provide the members with ample notice of the meetings.

The Board has a formal schedule of matters reserved at Board meetings which includes corporate plans, annual budgets,

operational and financial performance reviews, major investments and financial decisions, management performance

assessment, changes to the management and control structure within the Group, including key policies and procedures and

delegated authority limits. The reports of the Board Audit and Nomination and Remuneration Committees are also presented

and deliberated at Board meetings. All proceedings of Board meetings are duly recorded in the minutes of each meeting and

signed minutes of each Board meeting are properly kept by the Company Secretary.

During the financial year under review, the Board met in total of five times. All Directors complied with the minimum

attendance requirement of at least 50% of Board meetings held during the financial year pursuant to the MMLR.

The breakdown of the meetings of the Board Committees and Annual General Meeting held and the attendance of the

Directors who had served PGB during the financial year under review, are as follows:

Board ofDirectors’ Meetings

Board Audit Committee

Meetings

Nomination and Remuneration

Committee Meetings

Annual General Meeting

Name of Directors Att

end

ance

Per

cen

tag

e

Att

end

ance

Per

cen

tag

e

Att

end

ance

Per

cen

tag

e

Att

end

ance

Per

cen

tag

e

Tan Sri Dato’ Seri Shamsul Azhar Abbas*** 5/5 100 1/1 100

Yusa’ Hassan 5/5 100 1/1 100

Dato’ N. Sadasivan N.N. Pillay*** 5/5 100 4/4 100 2/2 100 1/1 100

Datuk Rosli Boni** 4/4 100 3/3 100 1/1 100

Dato’ Ab. Halim Mohyiddin 5/5 100 4/4 100 1/1 100

Ir. Pramod Kumar Karunakaran** 4/4 100 1/1 100

Lim Beng Choon***# 5/5 100 3/3 100 2/2 100 1/1 100

Habibah Abdul# 5/5 100 3/3 100 2/2 100 1/1 100

Emeliana Dallan Rice-Oxley* 1/1 100 1/1 100

Wan Shamilah Wan Muhammad Saidi* 1/1 100

* Appointed on 1 September 2016

** Vacated office on 1 September 2016

*** Vacated office on 1 January 2017# Appointed as Board Committee members on 24 February 2016

The Board’s strategic conversation with the LT of PGB was held on 13 September 2016 to deliberate on the market outlook,

external environment analysis and the Group’s strategic and growth plans.

PAGE: 172

PETRONAS GAS BERHAD


Dealing in Shares

On a quarterly basis, the Company

Secretary issued a Notice of Closed

Period to Directors and Management,

highlighting the requirements with

regard to dealing in the Company’s

shares during the “Closed

Period”/”Outside Closed Period” as they

are in a possession of price sensitive

information relating to PGB.


none of the Directors and the

Management of PGB have any dealing

in shares during the “Closed Period”.

Supply and Access to Information

Prior to each Board meeting, the

agenda and a set of board papers

encompassing qualitative and

quantitative information relevant to the

business of the meeting are circulated

to all Directors within five business

days of the meeting dates. This enables

the Directors to have sufficient time to

peruse the board papers and seek

clarification or further details from the

Management or the Company Secretary

before each meeting to ensure

preparedness for the meeting. Any

Director may request matters to be

included in the agenda. Urgent papers

may be presented and tabled at a

meeting under the item Any Other

Business, subject to the approval of

both the Chairman and MD/CEO. The

content of the board papers are

comprehensive and include objectives,

background, critical issues, implications,

risks, strategic fit, recommendations

and other pertinent information to

enable informed decision making by

the Board.

Presentations and briefings by the

Management and relevant external

consultants, where applicable, are also

held at Board meetings to advise the

Board. In this regard, relevant

information is furnished and

clarification given to assist the Board in

making a decision.

Access by the Board to board papers is

carried out online through a

collaborative software which allows the

Directors to securely access Board

documents and collaborate with other

Board Members and the Company

Secretary electronically. The online

accessibility facilitates the Directors to

read and review documents or

communicate with other Board

Members at any time.

The Directors have direct access to the

Management and have unrestricted

access to any information relating to

the Group to enable them to discharge

their duties. The Directors also have

direct access to the advice and services

of the Company Secretaries and are

regularly updated on new statutory and

regulatory requirements relating to the

duties and responsibilities of the

Directors. The Directors, whether as a

full Board or in their individual capacity,

may seek independent professional

advice at the Company’s expense in

furtherance of their duties.

Board Committees

To assist the Board in discharging its

duties, the Board has established two

Board Committees namely the Board

Audit Committee (BAC) and the


Committee (NRC). The reports of these

Committees can be found on pages

198 to 209 of this Annual Report.

Continuing Development Programme for Directors

All the Directors except for Datuk

Mohd Anuar Taib and Wan Shamilah

Wan Muhammad Saidi have attended

the Mandatory Accreditation

Programme (MAP) as required under

the MMLR of Bursa Malaysia.

Datuk Mohd Anuar Taib and Wan

Shamilah Wan Muhammad Saidi will

complete the MAP on 6-7 April 2017

and 20-21 February 2017 respectively.

The Directors are regularly updated on

the Group’s businesses and the

competitive and regulatory environment

in which the Group operates. As an

integral part of orientation programme

for new directors, the Company

provides comprehensive briefings on

the Group’s operations and financial

performance as well as site visits to the

Group’s projects and facilities.

In line with Recommendation 4.2 of

the MCCG 2012, the Directors

recognise the importance and value of

attending conferences, training

programmes and seminars in order to

keep themselves abreast with the

development and changes in the

industries in which the Group operates,

as well as to update themselves on

new statutory and regulatory

requirements. During the financial year

under review, the Directors attended

and participated in programmes,

conferences and seminars that covered

the areas of corporate governance,

financial, relevant industry updates and

global business developments which

they considered as useful in

contributing to the effective discharge

of their duties as directors. The

Directors also participated in a

familiarisation visit to PGB’s project site

situated at Pengerang, Johor.

PAGE: 173

ANNUAL REPORT 2016

During the financial year under review, the Directors participated in seminars and training programmes in various capacities

as delegates and/or speakers, the details of which are set out below:

Attendee(s) Training/Conferences Date

Tan Sri Dato’ Seri

Shamsul Azhar Abbas

1. Sustainability Engagement Series for Directors and CEOs

2. Site Visit at Pengerang Integrated Complex (PIC) Pengerang, Johor

– Overview of LNG Regasification Terminal (RGT) and Air Separation

Unit (ASU) Projects

3. 5th PETRONAS BAC Forum 2016

4. MISC Berhad Board Annual Training

– Ethics and Compliance

– Financial Reporting – Updates on Changes in Reporting Standards.

31 March 2016

23 July 2016

16 August 2016

11 November 2016

Yusa’ Hassan 1. Daiwa Investment Conference 2016

2. Invest Malaysia 2016 “Leadership Think LAB”

3. Briefing on Securities Commission Malaysia Annual Report 2015

4. Strategic Insights Forum with IHS

5. Sustainability Engagement Series for Directors and CEO

6. Site Visit at PIC Pengerang, Johor

– Overview of RGT and ASU Projects

3 – 4 January 2016

10 March 2016

10 March 2016

22 April 2016

1 June 2016

23 July 2016

Dato’ N. Sadasivan

N.N. Pillay


2. The Interplay between CG, NFI and Investment Decision – What

Boards of Listed Companies Need to Know

3. Related Party Transactions

– Their Implications to the Board of Directors, Audit Committee &

Management

16 August 2016

28 September 2016

25 October 2016

Datuk Rosli Boni 1. Site Visit at PIC Pengerang, Johor


23 July 2016

Ir. Pramod Kumar Karunakaran 1. Site Visit at PIC Pengerang, Johor


23 July 2016

Dato’ Ab. Halim Mohyiddin 1. Corporate Governance Breakfast Series

– Future of Auditor Reporting

– The Game Changer for Boardroom

2. Independent Directors Programme: The Essence of Independence

3. MFRS Update 2016 (Run 2)

4. Annual Planning Forum


– Overview of RGT and ASU Project


6 March 2016

23 March 2016

28 March 2016

13 July 2016

23 July 2016

16 August 2016

Lim Beng Choon 1. Sustainability Engagement Series for Directors and CEOs




4. MISC Berhad Board Annual Training

– Ethics and Compliance

– Financial Reporting – Update on Changes in Reporting Standards

31 March 2016

23 July 2016

16 August 2016

11 November 2016

Habibah Abdul 1. Site Visit at PIC Pengerang, Johor


2. Tax Budget by Ernst & Young

3. Conference – Malaysian Institute of Accountants

23 July 2016

27 October 2016

15 – 16 November 2016

Emeliana Dallan Rice-Oxley 1. Mandatory Accreditation Programme (MAP) 13 – 14 October 2016

Wan Shamilah

Wan Muhammad Saidi

1. Advanced 1: Best Practices for Board Excellence Programme

2. Advanced 2: Effective Strategy for Stakeholders Management

3. Advanced Management Programme, Harvard School

3 August 2016

17 October 2016

28 March – 20 May 2016

PAGE: 174

PETRONAS GAS BERHAD


Re-appointment and Re-election

In accordance with Article 93 of the

Constitution of the Company, at every

Annual General Meeting (AGM),

one-third of the Directors shall retire

from office by rotation and may offer

themselves for re-election. The

Constitution of the Company also

provides that all Directors are subject

to retirement by rotation at least once

in every three years and shall be

eligible for re-election. Directors who

are appointed by the Board during the

financial year are subject to re-election

by shareholders at the first AGM held

following their appointments.

The Companies Act 2016, has now

replaced the Companies Act 1965

effective 31 January 2017. With the

enforcement of the new Act, the

Companies Act 1965 was therefore

repealed. Previously, under section 129

of the Companies Act 1965 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-fourths

majority. Pursuant to new Companies

Act 2016 Directors who attain the age

of more than 70 years are no longer

required to retire at the AGM of the

Company.

Recommendations 3.2 and 3.3 of the

MCCG 2012, states that the tenure of

an Independent Non-Executive

Directors should not exceed a

cumulative term of nine years. Upon

completion of the nine years, an

Independent Non-Executive Director

may continue to serve on the Board

subject to the directors’ re-designation

as a Non-Independent Director or the

Board must justify and seek

shareholders’ approval in the event it

retains the Director as an Independent

Director.

For the financial year under review,

none of PGB’s Independent Director

has exceeded the nine years tenure.

Board Effectiveness Evaluation

The Company conducts an annual

evaluation of the effectiveness of its

Board and Committees. It comprises a

Board Evaluation, a Committee

Evaluation, Board Skills and

Competency Mapping and Individual

Director Self and Peer Evaluation

(Board Evaluation). The purpose of the

Board evaluation is to measure the

effectiveness of the performance of the

Board and Committees as a whole and

the Directors individually as well as to

address the Board’s and Committees’

attention on areas for improvement as

part of discharging each members’ role

as a Director of the Company. The

Board Evaluation also addresses the

Board’s and each Committee’s

attention on areas for improvement as

part of discharging his/her role as a

Director of PGB.

The questionnaires on the Board

Evaluation are prepared internally

incorporating applicable best practices.

The indicators for the performance of

the Board include factors such as

conduct, participation and

communication with the Management

and stakeholders as well as overall

strategy and planning for the Company.

The performance indicators for

individual Directors include roles,

leadership and contribution to the

Company.

Upon completion of the evaluation by

the Directors, the Company Secretary

collates and analyses the feedback

received. The analysis conducted is

presented to the NRC for deliberation.

In addition, the Chairman may conduct

individual feedback sessions with the

Board Members with a view to

enhance strengths and discuss areas

for improvement.

For the financial year under review, a

Board evaluation was undertaken with

the Board providing its feedback and

assessment on the performances of

both the MD/CEO and the Chairman.

From the Board Evaluation, it was

noted that the MD/CEO and

Chairman’s roles were balanced and

linked to the current strategy and

future aspirations of the Company.

Directors’ Fees

The fees structure of Non-Executive

Directors of the Company consists of

the following:

• Fees for duties as Directors and

additional fees for undertaking

responsibilities as Chairman of the

Board;

• Meeting allowances for each

meeting attended;

• Fuel allowance; and

• Directors and Officers Liability

Insurance.

The fees and allowances for Non-

Executive Directors are determined by

the Board and are subject to the

approval of the shareholders of the

Company at the AGM. The review of

Directors’ fees and allowances is under

the purview of the NRC before any

recommendation is tabled to the Board.

The Director’s fees and meeting

allowances for certain Non-Independent

Non-Executive Directors who are also

employees of PETRONAS and holding

positions of Vice President and above

are paid directly to PETRONAS. The

presence and participation of the

Non-Independent Non-Executive

Directors who are employees of

PETRONAS provide the Board with a

deeper insight into the operations of

PETRONAS.

PAGE: 175

ANNUAL REPORT 2016

Pursuant to Article 84 of the Constitution of the Company, PGB also reimburses reasonable expenses incurred by Directors,

where relevant, in the course of carrying out their duties as Directors.For the financial year under review, the breakdown of

the Directors’ fees is as follows:

Name of Directors

Directors’ Fees(RM)

Board Meeting

Attendance Fees^ (RM)

Audit Committee

Meeting Attendance

Fees^

(RM)

Nomination and

Remuneration Committee

Meeting Attendance

Fees^

(RM)AGM(RM)

Others**

(RM)Total

(RM)

Tan Sri Dato’ Seri

Shamsul Azhar Abbas 108,000 20,000 N/A N/A 4,000 6,000 138,000

Yusa’ Hassan N/A N/A N/A N/A N/A N/A N/A

Dato’ N. Sadasivan N.N.

Pillay 72,000 15,000 9,000 4,000 3,000 6,000 109,000

Datuk Rosli Boni 48,000 12,000 6,000 N/A 3,000 6,000 75,000

Ir Pramod Kumar

Karunakaran

36,000

12,000

6,000

6,000 N/A N/A

3,000

1,000

45,000*

19,000

Dato’ Ab. Halim

Mohyiddin 72,000 15,000 8,000 N/A 3,000 6,000 104,000

Lim Beng Choon 72,000 15,000 6,000 6,000 3,000 3,000 105,000

Habibah Abdul 72,000 15,000 9,000 4,000 3,000 6,000 109,000

Emeliana Dallan Rice-

Oxley 24,000 3,000 2,000 N/A N/A N/A 29,000*

Wan Shamilah Wan

Muhammad Saidi 24,000 3,000 N/A N/A N/A N/A 27,000

Total 540,000 110,000 40,000 14,000 22,000 34,000 760,000

* Fees paid to PETRONAS

** Others includes petrol/fleet card.

^ Meeting attendance fees are based on the number of meetings attended by the Directors.

PAGE: 176

PETRONAS GAS BERHAD


The remuneration package for the

Executive Director of the Company is

balanced between fixed and

performance linked elements. A portion

of the Executive Director’s

compensation package is variable in

nature and is Key Performance

Indicator (KPI) driven, which includes

the Group’s performance. As an

Executive Director, he is not entitled to

receive Directors’ fees as well as

meeting allowance.

Yusa’ Hassan, the MD/CEO and an

Executive Director of the Company, is

an employee of PETRONAS and is

seconded to the Company. In

consideration of the service of the

MD/CEO, the Company is required to

pay fee to cover all payroll-related costs

and benefits ordinarily incurred by him

in the course of his employment. During

the year, RM787,320 was paid for his

services as MD/CEO of the Company.

Management staff and executives of

PGB have also been seconded from

PETRONAS. Their training, succession

planning and performance appraisal are

aligned to the PETRONAS’ Human

Resources Policies and Strategies. The

Board ensures that only appropriate

personnel with the relevant skills and

experiences are appointed to the

Management positions of PGB.

The Directors’ fees are broadly categorised into the following bands:

Number of Directors

Range of Fees Executive Non-Executive

RM50,000 and below – 2

RM50,001 to RM100,000 – 2

RM100,001 to RM150,000 – 5

RM700,000 to RM1,000,000 1 –

IR5 The remuneration package is well balanced and directly linked to the Group performance. Read more

on our performance scorecard and key performance indicators from pages 102 to 107.

Fixed

Group Performance

Variable

PAGE: 177

ANNUAL REPORT 2016

RELATIONSHIP WITH SHAREHOLDERS

Communications between the Company and its investors

The Board recognises the importance of

effective communications with the

Company’s shareholders and other

stakeholders including the general

public. Information on the Group’s

business activities and financial

performance is disseminated timely

through announcements to Bursa

Malaysia, postings on the Company’s

website, press releases, issuance of the

Annual Report and where required,

press conferences. Immediately after the

conclusion of the AGM, the Company

will hold a press conference with the

media and any materials distributed

during the press conference are

published on the Company’s website.

The MD/CEO together with the Chief

Financial Officer and the Company’s

Investor Relations Unit conduct regular

dialogues with the Company’s

institutional shareholders and analysts,

and hold quarterly analysts briefings to

further explain the Group’s quarterly

financial results. This is to promote

better understanding of the Group’s

financial performance and operations.

Visits to the Group’s facilities are also

organised periodically to facilitate

better appreciation and insight into the

Group’s business and operations.

The Company actively updates its

website www.petronasgas.com

with the latest information on the

corporate and business aspects of the

Group. Press releases, announcements

to the Bursa Malaysia, analyst briefings

and quarterly results of the Group are

also made available on the website and

this helps to promote accessibility of

information to the Company’s

shareholders and all other market

participants. Communication and

feedback from investors can also be

directed to the email address

[email protected] or

alternatively, it can be addressed to:

Harris HarunHead Investor Relations

Level 51, Tower 1

PETRONAS Twin Towers

50088 Kuala Lumpur

Malaysia

Annual General Meeting (AGM)

The AGM is the principal forum of

open dialogue with shareholders. The

notice and agenda of the AGM

together with Forms of Proxy are given

to shareholders at least 25 days before

AGM, which gives shareholders

sufficient time to prepare themselves to

attend the AGM or to appoint proxies

to attend and vote on their behalf.

Each item of ordinary business

included in the notice of the AGM will

be accompanied by an explanatory

statement on the effects of the

proposed resolution. For the past two

years, 28 days’ notice were issued to

shareholders.

At each AGM, shareholders are

encouraged and given sufficient

opportunity as well as time by the

Board to raise questions on issues

pertaining to the Annual Report,

resolutions being proposed and the

business of the Company or the Group

in general prior to seeking approval

from members and proxies on the

resolutions. The Board, LT, external

auditors and other advisors, as

applicable are present at the AGM to

provide answers and clarifications to

shareholders. The Chairman informs on

the availability of poll voting via

electronic polling by shareholders on

matters raised during the AGM.

Pursuant to Paragraph 8.29A of the

MMLR, each resolution to be tabled at

an AGM is to be voted by poll.

Consequently, decisions at PGB’s AGM

scheduled to be held on 17 April 2017

will be conducted via electronic

polling. For this purpose, PGB will

engage independent scrutineers to

validate the voting at the AGM for each

proposal presented to shareholders.

ACCOUNTABILITY AND AUDIT

Financial reporting

The Board is committed to provide a

fair and objective assessment of the

financial position and prospects of the

Group in the quarterly financial results,

annual financial statements, Annual

Reports and all other reports or

statements to shareholders, investors

and relevant regulatory authorities.

The Statement of Responsibility by

Directors in respect of preparation

of the annual audited financial

statements is set out on page 22 of

the Financial Report.

PAGE: 178

PETRONAS GAS BERHAD


Related Party Transactions and Conflict of Interest Situations

All related party transactions including

recurrent related party transactions

entered into by the Company or its

subsidiaries are reviewed by the BAC.

The list of transactions entered into

with related parties are incorporated at

page 82 of the Financial Report.

The Company has established its

policies and procedures on related party

transactions and conflict of interest

situations, including recurrent related

party transactions, to ensure that they

are undertaken on normal commercial

terms and are not to the detriment of

the Company’s minority shareholders.

The policies and procedures are

embodied in the PGB Related Party

Transaction/Recurrent Related Party

Transactions Policies and Procedures.

The Statement on Risk Management

and Internal Control provides a

comprehensive overview of the Group’s

policies and procedures on related

party transactions and recurrent related

party transactions. This is set out

on page 193 to page 194 of this

Annual Report.

Risk Management and Internal Control

The Board continues to maintain and

review its risk management processes

and internal control procedures to

ensure a sound system of risk

management and internal control to

safeguard shareholders’ investments

and the assets of the Company and

the Group.

The Statement on Risk Management

and Internal Controls provides an

overview of the risk management and

internal controls within the Group as

set out on page 184 to page 197 of

this Annual Report.

INTEGRITY AND ETHICS

The Board further acknowledges its

role in establishing a corporate culture

that encompasses and embraces

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, the Corporate

Disclosure Guide and the Anti-Bribery

and Corruption Manual. The adoption

of these policies is to ensure that the

conduct of business and the

Company’s employees are consistently

carried out ethically and with integrity.

IR9 PGB is committed to uphold the ethical value

as mentioned above.

Code of Conduct and Business Ethics

The Group adopts and practices the

PETRONAS Code of Conduct and

Business Ethics (CoBE). Further

information on CoBE can be found on

page 212 of this Annual Report.

The CoBE is also accessible to

the public for reference on the


www.petronasgas.com

Whistleblowing Policy

The Group has adopted the PETRONAS

Whistleblowing Policy which provides

an avenue for the Group’s employees

and members of the public to disclose

any improper conduct in accordance

with the procedures as provided under

the Policy.

Further information on the PETRONAS

Whistleblowing Policy can be found on

page 213 of this Annual Report.

The Whistleblowing Policy is also

accessible to the public for reference

on the Company’s official website at

www.petronasgas.com

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 and accountability in the

communication and dissemination of

material information amongst the

Company organisation and public. A

detailed guide is available at

www.petronasgas.com

Trading on Insider Information

Notices on the Closed Period for trading

in the Company’s shares are sent to the

Directors and Principal Officers on a

quarterly basis as a reminder on the

prohibition to trade during the identifying

timeframe during which the Directors

and the Principal Officers are prohibited

from dealing in the Company’s shares.

Directors are also reminded not to deal

in the Company’s shares when price

sensitive information is shared with them

in the proposal papers.

None of the Directors and Principal

Officers breached the above ruling

during the financial year under review.

Selection of Vendors

The Group has adopted the PETRONAS

Tendering process and governing

principles that are embedded in the

PETRONAS Supply Chain Management

Policy for vendors’ selection. Generally,

the main selection criteria is based on

technically acceptable and

commercially lowest bid.

PAGE: 179

ANNUAL REPORT 2016

The Group has established Tender

Committees to carry out independent

assessment on bidders’ proposals and to

ensure tendering activities are carried

out in accordance with the Tender

Committee’s Terms of Reference.

Tendering processes are as follows:

(i) Tender Plan Approval

(ii) Technical Evaluation

(iii) Commercial Evaluation

(iv) Award Recommendation

QUALIFIED AND COMPETENT COMPANY SECRETARIES

The Company has two Company

Secretaries. The Company Secretaries of

the Company are qualified to act as

company secretaries pursuant to Section

235 of the Companies Act 2016. One of

them has a legal qualification and the

other is a Fellow of the Malaysian

Institute of Chartered Secretaries and

Administrators. The Company Secretaries

play an advisory role to the Board,

particularly with regards to the

Constitution of the Company, Board

policies and procedures and the

Company’s compliance with regulatory

requirements, codes, guidance and

legislation.

The Company Secretaries ensure that

the discussions and deliberations at

Board and Board Committee meetings

are well documented, and subsequently

communicated to the relevant

Management for appropriate actions.

The Company Secretaries update the

Board on the follow-up of its decisions

and recommendations by the

Management.

The Company Secretaries constantly

keep themselves abreast of the

evolving capital market environment,

regulatory changes and developments

in corporate governance through

continuous training. The Board is

satisfied with the performance and

support rendered by the Company

Secretaries to the Board in discharging

their functions.

RELATIONSHIP WITH AUDITORS

External Auditor

Through the BAC, the Company

maintains a professional and transparent

relationship with its external auditors,

KPMG PLT. The BAC met the external

auditors twice during the financial year

under review without the presence of

the Management to review the scope

and adequacy of the Group’s audit

process, the annual financial statements

and their audit findings. At the meeting,

the external auditors highlighted to both

the BAC and the Board on matters that

warranted their attention.

The role of the BAC in relation to the

external auditors is described in the

BAC Report on page 202 of this

Annual Report.

Internal Auditors

The Company’s Internal Auditors, whose

function is undertaken by the Group

Internal Audit (GIA) Division of

PETRONAS reports directly to the BAC

and has unrestricted access to the BAC.

The GIA function is independent of the

activities or operations of other

operating units. The GIA conducts

regular audits on the effectiveness of

internal controls, compliance with

internal and regulatory requirements.

The audit report which highlights any

findings, along with the

recommendations are tabled to the BAC.

Further information on Internal Audit

can be found on pages 202 to 203 of

this Annual Report.

STATEMENT BY THE BOARD ON COMPLIANCE

The Board has deliberated, reviewed

and approved this statement. The

Board is satisfied that the Company

and the Group have fulfilled their

obligations under the relevant

paragraphs of the MMLR, MCCG 2012

and MSWG Malaysia-ASEAN Corporate

Governance Scorecard on corporate

governance and applicable laws and

regulations throughout the financial

year ended 31 December 2016.

The table highlighting the Company’s

observance of the Principles and

Recommendations of the MCCG 2012

is set out on pages 181 to 183 of this

Annual Report.

This statement is made in accordance

with the resolution of the Board of

Directors dated 23 February 2017.

Datuk Mohd Anuar TaibChairman

Yusa’ HassanManaging Director/

Chief Executive Officer

PAGE: 180

PETRONAS GAS BERHAD


The table below sets out the status of the observance of PETRONAS Gas Berhad with the principles and recommendations

of Malaysian Code on Corporate Governance 2012 in respect of FY2016.

Principle/Recommendation Page Remarks

Principle 1 – Establish Clear Roles and Responsibilities

1.1 The Board should establish clear functions reserved for the

Board and those delegated to management

166,

169, 170

Complied

1.2 The Board should establish clear roles and responsibilities in

discharging its fiduciary and leadership functions

166 Complied

1.3 The Board should formalise ethical standards through a code of

conduct and ensure its compliance

179, 195,

212 – 213

Complied

1.4 The Board should ensure that the Company’s strategies

promote sustainability

166,

217 – 222

Complied

1.5 The Board should have procedures to allow its members access

to information and advice

173 Complied

1.6 The Board should ensure it is supported by a suitably qualified

and competent company secretary

180 Complied

1.7 The Board should formalise, periodically review and make

public its Board Charter

167 Complied

Principle 2 – Strengthen Composition

2.1 The Board should establish a Nominating Committee which

should comprise exclusively Non-Executive directors, a majority

of whom must be independent. The chair of the Nominating

Committee should be the Senior Independent Director

204 – 205 Currently the Senior Independent

Director of PGB serves as the Chairman

of the BAC. As such, the Board has

instead elected Dato’ Ab. Halim

Mohyiddin as the Chairman of the NRC

in order to have different Director

chairing the committees so as to

leverage on different dynamics. This will

also ensure that each Independent

Director has equitable roles and

responsibilities.

2.2 The Nominating Committee should develop, maintain and

review the criteria to be used in the recruitment process and

annual assessment of Directors

175,

206 – 207,

209

Complied

PAGE: 181

ANNUAL REPORT 2016

STATUS OF OBSERVANCE WITH THE PRINCIPLES AND RECOMMENDATIONS OF THE MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012


2.3 The Board should establish formal and transparent remuneration

policies and procedures to attract and retain Directors

175 – 176 The policy is currently being developed

and will be presented to the Board for

approval in due course.

Principle 3 – Reinforce Independence

3.1 The Board should undertake an assessment of its Independent

Directors annually

209 Complied

3.2 The tenure of an Independent Director should not exceed a

cumulative term of nine years. Upon completion of the nine

years, an Independent Director may continue to serve on the

Board subject to the Director’s re-designation as a Non-

Independent Director

175 Complied

3.3 The Board must justify and seek shareholders’ approval in the

event it retains as an Independent Director, a person who has

served in that capacity for more than nine years

175 Complied

3.4 The positions of Chairman and Chief Executive Officer should

be held by different individuals, and the Chairman must be a

Non-Executive member of the Board

169 – 170 Complied

3.5 The Board must comprise a majority of Independent Directors

where the Chairman of the Board is not an Independent

Director

167 The Chairman of the Company is

currently a Non-Independent Non-

Executive Director. This is premised on

the high level of integration between

PGB and PETRONAS Group of

Companies. The Board’s composition

comprises three Independent Non-

Executive Directors, three Non-


and one Executive Director. The current

Board composition is balanced and

complies with paragraph 15.02 of the

MMLR of Bursa Malaysia, as 1/3 of the

Board Members are Independent

Directors. The Company intends to

maintain the current Board composition.

Principle 4 – Foster Commitment

4.1 The Board should set out expectations on time commitment

for its members and protocols for accepting new directorships

169 Complied

4.2 The Board should ensure its members have access to

appropriate continuing education programmes


PAGE: 182

PETRONAS GAS BERHAD

STATUS OF OBSERVANCE WITH THE PRINCIPLES AND RECOMMENDATIONS OF THE MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012


Principle 5 – Uphold Integrity in Financial Reporting

5.1 The Audit Committee should ensure financial statements

comply with applicable financial reporting standards

201 Complied

5.2 The Audit Committee should have policies and procedures to

assess the suitability and independence of External Auditors

202 The Company does not have a policy

and procedures to assess the suitability

and independence of the external

auditors. However, as part of the annual

audit exercise, the Company obtains

assurance from the external auditors

confirming their independence

throughout the year under review.

Principle 6 – Recognise and Manage Risks

6.1 The Board should establish a sound framework to manage risks 179,

184 – 191,

203

Complied

6.2 The Board should establish an internal audit function which

reports directly to the Audit Committee


Principle 7 – Ensure the Timely and High Quality Disclosure

7.1 The Board should ensure the Company has appropriate

corporate disclosure policies and procedures

179 Complied

7.2 The Board should encourage the Company to leverage on

information technology for effective dissemination of

information

173 Complied

Principle 8 – Strengthen Relationship between Company and Shareholders

8.1 The Board should take reasonable steps to encourage

shareholder participation at general meetings

178 Complied

8.2 The Board should encourage poll voting 178 Effective 2017, general meetings will be

conducted via e-polling. Independent

Scrutineers and Poll Administrator will be

appointed to conduct the polling

process and verify the results of the poll.

8.3 The Board should promote effective communication and

proactive engagements with shareholders

178 Complied

PAGE: 183

ANNUAL REPORT 2016

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.

As internal control is an integral part of the Group’s risk and control continuum to achieve the

Group’s objectives, 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.

BOARD’S ACCOUNTABILITY

The Board acknowledges the importance of a sound risk management system and internal control practices for good

corporate governance with the objective of safeguarding 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 Controls: 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 (ERM) system to identify, evaluate and monitor the risks faced by the Group and to take specific measures

to mitigate these risks.

THE STATEMENT IS MADE PURSUANT TO PARAGRAPH 15.26 (B) OF THE MAIN

MARKET LISTING REQUIREMENTS (MMLR) OF BURSA MALAYSIA SECURITIES

BERHAD (BURSA MALAYSIA) WHERE THE BOARD OF DIRECTORS OF PUBLIC

COMPANIES ARE REQUIRED TO PUBLISH A STATEMENT ABOUT THE STATE

OF THE INTERNAL CONTROL OF THE LISTED ISSUER AS A GROUP.

PAGE: 184

PETRONAS GAS BERHAD

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROLS

Risk Oversight Structure

The Group risk oversight structure allows risk information flow for effective oversight on risk management implementation at

all levels. Risks are reviewed at various levels namely Divisional Plant Leadership Teams (PLTs) and Project Steering

Committees (PSCs) within the Group before it is deliberated at the PETRONAS Gas Berhad (PGB) Group Risk and Compliance

Committee (RCC) and Board Audit Committee (BAC).

BOARD

MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER

RISK &COMPLIANCECOMMITTEE

BOARD AUDIT COMMITTEE

RISK MANAGEMENT UNIT

HEAD, BUSINESS EXCELLENCE

High Level Group Risk Oversight Structure

Reporting flow Information flow

The BAC is authorised by Board to review the adequacy and

effectiveness of risk management practices and procedures as well

as conducting risk profiling reviews of the Group, on a quarterly

basis. The BAC also deliberates on the Group’s Enterprise Risk

Report on quarterly basis, including risk exposures and the

mitigation plans required, subsequent to review by the RCC.

The RCC, which is chaired by the Managing Director/Chief Executive

Officer (MD/CEO), is obliged to ensure that an appropriate and

effective risk management framework is in place and implemented

throughout the Group as well as its compliance with the statutory,

regulatory requirements and policies applicable to it.

Risk Management Unit (RMU) is entrusted with the

responsibility of ensuring effective risk governance and

implementation in the Group. RMU is also undertaking the

secretariat roles of RCC.

The Group’s Risk Policy provides communication on

Management’s expectations on risk management

implementation and business continuity practices. In addition,

the Group’s risk appetite statement further enhances clarity

on the risks that the Group is willing to pursue or retain:

“PETRONAS Gas Berhad shall take reasonable and practicable steps to mitigate or eliminate risks to ensure safe, reliable and competitive business operations towards achieving PGB’s objective to be A Leading Gas Infrastructure and Utilities Company.”

PAGE: 185

ANNUAL REPORT 2016

Risk Management Framework Implementation

(a) Enterprise Risk

The Group’s Enterprise Risk Management (ERM) adheres to the PETRONAS Resiliency Model, which includes an

enhanced PETRONAS ERM Framework that adopts ISO 31000:2009 Risk Management requirements. The enhanced ERM

Framework provides a standard and consistent approach in implementing ERM in an entity. There are six key

requirements of ERM under the Framework:

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 businesses and operations.

The Group’s annual risk profiling and assessment process are guided by its approved strategies and plans. 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 and facilities risks, and new business venture risks are reviewed to identify

significant risks to be escalated to the Enterprise Risk Profile (ERP). Other key discussions include recent Health, Safety,

Security and Environment (HSSE) or audit findings, operational issues as well as project issues.

GOVERNANCECONTINUALIMPROVEMENT

CONTEXT SETTINGRISK MONITORING & REVIEW

RISK ASSESSMENTRISK TREATMENT

• Risk Policy

• Organisational Structure

• Roles & Responsibilities

• System Monitoring

& Review

• Risk Assurance

• ERM Capability

• External Context

• Internal Context

• Risk Appetite

• Risk Criteria

• Risk Reporting

& Monitoring

• Risk Information

System

• Risk Identification

• Risk Analysis

• Risk Evaluation

• Risk Treatment Strategy

• Risk Treatment Plan

PAGE: 186

PETRONAS GAS BERHAD

ERMFRAMEWORK


From external context, any recent changes in regulatory or 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 operations.

Each risk is mapped based on a matrix which specifies its likelihood (how likely is the risk to happen) and its impact (the

extent of its impact if it did happen), analysing from both qualitative and quantitative perspectives. The matrix is adopted

from PETRONAS ERM 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.

Context of PGB 2016/17 ERP is based on various inputs to reflect the latest environment and expectations

PGB 2016/17 ENTERPRISE RISK PROFILE

PGB 2015/16

Risk Profile &

P4R Risk Profile

PGB Risk Policy

& Appetite

PGB 3ZERO100

BEYOND & PGB

Results 2

Latest

Development

Common Audit

Findings

Industry Outlook

New Regulatory/

Legal

Requirements

PGB Corporate

House; Vision and

Mission

Management

Expectation

OPERATING DIVISIONS

Plant and Facilities Risk

Report to:

Division Plant Leadership Team

PROJECTS

Project Risk

Report to:

Respective Projects

GROWTH / NEW BUSINESS TRANSACTIONS

Business Ventures Risk

Report to:

Respective Project/Commercial

Steering Committee

Operational and common project issues, plant performance, HSE incidents,

common audit findings, new development

PAGE: 187

ANNUAL REPORT 2016

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 developed are appropriately implemented,

monitored and regularly reported.

The RMU previously under

Planning and Risk Management

Department (PRMD) (now has

been restructured to be part of

Business Excellence Division) is

entrusted with the responsibility of

ensuring effective risk governance

and implementation in the Group.

The RCC is responsible to oversee

the overall risk management

activities and implementation in

the Group. The RCC is chaired by

Managing Director/Chief Executive

Office (MD/CEO) with RMU

undertaking the secretariat roles.

RMU provides updates on the

Group’s ERM implementation to

both the Group’s RCC and 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.

In the last review, key issues and

risks were deliberated at length

focusing on the key risks of the

Group, comprising Very High, High

and Medium risks. The rationale of

the likelihood and impact rating

assigned to the key risks were also

discussed against the

Management’s risk tolerance and

appetite. Further mitigations were

identified for the key risks, mainly

in the commercial, operational and

HSSE 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 page 74.

Risk mitigations validation and

assurance exercise were also

conducted during the year to

validate the controls and

completed mitigation actions. The

exercise were conducted both

internally as well as by PETRONAS

Downstream Business Unit. There

were six risks selected for the

assurance which included five

High and one Low risks from the

Group’s ERP. The outcome of the

assurance including corrective

actions were reported to the

Management. Overall, all of the

risks selected were rated as

satisfactory based on the risk

mitigation effectiveness. No major

findings were noted that could

significantly impair achievement of

the overall intended objectives of

the identified risk mitigations.

The Company had also provided

guidance to one of its joint

venture companies, on the

establishment of Risk Management

Framework.

Risk assessments are also

conducted on new business

ventures and strategies. During the

year under review, six Business

Venture Risk Assessment (BVRA)

were facilitated by RMU where the

reports were included as part of

business development proposal

presented to the Commercial

Steering Committee (CSC), relevant

Project Steering Committees (PSC)

or Divisional Plant Leadership

Team (PLT) for Management’s

approval and where relevant, in

the Final Investment Decision (FID)

proposals for the Board’s approval.

PGB Enterprise Risk Assessment adheres to a structured process which complies with PETRONAS ERM Framework.

02

Identify risks &

existing controls

03

Identify likelihood

& impact

04

Identify risk mitigations

& key risk indicators

05

Determine risk owners

and mitigations owners

06

Obtain approval of risk profile

from Leadership Team & BAC

07

Periodically monitor & report

mitigation action status to

Leadership Team & BAC

01

Establish internal &

external context

PAGE: 188

PETRONAS GAS BERHAD

(b) Plant and Facilities Risk

The PLT is responsible in ensuring

adequate and effective Plant and

Facilities Risk Management (PFRM)

at the divisions. The Group

managed its operational risks via

PFRM. Under PFRM, risks relevant

to operations at the divisions were

assessed, monitored and reported

to the respective Divisions’ 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

key risk.

During the year under review, the

plant and facilities risk review was

conducted for both Gas

Processing and Utilities (GPU)

division, and Gas Transmission and

Regasification (GTR) division. The

respective divisions’ risk profiles

were deliberated, updated and

approved at Division’s PLT.

Subsequently, the risks were

monitored with mitigation actions

tracked and periodically reported

to the respective PLT at the

operating divisions.

(c) Project Risk

The Group continues to

implement Project Risk

Management processes in line with

the PETRONAS Project

Management System (PPMS)

requirements. The Group carries

out Project Risk Assessments,

Independent Reviews and Lessons

Learnt for all its major and critical

projects.

Updates on project risk mitigations

status are included as part of the

monthly project progress report to

the relevant committees e.g.

respective Divisions’ PLT, the

relevant PSCs and RCC for proper

monitoring.

At Group level, the PSC is chaired

by PGB MD/CEO and meets on

regular basis to deliberate on key

project progress, risk areas and

their mitigations. Updates on

project progress are also

incorporated as an agenda

deliberated in the monthly

Management Committee (MC)

(now known as PGB Leadership

Team (LT)) meetings, and quarterly

Board meetings.

Project risk report which includes

project status and areas of

concerns are also incorporated

into the ERR and submitted to the

RCC and BAC on a quarterly basis.


PETRONAS Project Delivery &

Technology (PD&T) rolled out a

revised PPMS incorporating an

enhanced project gated process.

The Group is working closely with

PD&T to ensure compliance to the

new requirements.

(d) Contractor Risk

Contractor risk is managed through

tendering evaluation exercises

facilitated by the Company’s

Procurement Department, PD&T

and Procurement Downstream &

Indirect Spend (PDIS) prior to the

award of contracts in compliance

with the PETRONAS Group

tendering and contract procedures

and guidelines.

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, monitored and

resolved by the relevant teams

involved in the project.

(e) 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. These guidelines align the

Group’s practices with PETRONAS’

policies and guidelines.

PAGE: 189

ANNUAL REPORT 2016

(f) Credit Risk

To reduce its credit risk exposure,

the Company continues to apply

the Credit Risk Management

processes based on PETRONAS

Credit Risk Rating 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 Company’s

external customers. 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 trade and non-trade

receivables ageing are also

deliberated by the PGB LT as well

as Commercial Steering

Committee on monthly and

quarterly basis respectively.

(g) Contingency Planning and 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, Division PLT and

PGB LT. 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 210.

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.

(h) Health, Safety, Security and Environment (HSSE) Risk

The Group leverages on the

PETRONAS HSE Management

System (HSEMS) to manage HSSE

risks and ensure that operations

are in compliance with the HSSE

regulatory requirements. The

HSEMS ensures that HSSE risks

within the business are managed

effectively. In addition, the Group

subscribes to PETRONAS HSSE

Mandatory Control Framework to

strengthen HSSE governance

within the Group through clear

HSSE requirements.

The Group has established a

governance structure in managing

the HSSE risks, in tandem with the

PETRONAS HSEMS and HSSE

Mandatory Control Framework.

The governance structure includes

the identification of HSSE risks,

develop HSSE strategic initiative,

establish annual plan and targets,

internal compliance review and

appointment of Result Managers

for monitoring the implementation.

Amongst new Key Results Areas

for the year under review is the

rollout of Hearts & Minds

programme to all staff and

implementation of online database

for evaluation of regulatory

compliance.

The Group has established multiple

platforms to conduct periodic

management review on HSSE

related risks and events in

addressing changes that are

triggered from past incidents and

plant modifications activities. PGB

MD/CEO chairs the Health, Safety,

Environment and Operational

Excellence (HSEOE) Steering

Committee which comprises

members from the Management

to discuss HSSE matters

concerning the Group on monthly

basis. Similar HSSE Leadership

Team (HSELT) Committee

meetings are held at the facilities,

projects as well as at division level

which are chaired by respective

Management personnel.

The Group has also put in place a

series of assurance programmes to

review and verify the effectiveness

of the HSEMS and HSSE risk

mitigations. The HSSE assurance

programme adheres to the

requirement of PETRONAS HSEMS,

Mandatory Control Framework,

PETRONAS Technical Standards,

and international standards such as

ISO 14001 for Environmental

Management System, OHSAS

18001 and MS 1722 for

Occupational Health and Safety

Management System.


internal audits which involved

PETRONAS Downstream Business

as well as PETRONAS Group

Health, Safety and Environment

(GHSE), were conducted at Gas

Processing Kertih (GPK) and Gas

Processing Santong (GPS). The

Group also performed various

HSSE-related assurance

programmes and audits on its

facilities. HSSE Peer Review were

conducted on several assets of the

Group. The Group is committed to

PAGE: 190

PETRONAS GAS BERHAD


continue with its rigorous HSSE

assurance programmes in ensuring

the effectiveness of its HSEMS

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

policies on Risk Management

implementation. The Group has also

participated in various sharing platforms

established at PETRONAS level through

the Community of Practice (CoP)

discussions.

Moving Forward

The Group will continue its focus in

implementing key risk management

strategies and initiatives towards

institutionalisation of risk management

as a culture throughout the Group.

INTERNAL AUDIT FUNCTION

The Board recognises that the internal

audit function is an integral part of the

governance process. PETRONAS Group

Internal Audit (GIA) Division 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, its

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 GIA audit

reports including the agreed corrective

actions to be undertaken by the

auditees. GIA also monitors status of

the agreed corrective actions through

Quarterly Status Audit Report submitted

by auditees which are assessed and

verified by GIA. The consolidated status

of the audit issues is submitted and

presented to the BAC for deliberation

on a quarterly basis.

GIA 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 202 of this Annual Report.

OTHER SIGNIFICANT ELEMENTS OF INTERNAL CONTROL SYSTEM

The other significant elements of the

Group’s internal control system are

tabulated below.

(a) 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 Chief Financial Officer

(CFO) provides the Board with the

Group 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.

(b) 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.

Effective 1 January 2017, the

Company implemented new

organisational structure in line with

the strategy to transform our

organisational towards an efficient

and empowered organisation. The

Company’s organisational structure

is set out on page 27 of the

Annual Report.

The Company has a Leadership

Team (LT) which serves as an

advisory capacity to PGB MD/CEO

in accomplishing the vision,

mission, strategies and objectives

set for the Group. Additionally, the

GPU and GTR Division PLTs

provide operational directions and

manage operational issues at the

respective divisions.

PAGE: 191

ANNUAL REPORT 2016

Various functional committees

have also been established across

the Group to ensure the Group’s

activities, major projects and

operations are properly aligned

towards achieving the

organisation’s goals and objectives.

(c) Budget Approval

Budgets are an important control

mechanism used by the Group to

ensure an optimum allocation of

Group resources and the

operational managers are

sufficiently guided in making

business decisions. The Group

undertakes a comprehensive

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. The

Group’s plans and budget shall be

approved by the Board.

Variances against the approved

budget are analysed and reported

to the PGB LT and BAC/Board on

a monthly and quarterly basis

respectively and corrective actions

will be taken where necessary.

Any additional budget requirement

is to be managed by budget

transfer or supplementary budget

and is approved by the relevant

approving authority in accordance

to the Limits of Authority.

(d) 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.

A full review of LOA is undertaken

every five years and realignment of

LOA is performed to cater for a

change in the organisational

structure to ensure effective

decision making. The Company

has undertaken a full review of the

LOA in 2016 where the new

revised LOA has been

implemented effective 1 January

2017.

(e) System and Control

System and Control Unit of

Finance Division conducts

scheduled governance and

compliance audits in addition to

the internal audits conducted by

GIA. The audits are meant to

provide assurance to the

Management on the Group’s

internal control effectiveness and

compliance to the Company’s

Enterprise Resource Planning

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 RCC highlighting

findings and the agreed corrective

actions. The status of the audit

issues are monitored and reported

to the RCC on a quarterly basis.


self-assessment on PGB SAP Users

Profile Maintenance Exercise were

undertaken, with an overall

assessment of FAIR.

(f) Tendering and Procurement

The Group has defined

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

independent from the Tender

Committee. Tenders are called for

and are awarded based on factors

such as technical and financial

capability, quality, HSSE,

performance track record,

schedule and cost.

In inculcating integrity and

compliance culture among

contractors and their employees,

the Group has jointly conducted

the inaugural Integrity Pledge

signing ceremony with contractors

together with PETRONAS Chief

Integrity Officer (CIO)’s Office and

Company’s Procurement

Department on 30 November

2015, with 10 contractors signing

the pledge. A similar ceremony

was held during PGB Contractors

Forum on 2 August 2016, with

further 32 contractors signing the

pledge.

The Vendor Integrity Pledge is a

documented declaration on

contractors’ commitment to

uphold the Anti-Corruption

Principles. By signing the pledge,

contractors are making a unilateral

declaration that they will not

commit corrupt acts, will work

PAGE: 192

PETRONAS GAS BERHAD


towards creating a business

environment that is free from

corruption and will uphold a zero

tolerance to bribery in its business

and interaction with its business

partners and Government.

(g) Operating Procedures and Guidelines

As part of the Company’s efforts

in promoting self-assurance and

self-governance, the Company has

embarked on the implementation

of Operational Excellence

Management System (OeXMS)

which serves as a one-stop-centre

for all systems and requirements,

with a built-in self-assurance

process. It incorporates best

practices and continual

improvement cycles and embed

mandatory requirements into

day-to-day work practices,

translated into four levels of

structured document (Level 1,

Level 2, Level 3 and Level 4). The

system leverages on internal

governance processes that ensures

disciplined execution at all levels

of the Company.

(h) 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

functions 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, PGB

MD/CEO and the CFO provide

overall assurance to the Board on

the adequacy and effectiveness of

key internal controls of the Group.

During the year under review, the

Group assisted roll out of FCF to

two of its joint ventures.

(i) 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.

(j) Related Party Transaction

The Group has established policies

and procedures with regard to

Related Party Transactions (RPT)

and Conflict of Interest (COI) to

ensure full compliance to the

MMLR of Bursa Malaysia. This

includes the PGB RPT/Recurrent

RPT (RRPT) Policies and

Procedures.

During the financial year under

review, the BAC had endorsed

revisions to the policies and

procedures, which was

subsequently approved by the

Board. The revisions were made to

ensure PGB’s policies and

procedures are updated and in line

with the requirements of MMLR.

The policies and procedures

require the use of various methods

to ensure that RPT/RRPT are

conducted on normal commercial

terms, which are consistent with

the Group’s normal business

practices and policies, and that the

terms will not be to the detriment

of the Group’s minority

shareholders. Such methods

include the review and disclosure

procedures as follows:

• Directors and Officers of the

Company and its Group shall

not enter into transactions with

related parties unless these

transactions are carried out on

normal commercial terms and

are not to the detriment of the

Group’s minority shareholders.

PAGE: 193

ANNUAL REPORT 2016

• All Directors are required to

make annual written declaration

involving their interest, either

directly or indirectly, to the

Company Secretary. They can

also notify the Company

Secretary at Board meetings of

any interest in RPT or COI

situation when it becomes

known to them.

• As per the RPT/RRPT policies

and procedures, RPT/RRPT will

be reviewed by the BAC for

the BAC’s endorsement of the

transaction. Such transactions

are then approved by the

relevant approving authority as

prescribed in the Company’s

LOA. The Directors further

acknowledged that they are

required to abstain from

deliberation and voting on

relevant resolutions in which

they have conflict of interest at

the Board or any general

meeting convened (if any).

• Where possible, to conduct

benchmarking on the prices of

similar services/product

available in the market.

• The Board has the overall

responsibility to ensure

compliance to the established

guidelines and procedures to

approve and monitor RPT/RRPT

and COI situations. The Board

and/or BAC may also appoint

individuals and Committees to

examine the RPT/RRPT, as

deemed appropriate.

The Company has been granted

various waivers by Bursa Malaysia

from complying with the

requirements of Paragraph 10.08

and 10.09 of the MMLR of Bursa

Malaysia from having to seek

shareholders’ mandate for RRPT

entered into with parties that are

related to PETRONAS Group of

Companies vide letters dated 2

March 2011, 26 March 2014, 23

May 2014 and 27 October 2015.

The said exemptions were subject

to conditions which essentially

state that the exempted RRPT

must be transacted on an arm’s

length basis.

(k) Human Rights Commitment

The Group is committed to uphold

internationally recognised human

rights in areas of its operations,

complying with its Code of

Conduct, Business Ethics, and all

relevant legal requirements.

The Group subscribes to

PETRONAS Social Performance

Framework. The introduction of

this framework covers the supply

chain, community well-being,

labour and working conditions for

contractors, and third party

security which will strengthen the

commitment of social

responsibility. The Group are

working closely with GHSE to

increase the human rights

awareness in PGB. Human Rights

Awareness Session has been

conducted for Management level,

and will be rolled-out to all level.

Meanwhile, the Group is vigilant to

ensure all projects will comply not

only with the safety and

environment, but also with social

dimension. Prior to any

development of projects, social

impact assessment will be

conducted as part of the

Environmental Impact Assessment

process under the jurisdiction of

the Department of Environment.

Aspects and matters arising from

community health (dust, noise

pollution), safety (construction

debris, traffic flow prone to

accidents), community sensitivities

(cultural heritage, relocation of

local’s important socio elements

– pre-historical buildings etc) were

aptly addressed. Stakeholder

engagements were carried out

with the local communities to

reach to a mutual level of

understanding that benefit both

sides and without any prejudicial

or lopsided implication to the

latter.

(l) 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

assessment of staff’s performance

against the set performance

indicators which is reviewed on

periodical basis.

PAGE: 194

PETRONAS GAS BERHAD


(m) Capability Development

The Group invests in accelerating

the capability of its staff. The

Group aligns its capability

development efforts to the

PETRONAS Accelerated Capability

Development Framework for its

technical staff and Online

Functional Assessment for the

non-technical staff, where their

capabilities are continuously

developed and periodically

assessed.

The Group has also established a

platform to deliberate staff

capability matters through the

Company Capability Development

Working Committee (CDWC). This

platform is crucial to discuss on

staff capability and intervention

plans to close capability gaps for

each Skill Group together with

dedicated Discipline Resource

Person (DRP).

(n) Code of Conduct and Business Ethics

The Group adopts and practices

PETRONAS Code of Conduct

and Business Ethics (CoBE).

The CoBE is accessible to the

public for reference on the


www.petronasgas.com

which places significant

importance in upholding the

principle of discipline, good

conduct, professionalism, loyalty,

integrity and cohesiveness that are

critical to the success and well-

being of the Group. The CoBE

detailed policy statements on the

standards of behaviour and ethical

conduct expected of each

individual to whom the CoBE

applies. The Group also expects

that contractors, sub-contractors,

consultants, agents and

representatives and others

performing work or services for or

on behalf of the Group to comply

with the relevant parts of the

CoBE when performing such work

or services. 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 behalf of companies in the

PETRONAS Group.

In compliance with the CoBE, the

Company adopts the PETRONAS

Anti-Bribery and Corruption (ABC)

Manual which governs the

prevention of corruption and

unethical practices within the

Group. ABC Manual sets forth the

policy statement and guidelines on

how to deal with improper

solicitation, bribery and other

corrupt activities and issues that

may arise in the course of

business.

(o) Whistleblowing Policy

The Group has adopted the

PETRONAS Whistleblowing Policy

(WBP) which provides an avenue

for the Group employees and

member of the public to disclose

any improper conduct committed

or about to be committed in

accordance with the procedures

as provided under the policy.

The WBP is accessible to the

public for reference on the



Under the WBP, a whistle blower

will be accorded with protection

of confidentiality of identity, to the

extent reasonably practicable. An

employee who whistle blows

internally will also be protected

against any adverse and

detrimental actions for disclosing

any improper conduct committed

or about to be committed within

the Group, to the extent

reasonably practicable, provided

that the disclosure is made in

good faith. Such protection is

accorded even if the investigation

later reveals that the whistle

blower is mistaken as to the facts

and the rules and procedures

involved.

(p) PETRONAS Raid Protocol

The Company’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’

offices worldwide. It is an internal

procedure in response to the

powers of the authorities under

relevant laws and various

jurisdictions.

PAGE: 195

ANNUAL REPORT 2016

(q) 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

positions at business and

corporate level. The Company

invests 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 the Company 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.

(r) Leadership Development

The Management recognises the

importance of Leadership

Development in ensuring the

organisation has sufficient leaders

in the future. The PETRONAS

Leadership Competencies and

PETRONAS Cultural Beliefs

behaviours guides staff to better

understand the PETRONAS

Leadership Philosophy,

emphasising on Leadership

Competencies and Cultural Beliefs

behaviours to promote better

internalisation.

(s) Human Resource Policies and Procedures

The Group’s Human Resource (HR)

policies are aligned to the

PETRONAS policies 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 established in the

Group include Job Management,

Succession Planning and

Leadership Development.

MANAGEMENT ROLE

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.

The MD/CEO and the CFO have

provided the Board with assurance that

the Group risk management and

internal control system is operating

adequately and effectively, in all

material aspects, to ensure

achievement of corporate objectives. In

providing the above assurance by

MD/CEO and CFO, similar letters of

assurance have also been obtained

from PGB LT members confirming the

adequacy and effectiveness of risk

management practice and internal

control system within their respective

areas.

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

There were no material losses incurred

during the year as a result of

weaknesses in risk management and

internal control. The Management

continues 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 AND SUBSIDIARIES

The implementation of the relevant risk

management and internal control

systems at the Group’s material JV is in

place.

The implementation of the relevant risk


systems at the Group’s subsidiary,

Pengerang LNG (Two) Sdn Bhd will be

in place progressively upon completion

of the project and commencement of

the operations.

PAGE: 196

PETRONAS GAS BERHAD


REVIEW OF THIS STATEMENT

The external auditors have reviewed

this Statement on Risk Management

and 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 2016, 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) has not been prepared in

accordance with the disclosures

required by paragraphs 41 and 42

of the Statement on Risk

Management and Internal Control:

Guidelines for Directors of Listed

Issuers, or

(b) is factually inaccurate.

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


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 23 February 2017.

Datuk Mohd Anuar Taib Chairman

Yusa’ Hassan Managing Director/

Chief Executive Officer

PAGE: 197

ANNUAL REPORT 2016

THE BOARD AUDIT COMMITTEE (BAC) OF PETRONAS GAS BERHAD

(PGB OR THE COMPANY) IS PLEASED TO PRESENT THE BAC REPORT FOR

THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 IN COMPLIANCE WITH

PARAGRAPH 15.15 OF THE MAIN MARKET LISTING REQUIREMENTS

(MMLR) OF BURSA MALAYSIA SECURITIES BERHAD

(BURSA MALAYSIA).

HABIBAH ABDUL HENG HEYOK CHIANG @ HENG HOCK CHENG

EMELIANA DALLAN RICE-OXLEYDATO’ AB. HALIM MOHYIDDIN

The BAC members as at 23 February 2017.

PAGE: 198

PETRONAS GAS BERHAD

BOARD AUDIT COMMITTEE REPORT

COMPOSITION

The BAC was formed by the Board pursuant to its meeting held on 14 August 1995.

Emeliana Dallan Rice-Oxley was appointed as a member of the BAC of PGB effective 1 September 2016 in place of Datuk

Rosli Boni who had retired from PETRONAS.

As at 31 December 2016, the composition of the BAC is as follows:

No Name of Members MembershipDate of

Appointment Tenure on the BAC

1 Habibah Abdul

(Chairman)

Senior Independent Director 24 February 2016 10 months

2 Dato’ N. Sadasivan N.N. Pillay Non-Independent Non-Executive

Director

29 August 1995 21 years

3 Dato’ Ab. Halim Mohyiddin Independent Non-Executive

Director

4 August 2011 5 years

4 Lim Beng Choon Independent Non-Executive

Director

24 February 2016 10 months

5 Emeliana Dallan Rice-Oxley Non-Independent Non-Executive

Director

1 September 2016 3 months

The Chairman of the BAC, Habibah Abdul and Dato’ Ab. Halim Mohyiddin are both qualified accountants. Habibah is

currently a Member of the Institute of Chartered Accountants in England and Wales, Malaysian Institute of Certified Public

Accountants and Malaysian Institute of Accountants whilst Dato’ Ab Halim is a Council Member of the Malaysian Institute of

Certified Public Accountants and a Member of the Malaysian Institute of Accountants. In this regard, the Company is in

compliance with Paragraph 15.09(c)(i) of the MMLR which requires at least one member of the BAC to be a qualified

accountant.

During the year under review, the Board assessed the performance of the BAC through an annual Board Committee

effectiveness evaluation. The Board is satisfied that the BAC has discharged its functions, duties and responsibilities in accordance

with the BAC Terms of Reference.

As at the date of this Annual Report and as announced to Bursa Malaysia on 2 November 2016 and 9 December 2016

respectively, effective 1 January 2017, both Lim Beng Choon and Dato’ N. Sadasivan N.N. Pillay ceased to be Directors of the

Company. Lim Beng Choon has been succeeded by an Independent Director, Heng Heyok Chiang @ Heng Hock Cheng

whilst the Company has not identified a replacement for Dato’ N. Sadasivan N.N. Pillay. The BAC wishes to record its

appreciation and gratitude to both outgoing Directors for their contribution and guidance during their tenure as Members of

the BAC.

PAGE: 199

ANNUAL REPORT 2016

As at the date of the Annual Report, the composition of the BAC is as follows:

No Name of Members Directorate

1 Habibah Abdul (Chairman) Senior Independent Director

2 Dato’ Ab. Halim Mohyiddin Independent Non-Executive Director

3 Emeliana Dallan Rice-Oxley Non-Independent Non-Executive Director

4 Heng Heyok Chiang @ Heng Hock Cheng Independent Non-Executive Director

The above composition is in compliance with Paragraph 15.09(1)(b) of the MMLR and the Malaysian Code on Corporate

Governance 2012 (MCCG 2012) where all four BAC members are Non-Executive Directors including three Independent

Directors who fulfill the criteria of independence as defined in the MMLR. None of the Independent Directors has appointed

alternate Directors.

TERMS OF REFERENCE

The Terms of Reference of the BAC set out the authority, duties and responsibilities of the BAC which are consistent with

the requirements of the MMLR and the MCCG 2012. The Terms of Reference of the BAC are accessible to the public for

reference on PGB’s official website at www.petronasgas.com.

MEETINGS

The BAC meets at least quarterly with additional meetings convened as and when necessary. The BAC meetings for the 2016

financial year are scheduled in November 2015 to facilitate the Directors in planning ahead and incorporating the BAC

meetings into their respective schedules. This also serves to provide the members with ample notice of the meetings.

During the financial year under review, the BAC held four meetings. The meeting attendance record of each member is as

follows:

No Name of Members No. of meetings attended

1 Habibah Abdul1 (Chairman) 3/3 (100%)

2 Dato’ N. Sadasivan N.N. Pillay 4/4 (100%)

3 Dato’ Ab. Halim Mohyiddin 4/4 (100%)

4 Lim Beng Choon1 3/3 (100%)

5 Emeliana Dallan Rice-Oxley3 1/1 (100%)

6 Datuk Rosli Boni2 3/3 (100%)

1 Appointed as BAC members on 24 February 20162 Resigned as BAC member on 1 September 20163 Appointed as BAC member on 1 September 2016

PAGE: 200

PETRONAS GAS BERHAD


By invitation, the Managing Director/

Chief Executive Officer, Company

Secretaries, Chief Financial Officer,

Head of Risk Management Division,

external and internal auditors attend

the BAC meetings to provide the BAC

their input and advice and furnish

appropriate relevant information.

The Head of Group Internal Audit (GIA)

Division of PETRONAS presents the

internal audit reports to the BAC. In this

regard, relevant members of the

Management are invited to apprise 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 meets

with the external auditors once during

the financial year without the presence of

the Management.

The agenda and a set of meeting

papers encompassing qualitative and

quantitative information relevant to the

business of the meeting are distributed

to the BAC members five days prior to

the meeting dates.

Deliberations during the BAC meetings

include performance review of the

Company, the proposed annual and

interim financial reporting to Bursa

Malaysia, assessment of related party

transactions (RPT) and recurrent related

party transactions (RRPT) proposed to be

entered into by the Company, status of

open audit findings together with the

agreed corrective actions, risk

management activities and proposed

interim dividends.

The above assists the BAC Chairman to

effectively convey to the Board the

matters deliberated at the BAC meetings.

Minutes of a BAC meeting are tabled for

confirmation at the next BAC meeting,

after which they are circulated 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, quarterly financial results and

proposed interim dividends.

SUMMARY OF WORK OF THE BAC DURING THE FINANCIAL YEAR 2016

The BAC carried out the following

work in 2016:

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 had

complied with the applicable

approved Malaysian Financial

Reporting Standards (MFRS) issued

by the Malaysian Accounting

Standards Board (MASB), MMLR

and other relevant regulatory

requirements.

(b) Reviewed the Company’s annual

and quarterly management

accounts.

(c) Reviewed the audited financial

statements of the Company prior

to submission to the Board for the

Board’s consideration and

approval, upon the BAC being

satisfied that, inter alia, the audited

financial statements were drawn

up in accordance with the

provisions of the Companies Act

1965 and the applicable approved

MFRS issued by the MASB.

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 was supported by

an independent review by

KPMG PLT.

(c) Quarterly review of all RPT and

RRPT.

(d) Reviewed the revisions to the PGB

RPT/RRPT Policies and Procedures.

Further details on RPT and RRPT

policies and procedures are set out

under the SORMIC on pages 193

to 194 of the Annual Report.

(e) Reviewed PGB’s Revised Limit of

Authority for Procurement.

Annual Reporting

The statements for the BAC Report

and the SORMIC for the financial year

ended 31 December 2016 for the

purpose of inclusion in the Company’s

2016 Annual Report, were reviewed

and endorsed by the BAC on 16

February 2017.

Related Party Transactions and Conflict of Interest

The BAC reviews all RPT and RRPT in

accordance with the PGB RPT Policies &

Procedures to monitor, track and identify

RPT and RRPT 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.


the BAC reviewed on a quarterly basis,

the status update of the Company’s RPT

and RRPT. The BAC also ensures that

any conflict of interest situation that may

arise in the deliberation of a transaction

is appropriately declared in advance.

Internal Audit

(a) Reviewed and deliberated on reports

of audits conducted by the GIA.

(b) Monitored all corrective actions on

audit findings identified by the GIA

until all issues were 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.

PAGE: 201

ANNUAL REPORT 2016

External Audit

(a) Reviewed with the external auditors’ audit strategy and scope for the statutory audit of the Company’s financial

statements for the financial year ended 31 December 2016.

(b) Reviewed with the external auditors the results of the statutory audit and the audit report.

(c) Reviewed and endorsed the proposed fees for the statutory audits.

(d) Reviewed and approved the non-audit services provided by the external auditors while ensuring there was no

impairment of independency or objectivity. This included monitoring the fee of the total non audit work carried out by

the external auditors so as not to jeorpardise their independence status. In relation to this, the BAC reviewed the

assurance letter from the external auditors confirming their independence throughout the financial year under review.

(e) PGB engaged the external auditors for non-audit services. Total fees paid to the external auditors is as follows:

2016 2015

ParticularsGroup

RM’000CompanyRM’000

GroupRM’000

CompanyRM’000

Audit Fees

• Statutory audit

• Other audit related services fees

43934

27515

377

15

244

15

Total Statutory Audit and Audit Related fees 473 290 392 259

Total Non-audit Fees

• Tax services – – – –

Percentage of Non-audit Fees over Statutory Audit &

Other Audit Related Services Fees – – – –

Risk Monitoring

Reviewed on a 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 PETRONAS GIA supports the BAC in their responsibilities by providing an independent and objective assurance designed

to add value and improve the PETRONAS Group’s operations.

GIA key functions are to assist the Group in accomplishing its goals by bringing a systematic and disciplined approach to

evaluate and improve the effectiveness of risk management, control and governance processes within the Group. The internal

audit function of PGB is carried out by GIA and is currently headed by Asril Rahman Abdul Hadi who reports to the BAC.

PAGE: 202

PETRONAS GAS BERHAD


GIA maintains its impartiality,

proficiency and due professional care,

as outlined in its Internal Audit Charter,

by having its plans and reports directly

under the purview of the BAC. The

BAC has full access to internal auditors

and receives reports on all audits

performed.

GIA performs independent audits in

diverse areas within the PGB including

overall governance and control,

operations, projects, accounting and

financial activities, in accordance with

the risk-based annual audit plan

presented to the BAC for approval.

GIA adopts the Standards and

Principles outlined in the International

Professional Practices Framework of

The Institute of Internal Auditors (IPPF)

and Committee of Sponsoring

Organisation of the Treadway

Commission (COSO) Internal Control

Framework, a comprehensive,

structured and widely used auditing

approach, in conducting the audit

activities. Based on the COSO

Framework, all aspects of controls are

given emphasis in order to ensure risk

is well managed and mitigated.

The audits conducted for PGB during

the financial year under review were:

No. Audit Titles Conducted in 2016

1 Audit on Overall Project

Management Activities of PGB

2 Audit on Operation and

Maintenance of Utilities Kertih,

Export Terminal and Kertih

Shared Marine Facility of PGB

3 Audit on Operations and

Maintenance of Gas

Transmission of PGB

The resulting reports from the audits

were reviewed by the BAC and

forwarded to the auditee’s Management

for the necessary corrective actions.

The auditee’s Management is

responsible for ensuring that corrective

actions are taken within the stipulated

time frame and all outstanding/open

items are reported to the BAC. This is

performed through Quarterly Audit

Status Report (QASR) submitted by the

auditees which will be assessed and

verified by GIA. The consolidated QASR

is submitted and presented to the BAC

for deliberation by PGB Risk

Management Unit.

In addition to the above audit

exercises, GIA also conducted a review

of PGB’s RRPT and RRPT Policies and

Procedures so as to provide assurance

to the BAC that the Policies and

Procedures conforms to the

requirements of Bursa Malaysia and

operations adhered to the Policies and

Procedures.

The said reviews were conducted on a

quarterly basis as well as for the year

ended 31 December 2016.

All internal audit activities for the

financial year under review were

performed in house by 22 internal

auditors from diverse backgrounds and

disciplines such as accounting and

finance, business administration and

management, engineering and

information technology.

GIA undertakes to ensure that the staff

are competent and adequately

equipped in carrying out their duties

and responsibilities by having structured

development programmes and

providing sufficient and relevant

trainings.

The total fees payable to GIA for the

internal audit function of the Company

and the Group for the financial year

was RM668,091.

RISK MANAGEMENT

The Board has established 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.

The Risk Management Unit (RMU) of

PGB has been tasked to conduct

assessment of risks for the PGB Group

of Companies. RMU reports to the BAC

on a quarterly basis or as and when

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 Risk Management are

provided under the SORMIC on page

186 of this Annual Report.

BAC plays a vital role in reviewing the

adequacy and effectiveness of the Risk

Management processes within the PGB

Group. In this regard, BAC reviews and

challenges the ERR which entails

amongst others the risk profile and

status of risk mitigation implementation.

REPORTING TO THE EXCHANGE

For the financial 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.

Habibah AbdulChairman

Board Audit Committee

16 February 2017

PAGE: 203

ANNUAL REPORT 2016

IN COMPLIANCE WITH PARAGRAPH 15.08A OF THE MAIN MARKET LISTING

REQUIREMENTS (MMLR) OF BURSA MALAYSIA SECURITIES BERHAD

(BURSA MALAYSIA), THE NOMINATION AND REMUNERATION COMMITTEE (NRC) OF

PETRONAS GAS BERHAD (PGB OR THE COMPANY) WAS ESTABLISHED ON 14

NOVEMBER 2011. THE NRC IS PLEASED TO PRESENT THE NRC REPORT FOR THE

FINANCIAL YEAR ENDED 31 DECEMBER 2016.

COMPOSITION

As at 31 December 2016, the NRC comprises three Independent Non-Executive Directors. In line with the Malaysian Code on

Corporate Governance 2012 (MCCG 2012), all NRC members including the Chairman are Non-Executive Directors.

The members of the NRC as at 31 December 2016 are:

No. Name of Members Directorate

1 Lim Beng Choon (Chairman) Independent Non-Executive Director

2 Dato’ N. Sadasivan N.N. Pillay Non-Independent Non-Executive Director

3 Habibah Abdul Senior Independent Director

HABIBAH ABDUL HENG HEYOK CHIANG @ HENG HOCK CHENG

DATO’ AB. HALIM MOHYIDDIN

PAGE: 204

PETRONAS GAS BERHAD

NOMINATION AND REMUNERATION COMMITTEE REPORT

NRC members as at 23 February 2017.

As at the date of this Annual Report and as announced to Bursa Malaysia on 2 November 2016 and 9 December 2016

respectively, effective 1 January 2017, both Lim Beng Choon and Dato’ N. Sadasivan N.N. Pillay ceased to be Directors of the

Company. Lim Beng Choon has been succeeded by an Independent Director, Heng Heyok Chiang @ Heng Hock Cheng,

whilst PGB is currently evaluating potential candidates to replace Dato’ N. Sadasivan N.N. Pillay. The NRC wishes to record its

appreciation and gratitude to both outgoing Directors for their contribution and guidance during their tenure as Members of

the NRC.

The NRC is now chaired by an Independent Director, Dato’ Ab. Halim Mohyiddin effective 1 January 2017.

The MCCG 2012 has recommended that the NRC be chaired by the Senior Independent Director of the Company. However,

the Senior Independent Director of PGB currently serves as the Chairman of the Board Audit Committee. As such, the Board

has instead elected Dato’ Ab. Halim Mohyiddin as the Chairman of the NRC in order to have different Directors chairing the

committees so as to leverage on different perspectives and dynamics. This will also ensure that each Independent Director

has equitable roles and responsibilities.

As at the date of the Annual Report, the composition of the NRC is as follows:

No. Name of Members Directorate

1 Dato’ Ab. Halim Mohyiddin (Chairman) Independent Non-Executive Director

2 Habibah Abdul Senior Independent Director

3 Heng Heyok Chiang @ Heng Hock Cheng Independent Non-Executive Director

The current composition of the NRC comprises exclusively Independent Non-Executive Directors, in compliance with the

requirement of Paragraph 15.08A (1) of MMLR, which provides that the NRC must comprise exclusively Non-Executive

Directors, the majority of whom are Independent Directors. This is also in line with the Recommendation 2.1 of the

MCCG 2012.

Based on the Board Evaluation carried out by the Board of Directors (Board), the Board is satisfied with the performance and

effectiveness of the NRC in providing sound advice and recommendations to the Board.

TERMS OF REFERENCE

The NRC is governed by the NRC Terms of Reference (TOR) which are consistent with the requirements of MMLR and

MCCG 2012. The TOR of the NRC are accessible to the public for reference on PGB’s official website at


PAGE: 205

ANNUAL REPORT 2016

MEETINGS

During the financial year under review, the NRC met twice and the attendance of each member is as follows:

No. Name of Members No. of meetings attended

1 Lim Beng Choon (Chairman) 2/2 (100%)

2 Dato’ N. Sadasivan N.N. Pillay 2/2 (100%)

3 Habibah Abdul 2/2 (100%)

Managing Director/Chief Executive

Officer (MD/CEO), Company

Secretaries, Head of Human Resource

Management Division and any other

persons deemed necessary by the NRC

are invited to attend the NRC meeting

and are present for deliberations which

require their input or advice. The

Company Secretaries and the Head of

Human Resource Management Division

act as Joint Secretaries to the NRC.

The NRC meetings for the financial

year 2016 were scheduled in

November 2015 to facilitate the

Members in planning ahead and

incorporating the NRC meetings into

their respective schedules. This also

serves to provide the Members with

ample notice of the meetings.

The agenda and a set of meeting

papers relevant to the business of the

meeting are distributed to the NRC

Members in advance of the meeting

date.

All proceedings of the NRC meetings

are duly recorded in the minutes of

each meeting and signed minutes of

each NRC meeting are properly kept

by the Secretary. The draft NRC

minutes are circulated to the NRC

members subsequent to the NRC

meeting and approved by the NRC

prior to the Board meeting. This assists

the NRC Chairman to effectively

convey to the Board matters

deliberated at the NRC meeting. The

minutes of the NRC are also distributed

to members of the Board for their

notation.

BOARD APPOINTMENT PROCESS

The Company practices a formal and

transparent procedure for the

appointment of new Directors.

Nomination of Directors to the Board

is made either by Petroliam Nasional

Berhad, being the majority shareholder,

or through engagement of a

professional recruitment firm to find

suitable candidates to fill in the

position of Independent Non-Executive

Directors.

In its selection of suitable candidates,

the NRC is guided by the guidelines

stipulated in the Board Selection

Criteria. The guideline will assist the

NRC in evaluating potential candidates

for the purpose of appointment and

re-appointment of Directors with

proper selection criteria that consider

competencies, skills and personal

attributes.

All nominees to the Board are first

considered by the NRC, taking into

consideration a mix of skills,

competencies, experience, integrity and

time commitment required to

effectively discharge his or her role as

a director. Diversity in terms of age,

gender and ethnicity are also

considered in selecting the best

candidate.

PAGE: 206

PETRONAS GAS BERHAD


PROCESS FLOW FOR APPOINTMENT OF A DIRECTOR

Circumstances giving rise to the appointment of Director

The NRC develops and deliberates selection criteria combining

competencies and attributes required

Search for candidates

Assess and shortlist the potential candidates in consultation

with the NRC

Interview shortlisted candidates

Deliberation by the NRC on the suitability of the candidate

PGB Board Approval

Orientation/Induction

Continuous Training & Annual Performance Assessment

In accordance with the Board Diversity Policy of the Company, the NRC is pleased to inform that the Board has successfully

met its target of 30% women Directors in line with the country’s aspirational target of 30% representation of women

Directors on Boards.

The three female Directors on the Board of PGB represents 43% of the current Board Composition.

PAGE: 207

ANNUAL REPORT 2016

DIRECTORS’ RE-ELECTION AND RE-APPOINTMENT

Based on the schedule of retirement by rotation, the NRC is responsible for recommending to the Board those Directors

who are eligible to stand for re-election or re-appointment. The recommendation is based on the performance of the

Directors, taking into account their contribution to the Board through their skills, experience, strengths and qualities in

particular the level of independence and ability to act in the best interests of the Company.

Article 93 of the Constitution of the Company (CC) provides that one-third of the Directors of the Company for the time

being shall retire by rotation at an Annual General Meeting (AGM) of the Company. With the current Board composition and

with exclusions of Directors retiring under other applicable provisions of the CC, one Director is to retire in accordance with

Article 93 of the CC. The eligible Director may seek re-election at the forthcoming AGM.

The NRC at its meeting held on 23 January 2017 had endorsed for Habibah Abdul to retire and seek for re-election at the

34th AGM pursuant to Article 93 of the CC for re-election at the forthcoming AGM.

Article 96 of the CC provides amongst others, that the Board shall have the power to appoint any person to be a Director

to fill a casual vacancy or as an addition to the existing Board, and that any Director so appointed shall hold office until the

next following AGM and shall then be eligible for re-election.

As at the date of this Annual Report, the following resignations and appointments have taken place:

No Resignations Directorships New Appointments Appointment Date

1 Datuk Rosli Boni Non-Executive Director Wan Shamilah

Wan Muhammad Saidi

1 September 2016

2 Ir Pramod Kumar Karunakaran Non-Executive Director Emeliana Dallan Rice-Oxley 1 September 2016

3 Tan Sri Dato’ Seri Shamsul

Azhar Abbas

Chairman Datuk Mohd Anuar Taib 1 January 2017

4 Lim Beng Choon Independent

Non-Executive Director

Heng Heyok Chiang @ Heng

Hock Cheng

1 January 2017

5 Dato’ N. Sadasivan N.N Pillay Non-Independent

Non-Executive Director

Yet to be identified N/A

In view of the above, the following Directors shall retire at the next AGM pursuant to Article 96 of the CC and offer

themselves for re-election:

1. Emeliana Dallan Rice-Oxley

2. Wan Shamilah Wan Muhammad Saidi

3. Datuk Mohd Anuar Taib

4. Heng Heyok Chiang @Heng Hock Cheng

The NRC at its meeting held on 23 January 2017 had recommended to the Board re-election of the above four Directors at

the forthcoming AGM.

PAGE: 208

PETRONAS GAS BERHAD


BOARD EVALUATION

Every year, under the purview of the

NRC, a formal 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 interests of the

Company.

The Board Evaluation assessed the

following areas:

(a) Board Structure;

(b) Board Operations and Interactions;

(c) Board Communications; and

(d) Board Roles and Responsibilities

The NRC had, on 23 January 2017,

reviewed the outcome of the Board

Evaluation for 2016 and initiated

improvement actions.

SUCCESSION PLANNING FOR DIRECTORS

The Board Succession Plan will assist

the Company in ensuring the orderly

identification and selection of new

Non-Executive Directors in the event

of an opening on the Board, whether

such opening exists by reason of an

anticipated retirement, an unanticipated

departure, the expansion of the size of

the Board, or otherwise. In addition, a

thoughtful Succession Planning can

improve the composition and

effectiveness of a Board.

SUMMARY OF ACTIVITIES OF THE NRC COMMITTEE

The following activities were carried

out by the NRC during the financial

year ended 31 December 2016:

(a) Assessment on the effectiveness of

the Board as a whole, the

Committees of the Board, as well

as the contribution of each

individual director through a Board

Effectiveness and Directors’

Evaluation exercise.

(b) Reviewed the performance of

PGB’s Senior Management.

(c) Reviewed the Directors’ Training

Requirements.

(d) Reviewed and endorsed the

re-election of Directors.

(e) Reviewed and endorsed the

nomination of Datuk Mohd Anuar

Taib as the Chairman of the

Company.

(f) Reviewed and endorsed the

nomination of Emeliana Dallan

Rice-Oxley, Wan Shamilah

Wan Muhammad Saidi and Heng

Heyok Chiang @ Heng Hock

Cheng as members of the Board

and Board Committees.

(g) Reviewed and endorsed the NRC

Report for 2015 Annual Report.

(h) Reviewed potential candidates for

PGB Directorship.

(i) Reviewed and endorsed the

Management Fees for PGB’s MD/

CEO.

Dato’ Ab. Halim Mohyiddin

Chairman


Committee

23 January 2017

PAGE: 209

ANNUAL REPORT 2016

THE GROUP PRACTICES A STRUCTURED BUSINESS CONTINUITY MANAGEMENT

(BCM) TO ENSURE CONTINUITY OF THE GROUP’S OPERATIONS AND SERVICES IN

THE EVENT OF DISRUPTIONS OR CRISES

PGB BUSINESS CONTINUITY MANAGEMENT FRAMEWORK

Standards

People

Process

Infrastructure

Risk Profiling &

Control

Business Impact

Analysis

Strategy Selection

Business Continuity

Plan

Test &Exercise

Continual Improvement

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

The Group’s BCM provides a systematic approach from managing its operational risks to building capability towards effective

response during disruptions or crises.

PAGE: 210

PETRONAS GAS BERHAD

BUSINESS CONTINUITY MANAGEMENT

BCM GOVERNANCE

The Risk Management Unit (RMU) is

entrusted with the responsibility of

ensuring effective BCM governance and

implementation in the Group. At

operating divisions, there are focal

persons assigned from the Operational

Excellence and Improvement (OE&I)

Department to drive implementation of

the framework and processes rolled

out by RMU and ensure effective

execution of BCM at the respective

divisions. On regular basis, RMU guides

Divisions to ensure 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.

As set out on page 184 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.

The Group has in place a Gas Supply

Business Continuity Plan (BCP) which

adopts a three-tiered approach in

escalating response to gas supply

disruptions from operations to

management. The BCP will assist the

Group in effectively responding and

managing gas supply disruption. The

Group is also currently enhancing the

BCP for its utilities supply in Kertih and

Gebeng, in particular to formalise the

thresholds for BCP escalation criteria in

responding to utilities supply disruption.

The Company has also formulated BCP

in responding to the inaccessibility of

PETRONAS Twin Towers where its

Head Office operates. An alternate

worksite has been established to

resume its Head Office’s critical

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

being carried out for various level of

staff of the Group.

The Group has various 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.

PAGE: 211

ANNUAL REPORT 2016

PGB IS GUIDED BY

PETRONAS’ SHARED

VALUES OF LOYALTY,

INTEGRITY,

PROFESSIONALISM AND

COHESIVENESS IN

CARRYING OUT OUR

BUSINESS ACTIVITIES.

CODE OF CONDUCT AND BUSINESS ETHICS (CoBE)

CoBE outlines the ethical conduct

expected of our employees, Directors

as well as third parties working for or

on behalf of the PETRONAS Group.

Among the pertinent areas covered in

the code are conflict of interest,

anti-corruption, competition, anti-

money laundering, international trade

and export controls.

The code also places emphasis on

discipline, good conduct,

professionalism, loyalty, integrity and

cohesiveness – all principles that are

critical to the success and well-being

of the Company. Contractors,

sub-contractors, consultants, agents,

representatives and others performing

work or services for or on behalf of

the Company are required to comply

with the relevant parts of the CoBE

when undertaking such work or

services.

The CoBE and supporting documents

are available on our corporate website

at www.petronasgas.com.

ANTI-BRIBERY AND CORRUPTION COMPLIANCE PROGRAMME

PETRONAS mandates zero tolerance

for all forms of bribery and corruption,

and has implemented a No Gift Policy

since 1 April 2012. The PETRONAS

Integrity Compliance Framework (PICF)

which was developed to inculcate a

stronger culture of ethics and integrity

within the Company, and complement

the CoBE focusing on: Policies and

Procedures, Systems and Processes,

and People and Culture.

An Anti-Bribery and Corruption (ABC)

Manual has been developed to

supplement the general policy

statements set out in the CoBE on

fighting corruption and unethical

practices. The ABC Manual, applicable

across the PETRONAS Group, contains

detailed explanation on procedures for

dealing with improper solicitation,

bribery and corruption, as well as

addressing ethical issues in sensitive

situations.

This includes dealing with gifts,

entertainment and corporate hospitality;

facilitation payments; dealing with third

parties, including promoting PETRONAS’

whistleblowing channels to all

employees as well as third parties.

Mandatory online ABC training was

rolled out in December 2015 to all

staff. The ABC Manual is also available

online at www.petronasgas.com.

All employees are required to adhere

strictly to the provisions on anti-bribery

and corruption stipulated in the CoBE

as well as ABC Manual. The Company

may suspend an employee when

investigating a suspected breach of

CoBE or law on internal procedures.

We may also institute disciplinary

action against an employee should

findings reveal concrete and cogent

evidence in support of the alleged acts

of misconduct. Consequences of

breaching the CoBE include dismissal,

among others.

Managing Bribery and Corruption Risks

To further strengthen the Group’s

anti-bribery and corruption compliance

programme, PETRONAS introduced a

Compliance Desktop in 2015. This

integrated solution provides online

training on the ABC Manual, and an

online register for employees to

declare gifts, entertainment and

conflicts of interest, while facilitating

compliance activities related to third

party screening and due diligence.

PAGE: 212

PETRONAS GAS BERHAD

INTERNAL POLICIES

WHISTLEBLOWING POLICY AND PROCEDURES

The Whistleblowing Policy launched by

PETRONAS in 2012 allows employees

and members of the public to disclose

any improper conduct, criminal offence

or malpractice to the Company. Under

the policy, a whistleblower will be

accorded with protection of

confidentiality of identity to an extent

that is practicable. An employee who

whistleblows internally will also be

protected against any adverse actions

for their disclosure, to an extent that is

practicable, provided that the disclosure

is made in good faith.

Such protection is accorded even if

subsequent investigations reveal that

the whistleblower was mistaken as to

the facts or the rules and procedures

involved. The Whistleblowing Policy

and related procedures are accessible

to the public for reference on the



HEALTH, SAFETY AND ENVIRONMENT (HSE) POLICY

Managing the safety of people, assets

and the environment is PGB’s top

priority. The emphasis is to develop

adequate and effective controls on

identified Health, Safety and

Environment (HSE) risks.

The HSE Policy governs and reinforces

our commitment to safeguarding our

employees, and to preserving the

reliability of our facilities and

operations. This, in turn, translates into

efficient business activity. The Policy,

which is applicable to all employees

and third-party service providers, is

supported by an HSE Mandatory

Control Framework (MCF) to strengthen

HSE Governance within the Company

while providing clear requirements on

operational safety, environment and

health for consistent and effective

implementation.

HUMAN RIGHTS

The Human Rights Commitment was

launched by PETRONAS in October

2015 and has subsequently been

adopted by PGB, underlining our

allegiance to respecting internationally

recognised human rights principles,

laws, best industry practices and

standards in managing our operations.

The Commitment is applicable to all

employees of PGB, our contractors,

subcontractors and any third parties

within our premises or performing

work and/or business for or on behalf

of PGB. It complements the CoBE,

Anti-Bribery and Corruption (ABC)

Policy and Whistleblowing Policy.

Human Rights is embedded across the

five key areas within PETRONAS’ Social

Performance Framework that could

potentially affect our operational

activities namely Health, Safety,

Environment, Security and Socio-

economic and Cultural.

Among others, the Commitment

addresses labour and working

conditions for contractors, third-party

security, the supply chain and

community well-being.

PAGE: 213

ANNUAL REPORT 2016

Sungai Paka, Terengganu

SUSTAINABILITY REPORTING

218 About This Report

220 Sustainability Highlights

222 Sustainability Framework

226 Sustainability Statements

226 Economic

230 Environment

236 Social

07

Corporations exist within ecosystems, and their long-term

sustainability depends largely on the value they are able to

bring to the stakeholders within these ecosystems. Broadly

speaking, these values are linked to the Economic,

Environmental and Social (EES) well-being of their

stakeholders and the natural environment surrounding their

operations.

We have been disclosing our non-financial performance in

the Corporate Responsibility (CR) sections of the previous

Annual Reports. This is our first effort in producing a new

format of Sustainability Report, which highlights the key EES

initiatives.

Information in this report covers the sustainability efforts

undertaken by PGB and our regional offices nationwide

throughout the 12-month period from 1 January to

31 December 2016. Views and feedbacks from our

stakeholders have been compiled to help us identify,

prioritise and address material sustainability issues in our

business strategies. We endeavour to report all issues which

are material to the Company and our stakeholders, as

determined by our policies, surveys, analyses of internal

documents, interactions and media reports. We acknowledge

that there will be gaps in our disclosure, but we are

committed to strengthening our internal mechanisms to

monitor, report and verify key data each successive year.

SCOPE

PETRONAS GAS BERHAD (PGB)

RECOGNISES THAT THE

SUCCESS OF A COMPANY IS

MEASURED NOT ONLY BY ITS

PROFITABILITY BUT ALSO THE

MANNER IN WHICH IT IS BEING

ACHIEVED.

PAGE: 218

PETRONAS GAS BERHAD

ABOUT THIS REPORT

In producing this report, we are guided by the local and

international statutory and reporting frameworks, particularly

Bursa Malaysia Securities Berhad (Bursa Malaysia)’s newly

introduced guidelines relating to Sustainability Statements as

well as the FTSE Environmental, Social and Governance

(ESG) assessment indicators.

We value feedbacks and welcome comments on our

reporting. Please direct them to:

PETRONAS Gas Berhad

Sustainability Reporting Team

Corporate Affairs

PETRONAS Gas Berhad

Level 51, Tower 1, PETRONAS Twin Towers

Kuala Lumpur City Centre

50088 Kuala Lumpur

Malaysia

or email: [email protected]

APPROACH FEEDBACK

PAGE: 219

ANNUAL REPORT 2016

Board Leadership Team

PAGE: 220

PETRONAS GAS BERHAD

SCORECARD

ECONOMIC

ENVIRONMENT

SOCIAL

100%

Dividends

HSSE

EMPLOYEES

COMMUNITIES

Profit After Tax

Revenue

Product Delivery Reliability

62

0

3

43% 38%

38%

96%

6 LTI

2,117 31.7

4.6

2

3%4.0

1.7

5,044 2,152RM42.1

sen

fatalities

RM

RM

RM

billion

million

tonnes Co2e

million

million

billion

billion

mmscfdhectares

2015: 60 sen

2015: 0

2015: 1

2015: 13% 2015: 33%

2015: 10%

2015: 93%

2015: RM4.5 billion

2015: 5

2015: RM1.7 billion

2015: 5.6 million tonnes Co2e

LAND NATURAL GAS

MARKET CAPITALISATION

MALAYSIAPOPULATION*

EMPLOYEES

(salesgas,

power, steam)

* source: Department of Statistics Malaysia

Lost Time Injury Major Fire

Women Composition

CARBON EMISSION Sayangi Sungai Paka

WATER RECYCLED

Permanent Employees

PROGRAM

SENTUHAN

KASIH

PETRONAS

PGB

LIVELIHOOD

PROGRAMME

PROGRAM

SENTUHAN

ILMU

allocated for

waste disposal

effort

annual target on reduction in waste disposalEcosystem baseline assessment

SU

STA

INA

BIL

ITY

HIG

HLIG

HTS

PAGE: 221

ANNUAL REPORT 2016

KEY MILESTONE

2005 - 2010

20112012

2013

2014

2015

2016

• Program Sentuhan

Kasih PETRONAS

• Building Leaders

Programme

• Acid Gas Oxidiser

(AGO) to reduce acid

gas emission

• Certified with MS ISO

14001:2004 (Environmental

Management System)

• Implemented 4G Initiative

(Green Care, Green Mind, Green

Ownership and Green Growth)

• 32% savings of waste

handling costs resulted

from 4G Initiative

• Implementation of

Program Bakti

Pendidikan (PBPP), which

is now rebranded as

Program Sentuhan Ilmu

PETRONAS (PSIP)

• 50% reduction of energy

consumption resulted from 4G

Initiative

• Seeding Programme to develop

future talents by recruiting fresh

graduates

• PGB greenhouse gas emission

reporting enhancement via

SANGEA® software

• Commissioning of Flare Gas

Recovery Unit (FGRU), resulted

in flaring emission reduction

• Mercury management through

HycaptureTM Hg

• Installation of high pressure

online washing at Gas Turbines

inlet to reduce energy

consumption

• Installation of cogeneration

(COGEN) unit

• Collaboration with Malaysian

Nature Society (MNS) to

preserve the biodiversity of

Sungai Paka

• Collaboration with Yayasan

Salam Malaysia on the

Livelihood Programme

• Certified with ISO 14001:2015 (Environmental Management System)

• Developed a structured Leak Detection and Repair (LDAR)

programme to monitor fugitive emission

• Installation of Predictive Emission Monitoring System (PEMS)

• Accelerating Culture Change (ACC) programme

SU

STA

INA

BIL

ITY

HIG

HLIG

HTS

SUSTAINABILITY GOVERNANCE

At PGB, leadership sustainability is part of our organisational approach and is led by the Leadership Team (LT), who oversees

and ensures the Group pursues our regulatory and commercial objectives and remain as a responsible organisation. Relevant

sustainable policies are approved by the Board for implementation.

The LT is supported by our Health, Safety and Environment Steering Committee (HSESC) and sustainability material matters

are reported on a regular basis to the Plant Leadership Team (PLT), LT and Board Audit Committee (BAC). We believe such

cross-functional approach helps us to better identify and manage material issues arising across all our businesses.

These material issues are taken into consideration during our decision-making processes and set the direction for our

sustainability initiatives. The LT also enhances our risk management and contribute to the development of effective

stakeholders’ communication.

Code of Conduct and

Business Ethics (CoBE)

Anti-Bribery and

Corruption Policy and

Guidelines

Health, Safety and

Environment (HSE) Policy

HSE Management System

and Mandatory Control

Framework

Sustainable Development

Management System

Corporate Sustainability

Framework

Carbon Commitments

Energy and Loss

Management System

Water Management Guide

Human Rights

Commitment

PETRONAS Technical

Guidelines on Social Risk

Assessment, Human Rights

Due Diligence and

Grievance Mechanism

Our sustainability efforts are guided by a robust framework as follows:

Our sustainability effort focuses on our management of Economic, Environment and Social (EES) risks and opportunities.

PAGE: 222

PETRONAS GAS BERHAD

SUSTAINABILITY FRAMEWORK

SUSTAINABILITY ENVIRONMENT

GOVERNANCE

ECONOMIC

SOCIETY

01

02

03

04

05

06

PGB

Transformation

programme

Internal documents

such as business

plans and

management

reports

PETRONAS’ Corporate

Sustainability

Framework

Input from our

operations, businesses,

shareholders and

stakeholders

Media reports

about the

Company

Sustainability

Reporting guidelines

and assessment

requirements

Cost Reduction

IDENTIFYING MATERIALITY

Elements of material sustainability are embedded into the Company’s business strategy to deliver excellence in our operation

and project deliveries underpinned by the Transformation programme to boost our resilience especially during the current

low oil price environment. The content of this report was generated by reviewing several internal and external sources of

information as well as findings, which were then deliberated with our internal subject matter experts in various steering

committees.

The following resources are assessed to identify sustainability materiality:

We are committed to continuously enhance our reporting process along with improved materiality mapping. We

acknowledge that a comprehensive exercise will require time and resources as it would entail obtaining inputs from our

various internal and external stakeholders. We will continue to undertake greater stakeholder engagement through formal and

informal channels.

PAGE: 223

ANNUAL REPORT 2016

Key input Impact to strategyHow we create valueHow we engage

• Financing (equity and debt

funding)

• Highly engaged investors

• Quarterly result announcements

and financial reports

• Audited Financial Statements

• Annual General Meeting

• Analysts & Investors briefing

• PGB website

• Plant visits

• Conferences

• Investor Relations

• Capital growth

• Sustainable dividend

• Good corporate governance

• Optimal gearing ratio

• 100% Product Delivery

Reliability

Key input

Key input

Impact to strategy

Impact to strategy

How we create value

How we create value

How we engage

How we engage

• Incentives (tax)

• Property, plant and

equipment

• Demand

• Revenue

• Continuous engagement

through formal and informal

events

• Constructive feedback

sessions

• Participate in surveys, forum

& reporting

• Seek consultation

• Sponsorship

• Corporate Integrity Pledge

• Satisfaction survey

• Customers feedback system

• Customers relationship

management

• PGB website

• Consultation meetings

• One-to-one engagement

• Diligent taxpayer

• Conformance to legislation

and license requirements

• Reduction of waste

• Corporate social investment

and job creation

• Managing environment

impact

• Health and safety assurance

• Quality products and services

• Security of supply

• Responsive to customers'

need and feedback

• ZERO Non-Compliance


Reliability

Customers

CREATING VALUE TO STAKEHOLDERS

Building credibility, trust and mutual respect with our stakeholders is crucial to PGB as these relationships have a direct and

indirect impact on our business. During the year under review, we continued to engage actively with our various stakeholder

groups in ways that are meaningful to each.

Investors & funding institutions

Government agencies authorities

PAGE: 224

PETRONAS GAS BERHAD

Key input Impact to strategyHow we create valueHow we engage

• Intellectual capital (system &

process)

• Financing equity funding

• Specific knowledge and skills

• One-to-one engagement

• Contractors forum

• Joint venture meetings

• Supply chain management

• No Gift Policy

• Code of Conduct and

Business Ethics

• Corporate Integrity Pledge

• Timely payment

• Business opportunity

• Profit sharing

• Fair treatment

• ZERO HSE Incident


• ZERO Interruption


Reliability

Key input

Key input

Impact to strategy

Impact to strategy

How we create value

How we create value

How we engage

How we engage

• Demand

• Growth opportunity

• Intellectual property

• Specific knowledge, skills

and expertise

• Highly ethical employees

practising PETRONAS

Cultural Belief

• Through Corporate Social

Investment programmes

• Providing once-off relief

assistance to the

underprivileged families in

area of our operations

• Responding to request from

our strategic stakeholders

through monetary

contributions

• Employee survey

• Performance Management

System

• Periodic union meetings

• Training and attachment

programme

• Regular leadership

engagement sessions

• Internal newsletters & intranet

• Badan Rekreasi & Kebajikan

Sukan (BRKS)

• Badan Kebajikan Islam

PETRONAS (BAKIP)


• Social engagements

• Managing of environmental

impact

• Social economic

• Philanthropic assistance

• Sponsorship/donation

• Job security

• Performance management

• Competitive remuneration

• Career progression

• Competency and capability

management


• Engagement


• Product Delivery Reliability



• ZERO Interruption


Reliability

• Efficient & Sustainable

System & Work Process

• Highly Engage & Capable

Workforce

Business partners and suppliers

Communities

Employees and unions

PAGE: 225

ANNUAL REPORT 2016

ECE

PGB CONTRIBUTES TO THE ECONOMY OF THE COUNTRY THROUGH THE SUPPLY OF GAS TO THE MALAYSIA’S POWER

SECTOR, WHICH CHANNELS POWER SUPPLY TO THE WHOLE NATION. TO ENSURE ECONOMIC

SUSTAINABILITY, WE ARE COMMITED TO MAINTAIN HIGH PLANT AND PRODUCT DELIVERY RELIABILITY.

THIS TRANSLATES INTO A SUSTAINABLE PERFORMANCE AND SUSTAINABLE RETURN TO

OUR SHAREHOLDERS.

ECONOMICSUSTAINABILITY

It is essential that our shareholders receive consistent and positive economic returns such as dividends and share capital

appreciation from their investments in PGB to protect and add value to their wealth portfolios. Our major shareholders, such as

PETRONAS, the Employee Provident Fund (EPF) and Kumpulan Wang Persaraan (Diperbadankan) (KWAP), indirectly distribute their

wealth to the Government and public communities. The performance of their investments in PGB therefore has a significant impact

on the economic well-being of the nation.

In our pursuit for profits through the generation of revenue, PGB has contributed to its stakeholders through various activities

including procurements, servicing taxes and giving employment opportunities. These economic outflows benefit our shareholders,

vendors, employees and the Government.

PAGE: 227

ANNUAL REPORT 2016

In line with our vision for sustainable growth, we are continuously evolving our services to meet the needs of the industry

and we continuously seek opportunities to invest in technology, asset integrity and business growth.

Power Steam Salesgas Regasification Transmission

Reliability (%)

98

.8

96

.497.

8

94

.5

95

.997.

9

99

.2

99

.2

99

.4

99

.96

99

.92

99

.92

98

.4

86

.3

79

.2

’14 ’15 ’16 ’14 ’15 ’16 ’14 ’15 ’16 ’14 ’15 ’16’14 ’15 ’16

Performance Based Structure (PBS) income

million

RM68.8

INVESTING IN ASSET INTEGRITY

PGB plays major role in gas value chain by processing, regasifying and delivering gas to power sector which subsequently

channel power supply to the whole nation as well as non-power sector. Security of gas supply is therefore of national

interest as it significantly impacting the nation, Malaysia economy and livelihood of people.

The Group therefore ensures high plant reliability via five-year integrated maintenance plans through which we conduct

reactive and preventive repair and maintenance, major repair and maintenance, major inspections and turnarounds, as well as

revamp and rejuvenation programmes in addition to acquiring or constructing new major assets. We also conduct studies on

life cycle improvement and modernisation of assets.

As part of the 3ZERO100 Transformation programme, we have invested significantly in improving our assets integrity and

reliability. As a result of various strategic initiatives focusing on Key Result Areas (KRAs), we successfully delivered

commendable operational performance, with our plants attaining world-class standards, recording higher reliability as well as

Overall Equipment Efficiency (OEE) and attaining 100% product delivery. This has also resulted in additional revenue through

the Performance Based Structure (PBS) income.

INVESTING IN TECHNOLOGY

PGB has invested on Gas Processing Plant (GPP) Ethane Recovery Improvement

initiative which contributed to the higher ethane production and delivery as well

as subsequently improvement to the PETRONAS value chain. PGB has also

invested on RGT Export Compressor (RGTEC) project which is currently ongoing.

The RGTEC project aims to allow our LNG Regasification Terminal in Sungai

Udang (RGTSU) to be on standby mode with zero send out without flaring. This

will enable RGTSU to recover the Boil off Gas and send it to the pipeline, which

in return results to zero flaring. The cost of flaring based on current gas price

(approximately USD6 per mmbtu) is estimated to be USD67,000 per day.

SUSTAINABILITY STATEMENTS – ECONOMIC

PAGE: 228

PETRONAS GAS BERHAD

Value creation to stakeholders:

GOVERNMENT

EMPLOYEES

SUPPLIERS

INVESTING IN BUSINESS GROWTH

PGB has entered into two new projects in Pengerang Integrated Complex (PIC). The LNG Regasification Terminal in Pengerang

(RGTP) is progressing well and is expected to provide primary gas supply to the Refinery and Petrochemical Integrated Development

(RAPID), the Pengerang Cogeneration Plant (PCP) as well as the existing Peninsular Gas Utilisation (PGU) pipeline network.

During the year, PGB has formed a joint venture company with one of the world’s leading industrial gas player, Linde

Malaysia Sdn Bhd to undertake development of the Air Separation Unit (ASU) plant in the PIC. The ASU will be the sole

facility for the supply of industrial gaseous to PIC customers.

These projects is expected to contribute positively to PGB’s bottom line.

INVESTING IN TECHNOLOGY

INVESTING IN ASSET INTEGRITY

REVENUE

PROFIT AFTER TAX

INVESTING IN BUSINESS GROWTH

DIVIDEND

SUSTAINABILITY MATTERS

HOW THEY ARE MANAGED

WHY ARE THEY IMPORTANT

We continuously seek

opportunities to grow our

revenue and profit by:

Additional capacity ofOxygen

Nitrogen

Nm3/hr

Nm3/hr

41,00025,900

Additional capacity of

via RGTPmmscfd490

1.2RM

billion2015: RM1.1 billion

Return to shareholders

Gas supply for power generation

to the country

PAGE: 229

ANNUAL REPORT 2016

4.6RM


1.7RMbillion

2015: RM1.7 billion

122RM

million2015: RM169 million

282RM

million2015: RM283 million

31.7Malaysia population

1.4RM


TAX PAID TO

PAYMENT TO

SALARIES

MALAYSIA

GOVERNMENT

SUPPLIERS

Economic and livelihood of

million

PGB SUPPORTS THE GOVERNMENT’S NATIONAL DETERMINED CONTRIBUTION (NDC) BY

PROMOTING NATURAL GAS AS LOW CARBON FUEL FOR THE POWER AND MANUFACTURING

SECTORS, IN ADDITION TO DELIVERING ENERGY EFFICIENCY IN ALL OF OUR

OPERATIONS.

EVENVIRONMENTSUSTAINABILITY

Sungai Paka, Terengganu

PAGE: 231

ANNUAL REPORT 2016

COMPLYING TO ENVIRONMENTAL, LEGAL AND OTHER REQUIREMENTS

Towards this end, we have taken steps to manage the

impact of our operations on the environment. We are also

committed to further enhancing our sustainability approach

and disclosure, and identifying other environmental matters

that may be material to our business.

We achieved another year of 100% compliance with

regulatory requirements. During the year under review, PGB

was certified with ISO 14001: 2015 Environmental

Management System by SIRIM Berhad. We also carried out

periodic cross-departmental peer reviews on compliance as

part of internal assurance programmes in the area of

environment management.

To further strengthen our regulatory compliance assurance,

we have implemented an online Legal Easy System

which enables easy interpretation of legal and regulatory

requirement, and helps the evaluation of regulatory

compliance and action tracking to be more efficient.

SUSTAINABILITY STATEMENTS – ENVIRONMENT

PAGE: 232

PETRONAS GAS BERHAD

REDUCING AIR AND CARBON EMISSIONS

To comply with the Clean Air Regulation 2014, we have developed a structured Leak Detection and Repair (LDAR)

programme to monitor and track fugitive emissions. We are installing Continuous Emission Monitoring Systems (CEMS) and

Predictive Emission Monitoring Systems (PEMS) at our plants. In 2016, we set up a PEMS at one of our auxiliary boilers in

Gas Processing Santong (GPS) in Kertih, Terengganu. This has resulted in reduction of greenhouse gas (GHG) and air

emissions by about 20%.

In 2016, PGB’s annual GHG emissions amounted to 4.0 million tonnes CO2e

which is reduction compared to GHG emissions in

year 2015. The reduction was primarily driven by improvements at flared gas recovery units and cogeneration plants installed at

our Gas Processing Kertih (GPK) and GPS. Furthermore, the GHG accounting software was upgraded and more accurate emission

factors were applied, which improved the overall GHG.

Natural gas

firing Natural gas

firing

PAGE: 233

ANNUAL REPORT 2016

FLARE STACKS

FGRU FLARE STACKS

BOILERBOILER

Flare gas from

processing

plants

WITHOUT FGRU WITH FGRU

Flare gas from

processing

plants

Flare gas recovered

carbon, filters and other contaminated scheduled materials

to the recovery company. As a result, we achieved the 3%

waste reduction for 2016, which translated into savings of

almost RM800,000.

We have also enhanced our IETS at the Gas Processing

Santong (GPS) which focused on the sludge and chemical

treatments as well as the Dissolve Air Floatation (DAF). This

is part of our efforts to effectively manage the waste and

water quality, to meet the DOE standard before discharging

it into the monsoon drain.

IMPROVING ENERGY EFFICIENCY

Our energy saving efforts are undertaken through monitoring

of our performance on a monthly basis via the Energy Index.

For the year under review, the energy consumption for PGB

was 48,190,373GJ.

Gas Processing Kertih, Terengganu.

MANAGING WASTE AND EFFLUENT

PGB is committed to managing our hazardous and non-

hazardous wastes in accordance with regulatory

requirements. We have invested in Industrial Effluent

Treatment System (IETS) to treat our industrial effluent to be

in compliance with parameters standard set by the

Department of Environment (DOE). In 2016, a total of RM2.0

million has been allocated to ensure our waste is disposed

properly at identified premises in Malaysia by Kualiti Alam

Sdn Bhd and TRIENEKENS Sdn Bhd.

Having set a target of reducing our waste by 3% annually,

we explored the option of chanelling some of our waste to

a recovery company (that uses waste as raw material to

generate secondary products). To ascertain the viability of

this option, we first identified the most significant wastes

generated at our facilities and had these analysed at an

accredited laboratory. Based on the lab results, we are

satisfied that it is safe to dispatch used lube oil, activated

SUSTAINABILITY STATEMENTS – ENVIRONMENT

PAGE: 234

PETRONAS GAS BERHAD

CONSERVING WATER

Our operations, maintenance and

non-process activities all consume

water. We measure our water

consumption based on freshwater

usage in m3 and percentage of

recycled water from freshwater usage.

We consumed a total of 6,424,751 m3

of water in 2016, 38% of which was

recycled for operations and

maintenance purposes. Water

conservation forms part of our

environmental agenda, and the

programme initiated by our

Demineralised Water Unit, Utilities

Kertih, has been recognised for its

excellence in an Environment

Campaign Competition within the

PETRONAS Group of Companies.

PRESERVING BIODIVERSITY

In 2016, we entered the second year

of a collaboration with the Malaysian

Nature Society (MNS) to preserve the

biodiversity of Sungai Paka in

Terengganu. As a mangrove ecosystem,

Sungai Paka presents an ideal habitat

for fish to lay eggs and for fry to grow

due to low predatory pressure and

abundant source of food biodiversity.

However, a preliminary year-long study

we undertook on birds, mammals,

insects, fish and plants in and around

the river showed that the Sungai Paka

ecosystem is under stress from human

interference. The study involved

engagement with 14 families living

along the river as well as sampling of

17 genus and 18 species by PGB

employees, MNS volunteers and the

relevant local authorities. More

extensive studies will follow in 2017

along with several planned activities

such as planting of river vegetation,

catch-and-release of selected fish

species and throwing of mud balls, to

help rejuvenate Sungai Paka.

Volunteers among PGB staff, Paka community and school children collecting samples from Sungai Paka.

MSN volunteer inspecting the river plants.

PAGE: 235

ANNUAL REPORT 2016

SSCS

OUR PEOPLE AND THE COMMUNITY SURROUNDING OUR OPERATIONS MATTER MOST TO US. WE HELP TO PROTECT,

ELEVATE AND NURTURE THE TALENT OF OUR PEOPLE AS WELL AS THE COMMUNITY.

OUR CULTURE BELIEF AND VALUES GUIDE US TO BUILDING A STRONGER INSTITUTION THAT HAS

LONG TERM SUSTAINABILITY AND ENDURING VALUE THAT BENEFIT BOTH THE COMMUNITY

AND OUR PEOPLE.

SOCIAL SUSTAINABILITY

PAGE: 237

ANNUAL REPORT 2016

We focus on the employee and communities for our social sustainability with the upmost focus is on health and safety.

INSTILLING HEALTH AND SAFETY CULTURE

Safety considerations are embedded in all that we do, where every person is entrusted to collectively take ownership in

upholding safety. Technically complex operations with diverse and multidisciplinary teams of people are subjected to

stringent PGB HSE standards.

Great emphasis is placed on the PETRONAS Zero Tolerance (ZeTo) Rules, applicable to all personnel working at PGB’s assets

and facilities, with compliance being monitored by top Management.

Efforts to raise awareness on Health, Safety, Security and Environment (HSSE) matters were also led by the Leadership Team

(LT) through regular Management walkabouts, engagement sessions with internal and external stakeholders to foster shared

accountability on HSSE matters, including learning from internal and external incidents.

The key elements in embedding the health and safety culture are illustrated as below:

BOARD OF DIRECTORS

LEADERSHIP TEAM

EMPLOYEESOVERSIGHT

PERFORMANCEMONITORING

COMPLIANCE

EMPLOYEES'INVOLVEMENT

RISKASSESSMENT

POLICY

01 06

02

03 04

05

SUSTAINABILITY STATEMENTS – SOCIAL

PAGE: 238

PETRONAS GAS BERHAD

Health and Safety Oversight

EMPLOYEES & UNIONS COMMUNITIES BUSINESS PARTNERS &

SUPPLIERS

GOVERNMENT

AGENCIES &

AUTHORITIES

BOARD

BOARD AUDIT COMMITTEE

PGB LEADERSHIP TEAM

GPU PLANT LEADERSHIP TEAM

GTR PLANTLEADERSHIP TEAM

The Board is generally entrusted with the overall governance of the Company, as well as to safeguard the Company’s assets

together with the Health and Safety of all stakeholders.

Oversight of Health and Safety are as follows:

Oversight Authority Frequency of Health and Safety matters presented and deliberated

Board Quarterly

Board Audit Committee Quarterly

PGB Leadership Team Monthly

GPU Plant Leadership Team Monthly

GTR Plant Leadership Team Monthly

PAGE: 239

ANNUAL REPORT 2016

Performance Monitoring

Regrettably, PGB has recorded three

fatalities involving contractor workers in

2016, despite its effort to improve the

safety and health performance in the

Company, with a clean fatality incident

recorded in the year before.

The Loss Time Injury Frequency (LTIF)

has thus increased from the previous

year of 0.31 to 0.37 in year 2016 (in

year 2014, LTIF – 0.53). The

unfortunate incidents serve as a painful

reminder that we need to do more to

improve the current HSSE standards, in

particular in managing contractor,

through a more rigorous safety

awareness and assurance programmes.

With the implementation of HSSE

culture improvement programme –

Winning Hearts and Minds towards a

generative safety culture rolled out to

all staff across 17 operating facilities in

PGB, the similar safety programme will

have to be expanded to contractor as

part of safety improvement programme.

Compliance

In 2016, we have continued with another

year of compliance to safety, health,

legal and regulatory requirements

without any fines or compounds. During

the year under review, 13 (76%) of PGB

site facilities have been certified with ISO

18001 Occupational Health and

Management System.

We have embarked on Operational

Excellence Management System

(OeXMS), streamlining all PETRONAS

HSE Management System (HSEMS), HSE

Mandatory Control Framework (MCF),

ISO requirement into operational work

flow and procedures. We conducted

the inaugural OeXMS Management

System Review in year 2016, identifying

implementation gaps for improvement

from frontline to management level.

The OeXMS Management System

Review was attended by corporate

management representatives, operating

divisions’ management representative

and staff representatives.

In addition to the inaugural OeXMS

Management System Review, we

manage our safety and health through

a periodic HSE and Operational

Excellence Steering Committee chaired

by our Managing Director/Chief

Executive Officer at the corporate level;

and HSSE Leadership Meeting chaired

by the Operating Divisions’ Heads at

the Operating Divisions level, enabling

issues escalation and resolution.

We have completed one of our HSSE

key result area in strengthening the

regulatory compliance assurance,

through the implementation of online

Legal Easy System. It enables easy

interpretation of legal and regulatory

requirement, which helps the

evaluation of regulatory compliance

and action tracking to be more

efficient.

Policies

PGB is committed to Health, Safety,

Security and Environment (HSSE)

excellence in all its activities, with the

HSSE risks identified and managed to

as low as reasonably practical. We

manage identified HSSE risks to ensure

integrity of assets in safeguarding our

workforce, third party personnel and

the community living around the

operating facilities. This commitment is

stated in our HSSE Policy. The policy

statement encompasses its employees,

as well as its contractors.

The commitment towards safety is

extended with Stop Work Policy, which

empower staff, contractors or partners

at the frontline to stop any work

should any immediate risk arise that

would cause harm to people or

damage the environment.

In managing our HSSE activities, we

adopt PETRONAS HSEMS and

PETRONAS HSE MCF.

Our safety considerations in our

operations are subjected to the

stringent requirement of the PETRONAS

HSE Management System and

PETRONAS Technical Standards. We

leverage on the lesson learnts and best

practices across the PETRONAS Group

of Companies that are updated to the

PETRONAS Technical Standards.

The HSSE requirements are cascaded

to members of the workforce and

contractors via various platforms such

as contractual obligations, formal and

informal engagement sessions,

including other means of

communication such as trainings and

briefings. Assurance programmes are

established to review and verify the

effectiveness of the HSSE controls. The

approach to safety involves ensuring

the design, technical and operational

integrity of assets, focusing on the

adequacy as well as effectiveness of

control barriers.

Risk Assessment

In line with the PETRONAS HSE

Management System (HSEMS) and

PETRONAS Technical Standards (PTS),

risks relating to our activities are

managed to ensure they are mitigated

to as low as reasonably practical.

Occupational safety and health as well

as process safety related risks are

managed not only at enterprise level

but also at operational level.


PAGE: 240

PETRONAS GAS BERHAD

At enterprise level, major safety and

health risks are identified, assessed

managed and reviewed periodically

through the PGB Enterprise Risk

Register and Plant and Facilities Risk

Register.

At operational level, different risk

assessments are used on activity-based,

such as Hazard and Operability Study

(HAZOP), WHAT-IFs, Process Hazard

Analysis (PHA), Layer of Protection

Analysis (LOPA), Health Risk Assessment

(HSA), Chemical Health Risk Assessment

(CHRA), Job Hazard Analysis (JHA).

Operational hazards are also identified,

assessed, registered and managed

through Hazard and Effect Register

(HER), as part of Hazard and Effect

Management programme. In the year

under review, with the collaborated

effort with PETRONAS Group, we have

obtained the approval from Department

of Occupational Safety and Health

(DOSH) in using a Generic Chemical

Health Risk Assessment (CHRA) on Gas

Transmissions, thus providing a more

consistent, time and cost saving

approach in managing chemical risk.

Operating with hydrocarbon hazards,

managing fire safety has always been

one of the safety focuses. We have

embarked on Fire Safety Assessment

exercise at our facilities, which includes

tier-1 and tier-2 assurance programme

on fire safety based on the PTS on

Management of Fire Protection System.

In addition, adequacy of fire safety

protection system of RGTSU, our only

offshore operation facility, was also

reviewed, based on the latest PTS

requirements.

PAGE: 241

ANNUAL REPORT 2016

Employees’ Involvement

PGB adopts a holistic approach on safety across its business value chain in Malaysia.

The following activities are continuously carried out by employees to strengthen existing controls for identified HSSE risk

areas:

(i) Safety Process

We work towards enhancing the design, technical and operational integrity of our assets by deploying engineering

solutions based on internationally accepted codes and standards on process safety. This means, Design it Right, Operate

it Right and Maintain it Right in line with the requirements of PETRONAS’ HSEMS and MCF. The ultimate aim is to

protect the environment and ensure continual improvement of the Company’s HSSE management and performance. This

includes preventing Loss of Primary Containment (LOPC).

HSSE AT HEART PROGRAMME

STAFF

Safety Processes

Capability Development

Emergency Preparedness and Crisis

Management

Fire Safety Assessment

2,117


PAGE: 242

PETRONAS GAS BERHAD

(ii) HSSE Capability Development

PGB’s frontline personnel are the centre to the

Company’s growth and contribute significantly towards

HSSE value creation, a central component for enhanced

operational excellence. Considering this, three areas of

specialisation, particularly operation safety, industrial

hygiene, and occupational health were included as part

of the Technical Trade Specialist (TTS) framework for

non-executives. This scheme, while providing an

alternative career progression opportunity, retains the

tacit technical knowledge and niche HSSE skills.

We leverage on the structured training programmes

provided by PETRONAS Competency Assessment System

(PECAS) for technical non-executives, Accelerated

Capability Development (ACD) for technical executives,

and Skill Group Health, Safety, Environment technical

trainings in providing the necessary skillsets in managing

HSSE. Apart from that, PGB also enlisted 36 HSSE

compulsory trainings into our in-house Gas Academy

and Transmission Academy training programmes, made

available to all staff through scheduled training.

PAGE: 243

ANNUAL REPORT 2016

(iii) Emergency Preparedness and Crisis Management

Ongoing emergency response and crisis management

exercises as well as programmes further elevated the

Group’s preparedness, including response capabilities to

manage major fires and oil spills, among others. The

primary aim being to minimise harm on people via

effective solutions and swift response time, while

upholding business resilience by adequately controlling

exposure to current and emerging risks.

Regular training and engagement sessions with various

parties such as local government agencies, host country

authorities, business partners, contractors and local

community members wherever PETRONAS operates

underscores the strategy to foster a closer working

relationship in addressing emergencies as well as crisis

situations. A multidisciplinary internal task force was

formed to enhance existing current emergency plans

and processes, based on findings derived from the

various exercises conducted.

(iv) Fire Safety Assessment

PGB conducted Fire Safety Assessments (FSA) at

selected operating facilities to assess the adequacy as

well as operational readiness of its fire protection

systems. Training and coaching sessions on the FSA

were held for plant personnel to strengthen internal

capacity for conducting the necessary reviews based on

the PETRONAS Technical Standard on Management of

Fire Protection Systems, while instilling greater

ownership and accountability among the identified

individuals. Classroom sessions on the FSA techniques

were supported by practical plant inspection activities to

assess the operational conditions of the existing fire

protection systems.

To promote safety culture among staffs, Winning Hearts

& Minds programme were rolled out to 17 sites in PGB,

with 30 sessions of HSSE culture improvement

workshops conducted with collaboration with

PETRONAS Leadership Centre (PLC). Each session of the

workshop was attended by 20 staffs of all level, to

improve on HSSE culture awareness, work risk

assessment, and HSSE site supervision. In addition, HSE

Week was executed at all sites between August to

November 2016 by the respective facility site, including

programme namely HSE Fun Quiz, HSE Explorace, Plant

Mega Housekeeping and HSE Recognition Day.

In 2016, the following activities were organised by

employees at site:

a) 2016 GPS Green Run and Green Cyclethon in

conjunction with National Environment Day was

held on 21 September 2016 which involved 107

staff as well as contractors.

b) Awards was given to employees and contractors

who had shown outstanding performance in areas

related to HSSE during Gas Processing Unit (GPU)

Recognition Day on 9 October 2016. The event

also includes motivation talk on Occupational

Safety and Healthy (OSH) and blood donation drive.

c) Periodic HSE Audits in plants to promote safe

behaviour and to educate the importance to follow

HSSE rules and work safely during turnaround days.

d) Health Programme namely Biggest Loser which had

assisted obese staff to reduce weight under series

of motivational talks and physical activities.

Previous recognitions received for the HSSE

programmes:

• Gas Processing Kertih (GPK), the Malaysian Society

for Occupational Safety and Health (MSOSH) OSH

Grand Award Winner 2015-Superior OSH

Performance

• Utilities Kertih (UK) MSOSH OSH Gold Merit Award

Winner 2015-Excellent OSH Performance

• Gas Processing Santong (GPS) MSOSH OSH Gold

Class 1 Award Winner 2015-Very Good OSH

Performance

• Utilities Gebeng (UG) MSOSH OSH Gold Class 1

Award Winner 2015-Very Good OSH Performance


PAGE: 244

PETRONAS GAS BERHAD

INVESTING IN OUR PEOPLE

The Company aspires to attract and retain the best talent, develop and nurture a highly engaged and capable workforce to

become an efficient and empowered organisation, as this is critical for PGB to remain relevant. To ensure our employees

have the right skills and capabilities to execute their roles efficiently and effectively, we provide continuous Leadership and

Capability Development Programmes to enhance their professional and personal development.

EMPLOYEE DATA 2015 2016

No of Staff Under Collective Bargaining Agreements 1,107 1,133

Long Service Award 139 331

15 56 105

20 20 96

25 10 78

30 16 7

35 5 8

Retirees 32 37

EMPLOYEE DEVELOPMENT

Total mandays training per employee 9.78 days 10.33 days

Planned mandays 7 days 7 days

Training investment per employee (RM) RM7,824.19 RM6,347.90

Malaysian

Total Employees

Female

ATTRITION RATE

Technical

Non-Technical

Male

35 years

35 years

Other Nationalities

age

age142,103

2,117

2015: Malaysian = 2,173

2015: Technical = 80% 2015: 1%

2015: Male = 1,810 2015: Above 35 years = 52%

2015: Other Nationalities = 14

2015: Non-Technical = 20%

2015: Female = 377 2015: Below 35 years = 48%

1,788

46%

0.7%

80%

20%

< >

54%329

PAGE: 245

ANNUAL REPORT 2016

Talent Capability

As at December 2016, we had 2,117 employees at 15

locations. The number was less than the total of 2,187 at

end 2015 due to a new empowered and efficient

organisational structure implemented effective 1 January

2017, as well as business needs.

Accelerating Culture Change (ACC) for PGB Leaders

To support our 3ZERO100 Transformation, 31 managers

attended the Accelerating Culture Change (ACC) programme,

designed to enhance their competencies to Drive Direction

and Lead Change, as well as Innovation and Interpersonal

Effectiveness. The two-day programme adopted PETRONAS’

leadership tools as well as its Culture Beliefs to provide

clarity of required leadership and accountability as a

foundation of change efforts.

IR9 Our effort to instill PGB Desired Culture (C2) in decision making process.

Enhanced Building Leaders Programme (BLP)

We further enhanced the BLP which serves to develop

leadership qualities in talents from the senior executive level

to managers. We were more selective in the selection of

participants, adopting PETRONAS’ Employee Potential (EP)

criteria, and reinforced the content to lend further support

to our 3ZERO100 Transformation. The participants will

undergo a two-year customised Leadership Programme. The

30 talents selected for the enhanced BLP are still undergoing

training while 122 past graduates have assumed various

leadership roles in PGB and PETRONAS.

Grievances Management

In addressing grievances among staff, we have adopted

PETRONAS’ Grievance Management Policies and Procedures

where staff can express their grievances in an official manner

and ensure that proper and fair treatment were given to

them. For minor grievances, the cases will be managed at

departmental level and may escalate up to PETRONAS level

should it is still not resolved.

Long Services Award 2016 at Gas Processing and Utilities Division.

Employee Engagement

We engage frequently with our employees through various

activities and provide open platforms on which we share

common interests and work together to address any

differences. The higher level engagement sessions have

managed to drive change and accelerate our transformation

through common understanding of the Company’s strategy.

Formal Sessions

• Majlis Sekalung Budi held at the PETRONAS Twin Towers

in Kuala Lumpur, Segamat, Johor and Kertih, Terengganu

• 36 HR engagement sessions with staff

• Quarterly briefing sessions with the Trade Union

representative


PAGE: 246

PETRONAS GAS BERHAD

Informal Sessions

We engage with employees – from non-executives to

Leadership Team – in informal settings to further enhance

working relationships, engender a feeling of belonging, and

strengthen our team spirit. New activities were introduced to

keep high interest level and these include the Super Heroes

League, a monthly game session held at our Head Office

during lunch breaks. Other informal sessions include board

and miniature games as well as puzzles.

In order to encourage our staff to be fit and healthy, we

organised a two-month PGB Biggest Body Transformation

programme, under which twice weekly fitness-related activities

were held, such as aerobics and circuit training classes. These

were conducted by three PGB staff who are certified fitness

trainers. Participants’ baseline data such as body weight, body

fat and body measurements were recorded at the initial and

final weeks of the challenge. At the end of the programme,

three participants each from the male and female categories,

were named as winners based on the approved judging criteria.

PAGE: 247

ANNUAL REPORT 2016

ENRICHING COMMUNITIES

We believe we have a duty to care for the well-being of the marginalised and underprivileged in the communities that

surround our operations, and actively reach out to such individuals through our Corporate Social Responsibility (CSR) efforts.

We constantly reinforce our Corporate Social Investment (CSI) through the following flagship programmes.

Livelihood Programme

We collaborate with Yayasan Salam Malaysia on the Livelihood programme which aims to impart baking and entrepreneurial

skills to women from low-income households (of RM3,000 or less a month). Classes are held twice a week at the

community centres in Hulu Langat, Selangor and Segamat, Johor. Apart from baking and pastry-making, the women are

taught basic accounting and marketing skills. 2016 was the second year of our involvement in this programme. We were

pleased when participants at the Hulu Langat centre secured some RM60,000 worth of orders for Aildifitri cakes and cookies.

Free Market

We organised our second Free Market, a variation on the theme of a flea market, where our staff offered their own pre-loved

items, from clothes to toys, to underprivileged families. The event was held in collaboration with Kuala Lumpur-based charitable

organisation Nadi Annissa during Ramadan in aid of 60 families in Desa Mentari, Subang, Selangor. At the event, we also

presented 111 boys and girls with new baju melayu and baju kurung.


PAGE: 248

PETRONAS GAS BERHAD

Program Sentuhan Kasih PETRONAS (PSKP)

PSKP, launched in 2005, aims at nurturing the spirit of giving

and volunteerism among PETRONAS’ employees and

affiliates. In 2016, we gave 10kg of rice each to 95 low-

income families from the Desa Mentari flats during Ramadan.

The donation was organised together with Nadi Annissa

which helped to identify the deserving families.

Program Sentuhan Ilmu PETRONAS (PSIP)

PSIP was introduced in 2002 by PETRONAS to offer academic

and non-academic assistance to underperforming students

from low-income families at selected primary schools.

Academically, the programme helps to improve the children’s

performance in English, Science and Mathematics. In 2016, we

continued to facilitate various fun learning and other activities

under this programme for the students of Sekolah Kebangsaan

Cherana Puteh in Simpang Ampat, Melaka which we adopted

in 2013.

PSIP Programme at Sekolah Kebangsaan Cherana Puteh, Simpang Ampat, Melaka.

PAGE: 249

ANNUAL REPORT 2016

08

ACHIEVEMENTS

254 2016 Significant Events

256 2016 Media Milestones

258 2016 Calendar of Events

262 Awards and Achievements

265 Past Awards

2016 SIGNIFICANT EVENTS

Execution of a Facility Agreement with Mizuho Bank Ltd

on 7 January 2016 for a USD500 million Term Loan Facility

to finance the Group’s general corporate funding purposes

including, but not limited to, capital expenditure.

Signing ceremony of Shareholders Agreement Between PETRONAS Gas Berhad and Linde Malaysia Sdn Bhd for

the development of the Air Separation Unit (ASU) project in

Pengerang, Johor.

PGB’s involvement in the ASU project is an expansion to

its existing business of providing industrial gasses from the

Centralised Utilities Facilities (CUF) in Kertih, Terengganu

and Gebeng, Pahang.

Successful completion of both Liquefied Natural Gas (LNG) tanks for LNG Regasification Terminal in Pengerang, Johor (RGTP) located

within the Pengerang Integrated

Complex (PIC). The achievement was

not only significant to the development

of RGTP which is expected to

commence its operations by the fourth

quarter of 2017, but also complements

the overall development of the PIC.

The milestone achievement were

signified by the momentous air-rising

of the tanks roof which took about

three hours respectively and followed

by five hours of welding works

respectively, to secure the roofs into

position.

7 JANUARY

28 AUGUST

15 AUGUST

PAGE: 254

PETRONAS GAS BERHAD

PGB signed Long Term Service Agreement (LTSA) with TNB Repair and Maintenance Sdn Bhd (TNB REMACO) of

gas turbine and related equipment at Utilities Kertih and

Utilities Gebeng. The six-year contract will see TNB REMACO

performs the maintenance work at both facilities. The scope

will cover the supply of turbine spare parts, manpower

supply during the inspections and refurbishment of the

turbine components.

Gas Processing and Utilities Division (GPU) was awarded with five gold awards of the Royal Society for the Prevention of Accidents (RoSPA) Occupational Health and Safety Awards 2016 ROSPA. This was as a result of GPU

excellent performance and demonstration of well-developed

occupational health and safety management system and

culture, outstanding control of risk and very low levels or

error, harm and loss. The awards also further reaffirmed PGB’s

pledge in promoting HSE-compliant working environment.

PGB won for the third consecutive year the Industry Excellence Award for Listed Companies of the

prestigious National Annual Corporate Report Awards (NACRA) for the Industrial Products and Technology

category.

The theme for Annual Report 2015, “Transform to

Perform”, reflects PGB’s continued focus on its ongoing

transformation journey to attain sustainable world class

standards befitting PGB’s role as a Leading Gas

Infrastructure and Utilities Company.

26 NOVEMBER15 SEPTEMBER

6 DECEMBER

PAGE: 255

ANNUAL REPORT 2016

PAGE: 256

PETRONAS GAS BERHAD

2016MEDIAMILESTONES

PAGE: 257

ANNUAL REPORT 2016

PAGE: 258

PETRONAS GAS BERHAD

2016 CALENDAR OF EVENTS

Visit by Director of

Department of

Occupational and

Health (DOSH)

Terengganu to Gas

Processing and

Utilities (GPU)

Visit by Bangladesh Minister of Ports and Shipping with PETRONAS LNG Ltd to LNG Regasification Terminal Sungai Udang (RGTSU)

Visit by top officials

from Department of

Occupational Safety

and Health (DOSH)

to Sabah-Sarawak

Gas Pipeline (SSGP)

2 FEBRUARY

17 APRIL

5 FEBRUARY

25 FEBRUARY

20 MARCH

16 APRIL

19 APRIL

28 – 29 MARCH

Visit by SAMSUNG Korea together with PETRONAS LNG Ltd

to RGTSU

Visit by Malaysian

Investment Development

Authority (MIDA) to Gas

Processing Plant (GPP) 3

PACAT pilot plant, of Gas

Processing Kertih (GPK)

Kimanis Power Sdn Bhd organised Corporate Social

Responsibility (CSR) together with Hemophilia Society –

Sabah Chapter to celebrate the inaugural ‘World Hemophilia

Day’ in Sabah with about 100 Hemophilia patients and their

families, nurses, doctors and volunteers

Shah Alam

Regional Office

conducted public

awareness

programme and

engagement

session with Local

Authority, Majlis

Perbandaran

Subang Jaya

Ex-Batang Berjuntai

Emergency Response Exercise

(ERE) at Shah Alam Regional

Office

PGB 33rd Annual General Meeting

PAGE: 259

ANNUAL REPORT 2016

19 APRIL

11 JUNE

2 AUGUST

3 AUGUST19 JUNE

26-30 JUNE

26 APRIL

28 JUNE

Public Awareness

programme at

Pantai Puteri Hotel,

Melaka with local

authorities, local

community and

customers

CSR Rice Donation

programme, Projek

Perumahan Rakyat Miskin

Tegar (PPRT) Desa

Mentari, Petaling Jaya

Environment Institute of

Malaysia, Department of

Environment visit to

Gas Processing Kertih

and Gas Processing

Santong

PGB Contractors Forum 2016

was attended by 50 PGB

contractors from various fields

such as turnaround,

maintenance and projects.

Objectives of the event was to

impart best practices between

PGB and Contractors as well as

to serve as a platform for

continuous engagement

between both parties. At the

event, PGB, together with its

contractors also signed the

Contractors Integrity Pledge

“Free Market” CSR

activity in conjunction

with Aidilfitri for 100

less fortunate families

where they were

invited to choose items

ranging from clothing,

shoes, shirts, trousers,

shoes, and many more

Kimanis Power

Sdn Bhd visited

70 homes of less

fortunate people

in five villages of

Kimanis District

during Ramadhan

month

Engagement session and

public awareness

programme with factory

operator nearby PGB’s

Right of Way

2016 CALENDAR OF EVENTS

PAGE: 260

PETRONAS GAS BERHAD

Engagement session and

familiarisation visit by

community leaders from

Mukim Kertih and Kemasek

to GPK with the objectives

to enhance relationship and

to create public awareness

on the operations and

safety

15 AUGUST

29 AUGUST28 SEPTEMBER

22 SEPTEMBER

26 SEPTEMBER

11 OCTOBER

23 SEPTEMBER

25 AUGUST

Shareholders’

familiarisation visit

to PGB facility at

Gebeng to learn

more about the

Utilities facility

Public awareness programme and engagement session

organised by Miri Regional Office with petrol stations

operator located near the pipelines

Visit by newly appointed BOMBA State Director of Melaka to

RGTSU to learn and experience the offshore terminal and

facilities

Miri Regional Office Emergency Response Exercise

Tier 1 Field #03 for Miri Gas Distribution System

(MGDS) Operation and Maintenance

Engagement session

and familiarisation

visit by community

leaders from Kuantan

area to Utilities

Gebeng with the

objectives to

enhance relationship

and to create public

awareness on the

operations and safety

Engagement session with delegates from Majlis

Perbandaran Seremban

Beach cleaning activity at Esplanade, Miri as part of

PGB’s CSR Programme on environment

PAGE: 261

ANNUAL REPORT 2016

Visit by officials from Bank

Negara Malaysia, Suruhanjaya

Tenaga, Ministry of Finance,

Ministry of Domestic Trade,

Co-operative and

Consumerism (KPDNKK),

Department of Statistics and

Malaysia External Trade

Development Corporation

(MATRADE) to GPK

24 NOVEMBER

21 – 22 OCTOBER

22 NOVEMBER

31 OCTOBER

9 NOVEMBER

24 NOVEMBER

25 JANUARY

3 NOVEMBER

Corporate Social Investment (CSI) activity by Kimanis Power

Sdn Bhd through contribution of school facilities such as tables

and chairs to SK Kambizaan, Papar and SK Mandahan, Kimanis

Exhibition: Program Hari Alam Sekitar Negara, Peringkat

Negeri Johor

Ex-Gadut Tier 2 Drill Exercise at

Seremban City Gate Station

Ex-Long Kevok Tier 2 Field Exercise was carried out at East

Malaysia Office SSGP

Visit by

Asia-Pacific

Economic

Cooperation

together with

Energy

Commission

to RGTSU

Visit by Tenaga Nasional Berhad (TNB) Kenyir to Utilities Kertih

Engagement on

2015 Annual

Report Scorecard

with Minority

Shareholder

Watchdog Group

(MSWG)

PAGE : 262

PETRONAS GAS BERHAD

AWARDS AND

ACHIEV

PAGE : 263

ANNUAL REPORT 2016

EMENTS

20

16

AW

AR

DS

1. SIRIM

PETRONAS Gas Berhad (PGB):

i. Information Security Management System

Certification (ISO/IEC 27001:2005)

ii. SIRIM International Quality Management

System Certification (ISO 9001)

iii. Environment Management System

Certification (ISO 14001:2004)

iv. Occupational Health and Safety

Management System (OHSAS 18001:2007)

v. Occupational Health and Safety

Management System (MS 1722:2011)

Gas Processing and Utilities (GPU):

i. Information Security Management System

Certification (ISO/IEC 27001:2005)

2. Royal Society for the Prevention of Accidents (ROSPA) Occupational Health and Safety Awards 2016

Five Gold Awards for GPU (Gas Processing

Kertih, Gas Processing Santong, Utilities Kertih,

Utilities Gebeng and Tanjung Sulong Export

Terminal) by the ROSPA registered in England

3. Malaysian Society for Occupational Safety and Health (MSOSH) Award 2015

GPU Plant:

i. Gas Processing Kertih (GPK)

• MSOSH OSH Grand Award Winner 2015

– Superior OSH Performance

ii. Utilities Kertih (UK)

• MSOSH OSH Gold Merit Award Winner

2015 – Excellence OSH Performance

iii. Gas Processing Santong (GPS)

• MSOSH OSH Gold Class 1 Award

Winner 2015 – Very Good OSH

Performance

iv. Utilities Gebeng (UG)

• MSOSH OSH Gold Class Award Winner

2015 – Very Good OSH Performance

4. Focus Malaysia

Ranked fifth in the Most Transparent Big

Stock Award in a research undertaken by

Focus Malaysia, a leading English business

weekly newspaper

5. Minority Shareholder Watchdog Group (MSWG) Malaysia – Asean Corporate Governance Transparency

Award winner under the Industry Excellence

– Oil and Gas Category

6. National Annual Corporate Report Award (NACRA) 2016

Award winner under the Industrial Products

and Technology category for the third

consecutive year

7. FTSE4Good Bursa Malaysia Index

PGB remains a constituent of the FTSE4Good

Bursa Malaysia Index, following the 2016

assessment. The FTSE4Good Index Series is

designed to identify companies that

demonstrate strong Environmental, Social and

Governance practices measured against

globally recognised standards

8. Association of Chartered Certified Accountants (ACCA) Malaysia Sustainability Report Award (MaSRA) 2016

Top 20 companies shortlisted in MaSRA 2016

AWARDS AND ACHIEVEMENTS

PAGE: 264

PETRONAS GAS BERHAD

20

15

20

14

1. Focus Malaysia

Ranked ninth in the Most Transparent

Big Stock Award in a research

undertaken by Focus Malaysia, a

leading English business weekly.

2. National Annual Corporate Report Awards (NACRA) 2015

Award winner under Industrial

Products and Technology category.


PGB remains a constituent of the

FTSE4Good Bursa Malaysia Index,

following the 2015 assessment.

PGB was bestowed with the IKM

Laboratory Excellence Award 2015

certified by the Institut Kimia Malaysia

(IKM) [Malaysia Chemical Institute] in

the testing of gas, water and waste

water for each of its laboratory -

GPS, GPK, UK and TSET, all located in

Terengganu; as well as UG in Pahang.

• 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.

AW

AR

DS

AW

AR

DS

CERTIFICATIONSCE

RT

IFIC

AT

ION

S

PAGE: 265

ANNUAL REPORT 2016

PAST AWARDS

1. Finance Asia Award

Named the third Best Managed

Company in Malaysia.

2. MSWG-ASEAN Corporate Governance Index 2014

The best corporate governance

practices including transparency and

performance in the Oil and Gas

sector.

3. The Edge Billion Ringgit Club

Best Performing Industrial Stock with

a market capitalisation of more than

RM10 billion in the Industrial sector.

4. Focus Malaysia Award

Named the fourth Most Transparent

Big Stock in Malaysia.

5. National Annual Corporate Report Awards (NACRA) 2014

Award winner in the Industrial

Products and Technology category.


PETRONAS Gas Berhad was included

in the FTSE4Good Bursa Malaysia

Index, a newly-launched Index by the

local bourse, which is designed to

identify companies that demonstrate

strong Environmental, Social and

Governance practices measured

against globally-recognised standards.

09

STAKEHOLDER INFORMATION

268 Analysis of Shareholdings

268 Classification of Shareholders

269 Share Capital

269 List of Substantial Shareholders

269 List of Directors’ Shareholdings

270 List of 30 Largest Shareholders

272 Summary and Usage of

Landed Property,

Plant and Equipment

282 Top 10 Landed Plant,

Property & Equipment

283 Corporate Directory

284 FTSE4Good Index

292 Independent Assurance Statement

294 Notice of Annual General Meeting

298 Administrative Details for the

34th Annual General Meeting

299 Glossary

• Proxy Form

CategoryNo. of

Shareholders% of Total

ShareholdersNo. of Shares

% of Total Shareholdings

Less than 100 643 6.41 3,580 0.00

100 - 1,000 6,774 67.52 6,182,895 0.31

1,001 - 10,000 1,842 18.36 6,198,268 0.31

10,001 - 100,000 468 4.66 18,310,797 0.93

100,001 to less than 5% of issued shares 303 3.02 454,424,743 22.97

5% and above of issued shares 3 0.03 1,493,611,632 75.48

Total 10,033 100.00 1,978,731,915 100.00

Category

No. of Shareholders No. of Shares Shares Percentage

Malaysian Foreigner Malaysian Foreigner Malaysian Foreigner

Individuals 8,444 95 11,709,715 283,709 0.59 0.01

Body Corporate

Banks/Finance companies 65 0 313,029,100 0 15.82 0.00

Investment Trusts/Foundation/

Charities 6 0 139,000 0 0.02 0.00

Other types of companies 189 6 2,225,904 1,363,600 0.11 0.07

Government Agencies/

Institutions 6 0 1,435,000 0 0.07 0.00

Nominees 656 566 1,483,930,257 164,615,630 74.99 8.32

Others 0 0 0 0 0.00 0.00

Total 9,366 667 1,812,468,976 166,262,939 91.60 8.40

* As at 17 February 2017

PAGE: 268

PETRONAS GAS BERHAD

ANALYSIS OF SHAREHOLDINGS*

CLASSIFICATION OF SHAREHOLDERS*

No. NameNo. of Shares

% of TotalShareholding

1. Datuk Mohd Anuar Taib Nil Nil

2. Dato’ Ab. Halim Mohyiddin 5,000 0.00

3. Habibah Abdul Nil Nil

4. Yusa’ Hassan Nil Nil

5. Emeliana Dallan Rice-Oxley Nil Nil

6. Wan Shamilah Wan Muhammad Saidi Nil Nil

7. Heng Heyok Chiang @ Heng Hock Cheng Nil Nil

LIST OF LEADERSHIP TEAM’S SHAREHOLDINGS*

None of the Leadership Team members held any shares in PGB.

* As at 17 February 2017


% of TotalShares

1. CIMB Group Nominees (Tempatan) Sdn Bhd

- Exempt AN for Petroliam Nasional Berhad

- Exempt AN for Petroliam Nasional Berhad (PRF)

1,199,768,000

536,400

60.63

0.03

TOTAL 1,200,304,400 60.66

2. Employees Provident Fund Board 200,491,732 10.13

3. Kumpulan Wang Persaraan (Diperbadankan) 108,079,100 5.46

Share Capital : RM1,978,731,915 comprising 1,978,731,915

Class of Shares : Ordinary Shares

Voting Rights : One Vote Per Ordinary Share (On A Poll)

PAGE: 269

ANNUAL REPORT 2016

SHARE CAPITAL*

LIST OF DIRECTORS’ SHAREHOLDINGS*

LIST OF SUBSTANTIAL SHAREHOLDERS*



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

190,205,132 9.61

3. KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 103,638,500 5.24

4. AMANAHRAYA TRUSTEES BERHAD

AMANAH SAHAM BUMIPUTERA

62,577,300 3.16


AMANAH SAHAM MALAYSIA

29,958,300 1.51

6. CARTABAN NOMINEES (ASING) SDN BHD

EXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67)

22,874,960 1.16


AMANAH SAHAM WAWASAN 2020

20,683,400 1.05


AMANAH SAHAM BUMIPUTERA 2

16,316,300 0.82


AS 1MALAYSIA

15,358,100 0.78

10. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD

GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD

(PAR 1)

13,515,000 0.68

11. HSBC NOMINEES (ASING) SDN BHD

BBH AND CO BOSTON FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND

12,659,496 0.64


AMANAH SAHAM DIDIK

10,944,000 0.55


EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.S.A)

10,757,250 0.54

14. AMSEC NOMINEES (TEMPATAN) SDN BHD

MTRUSTEE BERHAD FOR CIMB ISLAMIC DALI EQUITY GROWTH FUND (UT-CIMB-

DALI)

9,461,700 0.48

15. CARTABAN NOMINEES (TEMPATAN) SDN BHD

PAMB FOR PRULINK EQUITY FUND

8,687,000 0.44

PAGE: 270

PETRONAS GAS BERHAD

LIST OF 30 LARGEST SHAREHOLDERSREGISTERED AS AT 17 FEBRUARY 2017



16. MAYBANK NOMINEES (TEMPATAN) SDN BHD

MAYBANK TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240)

7,300,000 0.37


PUBLIC ISLAMIC DIVIDEND FUND

7,223,000 0.37

18. PERMODALAN NASIONAL BERHAD 6,947,900 0.35


PUBLIC ISLAMIC SELECT ENTERPRISES FUND

5,739,200 0.29


PUBLIC ISLAMIC SECTOR SELECT FUND

4,961,500 0.25

21. MAYBANK NOMINEES (TEMPATAN) SDN BHD

MAYBANK TRUSTEES BERHAD FOR PUBLIC REGULAR SAVINGS FUND

(N14011940100)

4,897,500 0.25

22. CARTABAN NOMINEES (ASING) SDN BHD

GIC PRIVATE LIMITED FOR GOVERNMENT OF SINGAPORE (C)

4,688,400 0.24


PUBLIC ITTIKAL SEQUEL FUND

4,650,800 0.24

24. PERTUBUHAN KESELAMATAN SOSIAL 4,122,600 0.21


EMPLOYEES PROVIDENT FUND BOARD (CIMB PRIN)

3,577,900 0.18


EMPLOYEES PROVIDENT FUND BOARD (NOMURA)

3,342,700 0.17

27. CITIGROUP NOMINEES (ASING) SDN BHD

LEGAL & GENERAL ASSURANCE (PENSIONS MANAGEMENT) LIMITED (A/C

1125250001)

3,325,322 0.17


PUBLIC ISLAMIC EQUITY FUND

3,231,600 0.16


HSBC BK PLC FOR ABU DHABI INVESTMENT AUTHORITY (TRANG)

3,228,065 0.16

30. DB (MALAYSIA) NOMINEE (ASING) SDN BHD

SSBT FUND DU22 FOR CAISSE DE DEPOT ET PLACEMENT DU QUEBEC

2,931,142 0.15

PAGE: 271

ANNUAL REPORT 2016

A summary and usage of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at

31 December 2016:

LocationAcquisitionDate Tenure

Descriptionand usage

Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

TERENGGANU

Gas Processing Plants,

Kertih Km 105,

Jalan Kuantan-Kuala Terengganu,

24300 Kertih, Kemaman,

Terengganu Darul Iman

Lot No. 1903

Lot No. 3541

Lot No. 1902

30.09.1991

30.09.1991

30.09.1991

Leasehold

Expiry:

28.02.2043

(Sub-Lease

60 years)

03.04.2050

(60 years)

26.02.2082

(99 years)

Leasehold land

Plant

GPP 1

GPP 2

GPP 3

GPP 4/DPCU 2

Compressor

station

Office

Administration

building 1

Administration

building 2

Fire station

87.9

34.6

2.7

32.3

24.4

24.1

22.5

25.1

31.4

26.7

28.8

95,998

123,310

123,310

266,400

65,010

1,282

6,892

3,248

2,220,613

PAGE: 272

PETRONAS GAS BERHAD

SUMMARY AND USAGE OF LANDED PROPERTY, PLANT AND EQUIPMENTAS AT 31 DECEMBER 2016



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

Gas Processing Plants,

Paka Km 8, Kg. Tok Arun,

Off Jalan Santong

23100 Paka, Dungun,


Lot No. 7346

Lot No. 7220

03.08.1997

03.08.1997

Leasehold

Expiry:

13.07.2058

(60 years)

20.06.2058

(60 years)

Leasehold land

Plant

GPP 5

GPP 6

DPCU 3

Office

Administration

building

(Vacant)

189.6

26.9

17.9

17.0

18.3

19.2

200,000

220,000

60,000

12,220

866,341

Export Terminal Operation,

Tanjung Sulong,

24000 Kemaman,


Lot No. 1314

Lot No. 1333

24.07.1993

24.07.1993

Leasehold

Expiry:

19.03.2025

(40 years)

11.03.2027

(40 years)

Leasehold land

Plant

Unit 1, 2, 3, 4

Office

Administration

building

Marine facility

Breakwater

Jetty

9.7

2.8

32.1

32.1

1,146

251,746

PAGE: 273

ANNUAL REPORT 2016




Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

Utilities Plant, Kertih

Kertih Integrated Petrochemical

Complex,

Km 105, Jalan Kuantan-

Kuala Terengganu,

24300 Kertih,

Kemaman,


Lot No. 8065 21.12.1999

Leasehold

Expiry:

19.08.2060

(60 years)

Leasehold land

Plant

CGN B

CGN C

CGN D, E, F

Water plant

CGN G

ASU

Lab & workshop

Control room

Office

Administration

building

37.1

17.1

17.1

16.6

16.6

16.7

15.8

15.8

15.6

15.9

667

667

2,000

2,000

667

15,451

729

1,820

514

461,691

PAHANG

Kuantan Regional

Operations Office Lot 1, Sector 1,

Bandar Indera Mahkota

25200 Kuantan,

Pahang Darul Makmur

Lot No. PT16756 04.01.1989

Leasehold

Expiry:

04.01.2088

(99 years)

Leasehold land

Office

Regional office

11.2

25.2 2,428

7,786

Kuantan Compressor Station,

Kampung Mahkota,

Km 19, Jalan Gambang,

26070 Kuantan,

Pahang Darul Makmur

Lot No. 104462 04.01.1989

Leasehold

Expiry:

26.08.2101

(99 years)

Leasehold land

Plant

Compressor

station

Compressor

station

20.1

23.1

7.2

1,142

4,378

113,967

PAGE: 274

PETRONAS GAS BERHAD



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

Utilities Plant, Gebeng

Lot 139A, Gebeng Industrial Area,

Phase III,

26080 Kuantan,

Pahang Darul Makmur

Lot No. PT15127

17.11.1999 Leasehold

Expiry:

08.01.2100

(99 years)

Leasehold land

Plant

CGN A

CGN B

CGN C

N2GEN

Water plant

Office

Maintenance

building

Warehouse

18.8

17.1

17.1

17.1

17.1

16.6

15.6

15.6

667

667

667

360

2,000

1,015

1,004

248,246

JOHOR

Segamat Operation Centre,

Gas Transmission System,

KM 10, Lebuhraya

Segamat-Kuantan,

85000 Segamat,

Johor Darul Takzim

Lot No. PTD564 22.09.1991

Leasehold

Expiry:

18.02.2102

(99 years)

Leasehold land

Plant

Compressor

station

Office

Operation centre

61.3

19.0

24.4

2,792

8,080

51,701

Pasir Gudang Regional Operations

Office,

PLO 332, Jalan Perak 4,

Pasir Gudang Industrial Area,

81700 Pasir Gudang,

Johor Darul Takzim

Lot No. PTD84942 23.04.1989

Leasehold

Expiry:

22.04.2088

(99 years)

Leasehold land

Office

Regional office

4.1

24.5 2,428

7,164

PAGE: 275

ANNUAL REPORT 2016




Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

NEGERI SEMBILAN

Seremban Regional Operations

Office,

KM 11, Jalan Seremban – Tampin,

71450 Sg. Gadut, Seremban,

Negeri Sembilan Darul Khusus

Lot No. 21958 16.02.1994 Freehold

Freehold land

Office

Regional office

14.0

25.4 2,428

6,199

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

Lot No. PT606 12.10.1990

Leasehold

Expiry:

11.10.2089

(99 years)

Leasehold land

Office

Regional office

2.9

25.1 2,428

6,933

Meru Compressor Station,

Lot 1586 (G3907),

Mukim of Jeram,

District of Kuala Selangor,


Lot No. PT6875 04.08.1998

Leasehold

Expiry:

10.08.2107

(99 years)

Leasehold land

(Vacant)

5.4 N/A N/A 1,003

PERAK

Sitiawan Regional Operations Office,

Lot 33263,

Jalan Dato’ Ahmad Yunus,

32000 Sitiawan,

Perak Darul Ridzuan

Lot No. PT4535 04.11.1997

Leasehold

Expiry:

27.06.2101

(99 years)

Leasehold land

Office

Regional office

3.2

19.2 1,604

4,577

PAGE: 276

PETRONAS GAS BERHAD



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

KEDAH

Gurun Regional

Operations Office,

PO Box 31,

KM 1, Jalan Jeniang

08300 Gurun,

Kedah Darul Aman

Lot No. 8173 18.12.1997

Leasehold

Expiry:

22.04.2102

(99 years)

Leasehold land

Office

Regional office

2.9

18.3 1,604

5,171

8.0 km 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

11.8 N/A

750

SARAWAK

Miri Operations Office,

Lot 2075, Block 4,

Jalan Cattleya 2B,

Piasau Industrial Area,

PO Box 1504,

98008 Miri, Sarawak

N/A Pipeline

Meter Station

Pipeline across

42.2 km

N/A – located

along road

reserve area

26.8 2,066 14,236

Bintulu Gas Meter Station,

Kidurong Industrial Area,

Part of Lot 155,

Block 20,

Kemena Land District,

97007 Bintulu, Sarawak

Lot No. 1646 21.10.2004

Leasehold

Expiry:

16.07.2067

(60 years)

Leasehold land

Pipeline

Meter Station

Pipeline across

4.2 km

0.1 20.2 630

84

PAGE: 277

ANNUAL REPORT 2016




Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

MELAKA

LNG Regasification Terminal,

Sungai Udang PSR-1/MG3 Retrofit

Site Office Revamp PETRONAS

Penapisan Sungai Udang, Melaka

01.07.2011

01.10.2012

Leasehold

Expiry:

30.06.2038

(25 years)

30.04.2036

(24 years)

Regasification

Floating Storage

Units

Facilities Jetty

Office

Administration

building

N/A

0.3

3.6

1.5

N/A

3,000

2,806,323

15,157

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,



Expiry:

(40, 60 and

99 years)

Pipelines

Pipelines in

leasehold land

Terengganu:

43 lots

Terengganu:

237.3

32.3 N/A 29,765

PAGE: 278

PETRONAS GAS BERHAD



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

PGU II – total gas pipeline comprises

Sector 1 – 233 km from

Teluk Kalong, Terengganu to

Segamat, Johor,

Sector 2 – 241 km from Segamat,

Johor to Kapar, Selangor, &

Sector 3 – 211 km from Segamat,

Johor to Singapore


Expiry:

(99 years)

Pipelines

Pipelines 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:

968.3

Melaka:

191

Negeri

Sembilan:

463.9

Selangor:

295.7

25.1 N/A 518,455

PAGE: 279

ANNUAL REPORT 2016




Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

PGU III – total gas pipeline

comprises

Sector 1 – 184 km from Meru,

Selangor to Lumut, Perak,

Sector 2 – 176 km from Lumut,

Perak to Gurun, Kedah and

Sector 3 – 90 km of NPS 36"

mainline from Gurun to Pauh,

Perlis, Indera Kayangan


Expiry:

(99 years)

Pipelines

Pipelines 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:

21.1

Sector

2 & 3:

19.2

N/A

N/A

498,645

PGU Loop 1 – total gas pipeline of

265 km from Kertih, Terengganu to

Segamat, Johor

04.10.1999 N/A Pipelines

Pipelines in

leasehold land

Terengganu:

77 lots

Pahang:

315 lots

Terengganu:

158.9

Pahang:

104.6

17.4 N/A 311,183

PAGE: 280

PETRONAS GAS BERHAD



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2016 (RM’000)

PGU Loop 2 – total gas pipeline of

226 km from Segamat, Johor to

Meru, Selangor

01.11.2000 N/A Pipelines

Pipelines in

leasehold land

(Part of PGU’s

document of

title)

Melaka:

4 lots

Negeri

Sembilan:

4 lots

Melaka:

1.31

Negeri

Sembilan:

1.1

16.4 N/A 326,141

TOTAL 8,773,877

PAGE: 281

ANNUAL REPORT 2016

Name of Facilities and Location DescriptionNet Book Value

(RM'000)

LNG Regasification Terminal,

Sungai Udang

Floating Storage Units, Jetty Regasification

Unit and Pipelines and Administration Buildings

2,821,480

Gas Processing Plants, Kertih Leasehold land, Plant and Office Buildings 2,220,613

Gas Processing Plants, Santong Leasehold land, Plant and Office Buildings 866,341

PGU II Leasehold land and Pipelines 518,455

PGU III Leasehold land and Pipelines 498,645

Utilities Plants, Kertih Leasehold land, Plant and Office Buildings 461,691

PGU Loop 2 Leasehold land and Pipelines 326,141

PGU Loop 1 Leasehold land and Pipelines 311,183

Export Terminal Leasehold land, Plant and Marine Facility 251,746

Utilities Plants, Gebeng Leasehold land, Plant and Office Buildings 248,246

PAGE: 282

PETRONAS GAS BERHAD

TOP 10 LANDED PLANT, PROPERTY & EQUIPMENT

GAS PROCESSING AND UTILITIES DIVISION

Gas Processing Plant, KertihKM 105, Jalan Kuantan-Kuala

Terengganu

24300 Kertih, Kemaman


T: +(609) 831 2345

F: +(609) 827 1710

Gas Processing Plant, SantongKm 8, Kg. Tok Arun, Off Jalan Santong

23100 Paka, Dungun


T: +(609) 831 2345

F: +(609) 827 4578

Utilities Plant, KertihKertih Integrated Petrochemical

Complex

KM 105, Jalan Kuantan/Kuala

Terengganu



T: +(609) 830 5500

F: +(609) 830 5514

Utilities Plant, GebengLot 139A, Gebeng Industrial Area Fasa III

26080 Kuantan

Pahang Darul Makmur

T: +(609) 586 3300

F: +(609) 586 3311

Tanjung Sulong Export TerminalTanjung Sulong,

24000 Kemaman


T: +(609) 831 2345

F: +(609) 827 1710

GAS TRANSMISSION AND REGASIFICATION DIVISION

Gurun Regional OfficeKM 1, Jalan Jeniang, P.O. Box 31

08300 Gurun

Kedah Darul Aman

T: +(604) 468 5518

F: +(604) 468 5519

Sitiawan Regional OfficeLot 33263, Jalan Dato’ Ahmad Yunus

32000 Sitiawan

Perak Darul Ridzuan

T: +(605) 692 5611/12/13/14

F: +(605) 692 5615

Shah Alam Regional OfficeLot 1, Jalan Jemuju Lima 16/13E

Kawasan Perindustrian Seksyen 16

40200 Shah Alam


T: +(603) 5510 6222

F: +(603) 5510 1528

Seremban Regional OfficeKM 11, Jalan Seremban, Tampin

71450 Sungai Gadut

Negeri Sembilan Darul Khusus

T: +(606) 677 6777

F: +(606) 677 7799

Regas Terminal (Sg. Udang) Sdn Bhdc/o PSRI/MG3 Retrofit Buiding

Petronas Penapisan Melaka

Sungai Udang

76300 Melaka

T: +(607) 352 3801

Pasir Gudang Regional OfficePLO 332, Jalan Perak 4

Kawasan Perindustrian Pasir Gudang

81700 Pasir Gudang

Johor Darul Takzim

T: +(607) 251 0333

F: +(607) 251 0400

Segamat Operation CentreKM 10, Lebuhraya Segamat-Kuantan

85000 Segamat

Johor Darul Takzim

T: +(607) 935 3000

F: +(607) 931 6521

Kuantan Regional OfficeLot 1, Sektor 1, Bandar Indera Mahkota

25200 Kuantan

Pahang Darul Makmur

T: +(609) 573 2811

F: +(609) 573 2813

Kertih Regional OfficeAras 1, Kompleks Pejabat PETRONAS

Wilayah Pantai Timur



T: +(609) 867 3500

F: +(609) 864 0375

Bintulu Operation CentreLot 8, Block 16, Kemena Land District

KM 39.5, Bintulu/Miri Coastal Highway,

97000 Bintulu

P.O. Box 2190, 97011 Bintulu, Sarawak

T: +(6086) 85 4800

F: +(6086) 85 4999

Kimanis Operation CentreLot 2, Block A, Ground Floor

Membakut Jaya

89728 Membakut, Sabah

Miri Regional OfficeLot 1590 & 1591

Eastwood Valley Industrial Area

Jalan Miri By Pass,

P.O. Box 1504

98008 Miri, Sarawak

T: +(6085) 42 2811

F: +(6085) 41 6410

+(6087) 88 6217/224

F: +(6087) 88 6219

PETRONAS GAS BERHAD

Level 49-51, Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia

T: +(603) 2331 5000

F: +(603) 2051 6992 (General), +(603) 2051 6555 (Corporate Secretary)

PAGE: 283

ANNUAL REPORT 2016

CORPORATE DIRECTORY

Indicator Reference Indicator Description

Page Reference

Biodiversity

EBD02 At Critical sites:

(a) Targets to address biodiversity impact

(b) Commitment to net positive biodiversity impact (or compensation for

negative impact)

103, 133, 151,

134, 220, 221,

235

EBD05 Assessment of biodiversity risks for:

(a) Potential new operations or projects (due diligence)

(b) Existing operations or projects

105, 134, 151,

235

EBD06 Disclosure of biodiversity habitats:

(a) Within or adjacent to business operations

(b) Protected or restored by the company

235

EBD08 To reduce the loss of biodiversity engages with:

(a) Governments or Regulators

(b) International Organisations and NGOs

105, 134, 151,

235

EBD09 Biodiversity Action Plan (BAPs) audits:

(a) At some sites

(b) At all relevant sites

105, 134, 151,

235

EBD17 Policy or commitment statement on biodiversity to:

(a) Address the issue

(b) Reduce or avoid the impact

105, 134, 151

Climate Change

ECC01 Policy or commitment statement on climate change impact including CO2/

GHG emissions to:


(b) Improve efficiency, reduce or avoid the impact

133, 140,

220, 221, 233

ECC02 Recognition of climate change as:

(a) A significant issue

(b) A material issue for their business

133, 140,

220, 221, 233

ECC03 Demonstrating support to mitigating climate change through:

(a) Membership of business associations

(b) Company position on public policy and regulation

232

ECC12 Intensity of operational GHG emissions is:

(a) Measured and disclosed

(b) Reduced

72, 220, 221,

233, 234

PAGE: 284

PETRONAS GAS BERHAD

FTSE4GOOD INDEX


Page Reference

ECC37 Disclosure of results measured against previously disclosed targets to reduce

energy consumption:

(a) Unquantified progress

(b) Quantified progress

221, 234

ECC40 Disclosure of results measured against previously disclosed targets to reduce

operational GHG emissions:

(a) Unquantified progress

(b) Quantified progress

72, 220, 221,

233

Polution and Resources

EPR01 Supplier policy or commitment statement that addresses:

(a) Energy use

(b) Climate change impact including CO2/GHG emissions

134, 152, 191

EPR02 Policy or commitment statement on waste to:


(b) Improve efficiency, reduce or avoid the impact

105, 220, 221,

234

EPR05 Targets to reduce or avoid waste:

(a) Not quantified, process targets

(b) Quantified

220, 234

EPR08 Progress against previously set targets to reduce or avoid waste:

(a) Unquantified, process targets

(b) Quantified targets

220, 234

EPR28 Percentage of sites covered by recognised environmental management systems

such as ISO14001 or EMAS

221, 232

Supply Chain (Environment)

ESC02 Supplier policy or commitment statement that addresses:

(a) Energy use

(b) Climate change impact including CO2/GHG emissions

134, 152, 189,

191, 192


(a) Water use

(b) Biodiversity impacts

134, 152, 189,

191, 192


(a) Environmental issues

(b) Pollution

134, 152, 189,

191, 192


(a) Waste

(b) Resource use

134, 152, 189,

191, 192

PAGE: 285

ANNUAL REPORT 2016

FTSE4GOOD INDEX


Page Reference

ESC08 Environmental policy/policies integrated with suppliers through:

(a) Communication

(b) Training of relevant supplier staff

134, 189, 190,

259

ESC09 Risk Assessment regarding environmental issues for:

(a) Potential new suppliers (due diligence)

(b) Existing suppliers to identify those that are high risk

141, 190, 240,

241

ESC10 Action taken to manage the environmental impact of suppliers through

encouraging:

(a) Reporting

(b) Reduction

134, 152, 191,

192

ESC11 Monitoring of suppliers including:

(a) Physical inspection audits, or report number or proportion of suppliers

monitored or audited

(b) Results and specific action taken on any non-compliances

189, 190

ESC12 Company involvement in initiatives, or commitment to frameworks, on

environmental impacts in supply chain:

(a) Participation in workshops or industry/topic specific initiative or

collaboration

(b) Member in an industry or topic specific related initiative

189, 190, 259

Water Use

EWT12 Percentage of water recycled (non-potable) for use in own operations 220, 235

Health and Safety

SHS01 Policy or commitment statement on health and safety to:

(a) Address the issue as relevant and important

(b) Apply to contractors or other external stakeholders

75, 130, 140,

141, 148, 149,

158, 159, 213

SHS03 Board oversight of health and safety:

(a) Committee reporting into the board or clear board oversight over the issue

(b) Named individual/position responsible at board level

167, 185, 191,

203

SHS05 Employee involvement in health and safety improvements, through:

(a) Participative initiatives such as employee health and safety committees

(b) Management discussions on health and safety with worker representatives

or trade unions

134, 143, 152,

244, 247

SHS08 Performance monitoring and management of health and safety:

(a) Performance and progress against previously set targets

(b) Benchmarking against industry standards

240

SHS10 Independent verification of health and safety data:

(a) Independent verification by third party

(b) International assurance standard used and level of assurance declared

240

PAGE: 286

PETRONAS GAS BERHAD


Page Reference

SHS13 Number of staff trained on health and safety standards within the last year 242

SHS39 Policy or commitment statement on reducing health and safety impact through:

(a) Commitment to continuous improvement

(b) Time-specific, quantitative targets to reduce incidents

78, 131, 141,

149, 159

Human Rights and Community

SHR03 Statement of principles or process by which community investments are made

(a) Defined focus areas

(b) Focus area linked to business strategy

194, 213

SHR10 Human rights impact or risk assessment for:

(a) Potential new projects

(b) Existing company operations

189, 194, 213

SHR16 Mechanisms to facilitate employee engagement and involvement with charitable

partners

(a) Evidence of recognising volunteering

(b) Specific foundations, targets, structures set up

143, 161, 248,

249

Labour Standards

SLS26 Amount of time spent on employee development training

(a) Total hours as a company, or

(b) Average hours per employee

104, 245, 246

SLS29 Employee personal development training:

(a) Policy or commitment statement to provide employee personal

development training

(b) Detailed description of the personal development training that is provided

72, 80, 104,

245

Supply Chain (Social)

SSC02 Supplier policy addresses prevention of forced labour:

(a) Statement addressing issue

(b) Policy/Principles/Code

194, 213

SSC03 Supplier policy addresses non-discrimination or equal opportunities:

(a) Statement addressing issue


194, 213

SSC05 Supplier policy or statement supports the right to collective bargaining:

(a) Refers only to compliance with local law on collective bargaining

(b) Covers the respect or support of the right to collective bargaining

179, 180, 189

SSC06 Supplier policy addresses the elimination of excessive working hours:

(a) Comply/not exceed local law on working hours/overtime

(b) Clear policy on reducing excessive working hours

179, 180, 189

PAGE: 287

ANNUAL REPORT 2016

FTSE4GOOD INDEX


Page Reference

SSC07 Supplier policy supports the right to a minimum or living wage:

(a) Comply with minimum wage

(b) Commitment to exceed minimum wage/meet living wage

179, 180, 189

SSC08 Supplier policy addresses health & safety standards:

(a) Statement addressing issue or limited to legal compliance


179, 180, 189

SSC09 Social Supply Chain policy or code:

(a) Communicated globally to suppliers

(b) Translated into relevant languages

179, 180, 189

SSC11 Social Supply Chain policy integrated into:

(a) Buyer training

(b) Purchasing policy or supplier contract

179, 180, 189

SSC12 Monitoring of suppliers for social issues:

(a) Physical inspection audits, assessments are carried out

(b) Quantification of number or proportion of suppliers monitored or audited

179, 180, 189

SSC17 Capacity building in suppliers:

(a) Supplier training

(b) Supplier mentoring, secondments, or supporting suppliers sharing best

practice

179, 180, 189

Anti Corruption

GAC01 Policy or commitment statement addresses:

(a) Countering bribery

(b) At least 2 different forms of bribery related activities

179, 212

GAC02 Policy or commitment statement addresses:

(a) Anti-corruption

(b) Specific forms of corruption (including but not limited to money

laundering, embezzlement, obstruction of justice)

179, 195, 212

GAC03 Board has oversight of anti-corruption policy:

(a) Covers elements of corruption including bribery

(b) Covers anti-corruption specifically

166, 179, 184

GAC04 Due diligence of new business partners addresses corruption:



179, 195

GAC05 Confidential or anonymous whistle-blowing mechanism for staff:



179, 195

GAC07 Communication of anti-corruption policy to all employees:



179, 195

PAGE: 288

PETRONAS GAS BERHAD


Page Reference

GAC08 Training for staff on the anti-corruption policy:



193, 195

GAC09 Corruption risk assessment for company operations:



179

GAC10 Procedures are in place to address corruption in operations that are assessed

to be ‘high risk’:



179, 189

GAC11 Process for intermediaries (including contractors, agents or joint ventures):

(a) Corruption risk assessment or procedures to address corruption for

intermediaries

(b) Anti-corruption policy is communicated to intermediaries

195

Corporate Governance

GCG01 Separate Chairman and CEO

(a) Separate Chairman and CEO, where Chairman is not independent or his

independence is not declared

(b) Separate Chairman and CEO, where Chairman is independent

169

GCG02 Disclosure of details about Directors:

(a) Expertise

(b) Other Directorships

41 – 47

GCG03 Number of Board Directors 168

GCG04 Number of Independent Directors on the Board 167

GCG05 Number of women on the board 171

GCG06 Commitment to gender diversity on the Board:

(a) Statement of support

(b) Targets in place to improve gender ratio

167

GCG07 Board addresses:

(a) Conflicts of interest

(b) Abuse in related party transactions

41 – 47

GCG08 Periodic evaluation of board effectiveness:

(a) Review with no clear timeframe

(b) Evaluation with a clear timeframe (e.g. annually)

175

GCG09 Disclosure of:

(a) Board committees

(b) Their terms of reference or equivalent

173, 200,

204, 205,

290

PAGE: 289

ANNUAL REPORT 2016

FTSE4GOOD INDEX


Page Reference

GCG10 Disclosure of number of times each committee has met per annum:

(a) The Board

(b) Each Sub-committee

172

GCG11 Disclosure of the attendance rate for:

(a) Some individual Board/subcommittee member attendance rates, or an

average attendance rate

(b) All individual committee member’s attendance rate at Board and sub

committee level

172

GCG14 Disclosure of fixed and variable remuneration for:

(a) Executive board members

(b) Non-executive board members

176, 177

GCG19 Number of working days before the Annual General Meeting that the agenda is

published

178

GCG21 Shareholders have the right to vote on executive remuneration:

(a) Evidence of shareholders voting in the AGM

(b) The right to vote annually is explicitly covered in a company policy

proxy form

GCG22 Shareholders have the right to vote on Director appointments and dismissals:

(a) Evidence of shareholders voting in the AGM

(b) The right to vote annually for election/re-election of all directors is

explicitly covered in a company policy

proxy form

GCG26 Disclosure of voting results

(a) In a limited format (eg. Webcasts)

(b) In an official document

178, 183, 297

GCG42 Does the company provide for one share one vote for all company meeting

resolutions?

proxy form,

297

GCG44 Financial expertise on the audit committee:

(a) At least one independent financial expert on the audit committee

(b) A majority of independent financial experts on the audit committee

199

GCG46 There is a fully non-executive Audit Committee or Audit Board with:

(a) At least half independent members

(b) All independent members

200

GCG47 There is a fully non-executive Remuneration Committee with:

(a) At least half independent members

(b) All independent members

205

GCG49 Disclosure and nature of fees paid to the auditor 202, 203

PAGE: 290

PETRONAS GAS BERHAD


Page Reference

Risk Management

GRM01 Board:

(a) Has oversight of risk management

(b) Reviews the effectiveness of the risk management

179, 185

GRM02 There is a senior executive or committee responsible for risk:

(a) Reporting to the CEO or Board

(b) Separate from Head of Audit or equivalent

185, 191, 203

GRM04 Reference to external standards to inform the company’s risk management

system and reporting transparency:

(a) Risk management standards or frameworks such as ISO31000, COSCO,

IRM, FERMA, BASEL

(b) Reporting standards such as GRI, Integrated Reporting (IIR((c) ,

SASB

186

GRM05 Board applies oversight over:

(a) Code of Conduct or equivalent

(b) ESG risks

179, 195, 212

GRM07 The company’s charter/policy documents or equivalent:

(a) Describes the company’s risk management framework

(b) The framework covers ESG risks

186

GRM08 The company has a corporate-wide approach to non-compliance including:

(a) Procedures to investigate and follow up on any non-compliances identified

(b) Reporting of the number of substantiated claims or incidents of non-

compliance

76, 77, 83,

85, 193

GRM10 The company commits to:

(a) The regular rotation of auditors/audit partner

(b) To tender for a new audit firm on a regular basis

202

GRM11 The company addresses major ESG catastrophic events and incidents through:

(a) Scenario planning or stress testing

(b) Response plans or emergency procedures in place

190

GRM20 There is a confidential or anonymous whistle-blowing or equivalent mechanism

to notify breaches of company codes or policies for:

(a) Staff

(b) External Stakeholders

179, 195, 213

PAGE: 291

ANNUAL REPORT 2016

Board Audit Committee PETRONAS Gas Berhad Level 51, Tower 1PETRONAS Twin Towers50088 Kuala Lumpur

16 February 2017

Dear Sirs,

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

1 INTRODUCTION

PETRONAS Gas Berhad (‘PGB’), a subsidiary of Petroliam Nasional Berhad (‘PETRONAS’), is listed on the Main Market of Bursa Malaysia since 1995. PETRONAS Gas Berhad (‘PGB’) 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 2016 pursuant to the waiver for compliance with Paragraph 10.09 of Bursa Malaysia Main Market Listing Requirements granted by Bursa Malaysia based on its letter to PGB dated 27 October 2016 (‘the Waiver’).

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

(i) Nitrogen and Oxygen Supply Agreement with PRPC Refinery Cracker Sdn Bhd and PRPC Polymer Sdn Bhd(ii) Nitrogen Supply Agreement with PRPC Utilities and Facilities Sdn Bhd(iii) Land Lease Agreement with PETRONAS Hartabina Sdn Bhd(iv) Project Management Consultancy Services Agreement for EPCC of Pengerang LNG Regasification Facilities with PTSSB

PGB is required to disclose in its Annual Report after the date of the Exchange’s letter dated 27 October 2016, an independent financial adviser’s opinion that the methods or procedures in determining the transaction price and terms for the agreements stated above are adequate to ensure that the transactions will be carried out on normal commercial terms and will not be to the detriment of its minority shareholders (the ‘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 above (i-iv) 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 and the agreements terms and conditions of the services. PWCC is not involved in the formulation of these procedures adopted by the Company.

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

• Performed 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

• 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

PAGE: 292

PETRONAS GAS BERHAD

INDEPENDENT ASSURANCE STATEMENT

2 TERMS OF REFERENCE (continued)

• Interviewed Board members, including the Audit Committee Chairman to understand the Board’s role in reviewing the

RRPTs under review

• Developed report highlighting the results of work performed and recommendations for consideration

• Developed our opinion on whether the methods and procedures in determining the transaction prices and terms of

the RRPTs under review 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

Other than the review on the methods and procedures of the transactions as stipulated in this letter, we have not

conducted any other procedures on information included in PGB’s 2016 Annual Report.

3 REVIEW PROCEDURES IN DETERMINING AND REVIEWING THE TRANSACTION PRICE 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 of the contracts above (i-iv), we have considered the

following:

a) The Directors’ rationale and the benefits accruing to PGB arising as a result of entering into the RRPT contracts; and

b) The review procedures for each of the contracts stated above (i-iv);

Bursa Malaysia had on 27 October 2016 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 contracts stated above (i-iv).

During the period of review, PGB undertook adequate process which involved:

a) Determining suitable tariffs and prices for the contracts above (i-iv);

b) Negotiating with the relevant parties on pricing and terms and conditions in respect of the transactions; and

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

procedures.

Based on the result of our review, there were no exceptions relating to the price determination process and terms and

conditions for the contracts stated above (i-iv).

4 OPINION

Our test did not note any material exception as it relates to the methods and procedures undertaken to determine that

the transaction price and terms of the RRPT are carried out on normal commercial terms and will not be to the detriment

of 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

PAGE: 293

ANNUAL REPORT 2016

NOTICE IS HEREBY GIVEN THAT the 34th Annual General Meeting of PETRONAS Gas Berhad (the Company) will be

held at Conference Hall 2, Level 3, Kuala Lumpur Convention Centre, Jalan Ampang, 50088 Kuala Lumpur, Malaysia on

Monday, 17 April 2017 at 10.30 a.m. for the following businesses:

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2016 together with the Reports

of the Directors and Auditors thereon.

Please refer to Explanatory Note A.

2. To re-elect Habibah Abdul, who retires in accordance with Article 93 of the Constitution of the Company and, being

eligible, offer herself for re-election: (Resolution 1)

Please refer to Explanatory Note B.

3. To re-elect the following Directors pursuant to Article 96 of the Constitution of the Company:

(a) Datuk Mohd Anuar Taib (Resolution 2)(b) Emeliana Dallan Rice-Oxley (Resolution 3)(c) Wan Shamilah Wan Muhammad Saidi (Resolution 4)(d) Heng Heyok Chiang @ Heng Hock Cheng (Resolution 5)

Please refer to Explanatory Note B.

4. To approve the Directors’ Fees of up to RM1 million with effect from 1 January 2017 until the next Annual General

Meeting of the Company payable to Non-Executive Directors. (Resolution 6)

Please refer to Explanatory Note C.

5. To re-appoint KPMG PLT, as Auditors of the Company for the financial year ending 31 December 2017 and to authorise

the Directors to fix their remuneration. (Resolution 7)

Please refer to Explanatory Note D.

6. To transact any other business for which due notice has been given.

By Order of the Board

Intan Shafinas (Tuty) Hussain (LS 0009774) Yeap Kok Leong (MAICSA 0862549)

Company Secretary Company Secretary

Kuala Lumpur

20 March 2017

PAGE: 294

PETRONAS GAS BERHAD

NOTICE OF ANNUAL GENERAL MEETING

NOTES:

Proxy and/or Authorised Representative

1. For the purposes of determining a member who shall

be entitled to attend and vote at the forthcoming 34th

Annual General Meeting (AGM), the Company shall be

requesting the Record of Depositors as at 7 April 2017.

Only a depositor whose name appears on the Record

of Depositors as at 7 April 2017 shall be entitled to

attend 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.

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 accounts.

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

under the hand of the appointer or his attorney duly

authorised in writing or if the appointer is a corporation

either under seal or under the hand of an officer or

attorney duly authorised and must be deposited at 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,

Malaysia, not less than 48 hours before the time fixed

for holding the meeting.

7. If the 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 the 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.

PAGE: 295

ANNUAL REPORT 2016

NOTICE OF ANNUAL GENERAL MEETING

Explanatory Notes

Note A

Audited Financial Statements for the Financial Year Ended 31 December 2016

The audited financial statements are laid before the

shareholders pursuant to the provisions of Section 244(2)(a)

of the Companies Act 2016. The same is for discussion and

not put forward for voting.

Note B

Re-election of Directors who retire in accordance with Article 93 of the Constitution of the Company

Article 93 of the Constitution of the Company provides that

one-third of the Directors of the Company for the time

being shall retire by rotation at an AGM of the Company

provided always that all Directors, shall retire from office

once at least in each three years but shall be eligible for

re-election at the AGM.

Article 96 of the Constitution of the Company provides that

the directors may at any time appoint any person to be a

director, either to fill a casual vacancy or as an addition to

the existing directors. Any appointed directors shall hold

office only until the next following Annual General Meeting

of the Company and shall be eligible for re-election.

The Nomination and Remuneration Committee of the

Company determines the eligibility of each director standing

for re-election at the AGM based on the performance of the

Directors, taking into account the results of their latest

Board Evaluation, contribution to the Board through their

skills, experience, strengths and qualities, level of

independence and ability to act in the best interest of the

Company in decision making.

The profiles of the retiring Directors are set out in the

Profile of the Board of Directors on pages 41 to 47 of the

2016 Annual Report.

The Board endorsed the Nomination and Remuneration

Committee’s recommendation that the Directors who retire

in accordance with Article 93 and Article 96 of the

Constitution of the Company are eligible to stand for

re-election.

Note C

Non-Executive Directors’ Fees

Pursuant to Section 230(1) of the Companies Act 2016, the

fees of the directors, and any benefits payable to the

directors including any compensation for loss of

employment of a director or former director of a public

company or a listed company and its subsidiaries, shall be

approved at a general meeting.

The fee structure of the Non-Executive Directors (NEDs) of

the Company is as follows:

• Monthly fixed fees for duties as Director/Chairman;

• Meeting allowance for each Board/Board Committee

attended;

• Fuel allowance; and

• Directors and Officers Liability Insurance

The Directors’ fees and meeting allowances for Datuk Mohd

Anuar Taib and Emeliana Dallan Rice-Oxley being the

Non-Independent Non-Executive Directors who are also

employees of Petroliam Nasional Berhad (PETRONAS) and

holding positions of Vice President and above are paid directly

to PETRONAS. They are not entitled to fuel allowance.

The shareholders at the last AGM held on 26 April 2016

approved the Directors’ fees of RM986,000 per annum. The

actual Directors’ fees amount paid to NED for the financial

year ended 31 December 2016 is RM760,000 whilst the

Directors’ fees for NED for the period from 1 January 2017

until the next AGM to be held in year 2018 is estimated to

be RM1 million.

The Directors’ fees proposed for the financial year ending 31

December 2017 until the conclusion of the next AGM

(FYE2017/2018) are calculated based on the number of

scheduled Board’s and Board Committees’ meetings and on

assumption that all the NEDs will remain in office until the

next AGM. This resolution is to facilitate payment of the

Directors’ Fees for FYE2017/2018.

The Board will seek shareholders’ approval at the next AGM

in the event the Directors’ fees proposed is insufficient.

Details of the fees and allowances payable to the NEDs for

the financial year ended 31 December 2016 are enumerated

on page 176 of the 2016 Annual Report.

PAGE: 296

PETRONAS GAS BERHAD

Note D

Re-appointment of Auditors

The Board at its meeting held on 23 February 2017 endorsed

for the re-appointment of KPMG PLT as External Auditors of

the Company for the financial year ending 31 December

2017 be presented to the shareholders for approval.

KPMG had converted its legal entity status from unlimited

liability partnership pursuant to Partnership Act 1961 to

limited liability partnership pursuant to Section 29 of the

Limited Liability Partnerships Act, 2012 (LLP Act 2012)

effective 27 December 2016. Accordingly, KPMG had been

registered in the name of KPMG PLT. In this instance, PLT

means “Perkongsian Liabiliti Terhad”. There was no change

to the Partners serving the Company.

In any event, pursuant to Section 36 of the LLP Act 2012,

any agreements/engagements already made between the

Company and its Group and KPMG will continue to be in

force as if KPMG PLT were a party to the agreements.

Accordingly, all engagement letters signed with KPMG

continue to be in force until these are superseded.

Other Information

The Company has engaged independent scrutineers to

count, audit and validate the votes for each proposal

presented to shareholders.

PAGE: 297

ANNUAL REPORT 2016

REGISTRATION

(1) Registration will start at 8.00 a.m. on 17 April 2017 in front of the Conference Hall 2, Kuala Lumpur

Convention Centre, Kuala Lumpur.

(2) Please produce your original Identity Card (“IC”) to the registration staff 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 table.

(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 Kuala Lumpur Convention Centre or Suria KLCC. Please

bring your parking ticket for validation at the counter near the Conference Hall 2.

(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 3 p.m. on 17 April 2017. Any additional cost incurred for parking

after 3 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.

PAGE: 298

PETRONAS GAS BERHAD

ADMINISTRATIVE DETAILS FOR THE 34TH ANNUAL GENERAL MEETING

ABC Anti-Bribery and Corruption

ACC Accelerating Cultural Change

ACD Accelerated Capability Development

AGO Acid Gas Oxidiser

AGRU Acid Gas Removal Unit

ASPIRE ASU1 and ASU2 Power Supply Segregation

ASU Air Separation Unit

BAC Board of Audit Committee

BCM Business Continuity Management

BCP Business Continuity Plan

BLP Building Leaders Programme

BOM Bill of Material

BPC BASF PETRONAS Chemicals Sdn Bhd

BVRA Business Venture Risk Assessment

CAPEX Capital expenditure

CAR Clean Air Regulation

CC Constitution of the Company

CDWC Capability Development Working Committee

CEMS Continuous Emission Monitoring System

CFO Chief Financial Officer

CFP PETRONAS Corporate Financial Policy

CG Corporate Governance

CHRA Chemical Health Risk Assessment

CIMAH Control of Industrial Major Accident Hazards

CIO Chief Integrity Officer

CM Crisis Management

CoBE Code of Business Ethics

COD Commercial Operation Date

COGEN Cogeneration plant

COI Conflict of interest

COP Community of Practice

CoRA Contractor Risk Assessment

CR Corporate Responsibility

CSC Commercial Steering Committee

CSE Confined space entry

CSI Corporate Social Investment

CSR Corporate Social Responsibility

CTI Cost to income

CUF Centralised Utility facilities

DAF Dissolved Air Flotation

DHU Dehydration Unit

DOEFA Downstream Operational Excellence Forum

Awards

DOSH Department of Occupational Safety and

Health

DPR Dividend payout ratio

DPS Dividend per share

DRP Discipline Resource Person

DTA Deferred tax assets

EBITDA Earnings before interest, tax, depreciation

and amortisation

EC Energy Commission

ECER East Coast Economic Region

ECRO PETRONAS East Cost Regional Office

EES Economic, Environment and Social

EPF Employees Provident Fund

EPS Earnings per share

EPU Economic Planning Unit

ERM Enterprise Risk Management

ERP Enterprise Risk Profile

ERR Enterprise Risk Report

ERS Equipment Reliability Strategy

ESG FTSE Environmental, Social and Governance

FGRU Flare Gas Recovery Unit

FID Final Investment Decision

FLL Finance lease liabilities

FOREX Foreign exchange

FSU Floating Storage Unit

GEMA Gebeng Emergency Mutual Aid

GHG Greenhouse Gases

GHSE Group Health, Safety and Environment

GIA Group Internal Audit

GJ Gigajoule

GMB Gas Malaysia Berhad

GP Gas Processing

GPA Gas Processing Agreement

GPK Gas Processing Kertih

GPP Gas Processing Plant

GPS Gas Processing Santong

GPU Gas Processing and Utilities

GSA Gas Supply (Amendment) Act 2016

GT Gas Transmission

GTA Gas Transportation Agreement

GTR Gas Transportation and Regasification

GWh Gigawatt hour

HASN Hari Alam Sekitar Negara

HR Human Resource

HSE Health, Safety and Environment

HSELT HSE Leadership Team

HSEMS HSE Management System

HSEOE Health, Safety, Environment and Operational

Excellence

HSESC Health, Safety and Environment Steering

Committee

PAGE: 299

ANNUAL REPORT 2016

GLOSSARY

GLOSSARY

HSSE Health, Safety, Security and Environment

IA Initial Acceptance

ICQCC International Convention on Quality Control

Circles

ICT Information and Communication Technology

IETS Industrial Effluent Treatment System

IFSSC PETRONAS Integrated Financial Shared

Services Centre

IGS Industrial Gas Solutions Sdn Bhd

IKM Institut Kimia Malaysia

IPP Independent power producers

IPTM Inspection, Testing, Preventive Management

IRP Inspection Reference Plan

ITA Investment tax allowance

JBPM Jabatan Bomba dan Penyelamat Malaysia

JDA Joint Development Area

JV Joint Venture

KIPC Kertih Integrated Petrochemical Complex

KMt Kilometric tonnes

KOMSB Kimanis O&M Sdn Bhd

KPI Key performance indicators

KPSB Kimanis Power Sdn Bhd

KRA Key Results Area

KRI Key Risk Indicators

LDAR Leak Detection and Repair

LINDE Linde Malaysia Sdn Bhd

LNG Liquified Natural Gas

LOA Limits of Authority

LOPC Loss of primary containment

LT Leadership Team

LTI Lost Time Injury

LTIF Loss Time Injury Frequency

MAP Mandatory Accreditation Programme

MASB Malaysian Accounting Standards Board

MASRA Malaysia Sustainability Reporting Awards

MC Management Committee

MCCG 2012 Malaysian Code on Corporate Governance

2012

MCF Mandatory Control Framework

MFRS Malaysian Financial Reporting Standards

MI Mechanical Integrity

MIA Malaysian Institute of Accountants

MIDA Malaysian Industrial Development Authority

MLNG Malaysia LNG Sdn Bhd

MMLR Main Market Listing Requirement

MMSCFD Million standard cubic feet per day

MNm3 Mega normal cubic meters

MNS Malaysian Nature Society

MPC Malaysia Productivity Corporation

MSR Management System Review

MSWG Minority Shareholder Watchdog Group

MT Metric tonne

MTJDA Malaysia-Thailand Joint Development Area

MTPA Million tonnes per annum

NACRA National Annual Corporate Report Awards

NGU Nitrogen Generation unit

NGV Natural Gas vehicals

NRC Nomination and Remuneration Committee

O&M Operation and maintenance

OBIMA Overall Boiler Integrity Management

OE&I Operational Excellence and Improvement

OEE Overall Equipment Efficiency

OeXMS Operational Excellence Management System

OPEX Operating expenditure

OPU Operating units

OSH Occupational Safety and Health

PAT Profit after tax

PBPP Program Bakti Pendidikan

PBS Performance based structure

PCASB PETRONAS Chemicals Ammonia Sdn Bhd

PCB PETRONAS Cultural Beliefs

PCESB PETRONAS Chemical Ethylene Sdn Bhd

PCG PETRONAS Chemical Group

PCOGD PETRONAS Chemical Olefins, Glycol and

Derivatives

PCP Pengerang Cogeneration Plant

PCRRS PETRONAS Credit Risk Rating System

PD&T PETRONAS Project Delivery and Technology

PDIS Procurement Downstream and Indirect

Spend

PDR Product delivery reliability

PECAS PETRONAS Competency Assessment System

PEMS Predictive Emission Monitoring System

PETRONAS Petroliam Nasional Berhad

PFRM Plant and Facilities Risk Management

PGPP Pengerang Gas Pipeline Project

PGSSB Pengerang Gas Solution Sdn Bhd

PGU Peninsular Gas Utilisation

PIC Pengerang Integrated Complex

PIRESS Pipeline Relocation Sungai Skudai

PLC PETRONAS Leadership Centre

PLNG2 Penegerang LNG (Two) Sdn Bhd

PLT Plant Leadership Team

PPE Property, plant and equipment

PAGE: 300

PETRONAS GAS BERHAD

PPMS PETRONAS Project Management System

PPMSB PETRONAS Penapisan (Melaka) Sdn Bhd

PRBI PETRONAS Risk Based Inspection

PRMD Planning and Risk Management Department

PRR Plant Rejuvenation and Revamp

PSC Project Steering Committee

PSIP Program Sentuhan Ilmu PETRONAS

PSKP Program Sentuhan Kasih PETRONAS

PSM Process Safety Management

QA Quality assurance

QASR Quarterly Audit Status Report

QC Quality control

RA Reinvestment Allowance

RAPID Refinery and Petrochemicals Integrated

Development

RCC Risk and Compliance Committee

RCFA Root Cause Failure analysis

RGT Regasification

RGT2 Pengerang LNG Regasification Terminal

RGTEC RGT Minimum Sent Out Capability

Improvement

RGTLD Regas Terminal (Lahad Datu) Sdn Bhd

RGTP LNG Regasification Terminal Pengerang

RGTSU LNG Regasification Terminal Sungai Udang

RMU Risk Management Unit

ROA Return on Asset

ROE Return on Equity

ROSPA Royal Society for the Prevention of

Accidents

ROW Right of way

RPG Recommended Practice Guide

RPT Related Party Transaction

RRPT Recurring Related Party Transaction

RSA Regasification Service Agreement

SCE Safety Criticality Element

SEC Sabah Energy Corporation Sdn Bhd

SID Senior Independent Director

Sm3 Standard cubic meter

SME Subject matter experts

SoE Scheme of Examination

SORMIC Statement of Risk Management and Internal

Controls

SSGP Sabah-Sarawak Gas Pipeline

SSI Special Scheme Inspection

TOR Term of reference

TPA Third Party Access

TSET Tanjung Sulong Export Terminal

TSR Total shareholder’s return

TTS Technical Trade Specialist

UG Utilities Gebeng

UK Utilities Kertih

UT Utilities

WACC Weighted average cost of capital

WBP Whistleblowing Policy

WP Work process

YoY Year on year

ZeTo PETRONAS Zero Tolerance

PAGE: 301

ANNUAL REPORT 2016

This page has been intentionally left blank.

No. of Ordinary Shares Held

CDS Account No.

I/We Tel: (Full Name In Capital Letters)

of (Full Address)

being a Member of PETRONAS Gas Berhad (the Company) hereby appoint:

Full Name (in Block) Proportion of Shareholdings

NRIC/Passport No. No. of Shares %

Address

and/(delete as appropriate)

Full Name (in Block) Proportion of Shareholdings

NRIC/Passport No. No. of Shares %

Address

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 34th Annual General

Meeting of the Company to be held at the Conference Hall 2, Level 3, Kuala Lumpur Convention Centre, Jalan Ampang, 50088

Kuala Lumpur, Malaysia on Monday, 17 April 2017 at 10.30 a.m. and at any adjournment thereof.

Resolutions For Against

1. Re-election of Habibah Abdul as a Director

2. Re-election of Datuk Mohd Anuar Taib as a Director

3. Re-election of Emeliana Dallan Rice-Oxley as a Director

4. Re-election of Wan Shamilah Wan Muhammad Saidi as a Director

5. Re-election of Heng Heyok Chiang @ Heng Hock Cheng as a Director

6. Directors’ Fees of up to RM1 million with effect from 1 January 2017 until the next

Annual General Meeting of the Company payable to Non-Executive Directors

7. Re-appointment of KPMG PLT, as Auditors of the Company

* Please refer to the Notice of Annual General Meeting for full details of the proposed Resolutions.

(Please indicate with an “X” in the spaces provided whether you wish your vote to be cast for or against the Resolutions. In the

absence of specific directions, your proxy will vote or abstain as he/she thinks fit)

Date: 2017.

Signature/Common Seal of Shareholders

PETRONAS Gas Berhad (101671-H)

PROXY FORM

SYMPHONY SHARE REGISTRARS SDN BHD

Level 6, Symphony House,

Pusat Dagangan Dana 1,

Jalan PJU 1A/46, 47301 Petaling Jaya,

Selangor Darul Ehsan, Malaysia

FOLD HERE

FOLD HERE

AFFIX

STAMP

Notes:

1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming 34th Annual General Meeting, the Company shall be requesting

the Record of Depositors as at 7 April 2017. Only a depositor whose name appears on the Record of Depositors as at 7 April 2017 shall be entitled to attend and vote at

the meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead.

2. A member of the Company entitled to attend and vote at the meeting may appoint not more than two proxies to attend and vote on his behalf. A proxy may but need

not be a member of the Company and a member may appoint any person to be his proxy. 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

accounts.

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 under the hand of the appointer or his attorney duly authorised in writing or if the appointer is a corporation either

under seal or under the hand of an officer or attorney duly authorised and must be deposited at 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, Malaysia, not less than 48 hours before the time fixed for holding

the meeting.

7. If the 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 the 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.

PETRONAS GAS BERHAD (101671-H)

Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre

50088 Kuala Lumpur

Tel : (03) 2051 5000 • Fax: (03) 2051 6555

www.petronasgas.com

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