transform to perform : results matter

www.petronasgas.com

PETRONAS GAS BERHAD (101671-H)

Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre50088 Kuala Lumpur

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

Results MatterAnnual Report 2015PETRONAS GAS BERHAD (101671-H)

Annual Report 2015

PETRO

NA

S GA

S BER

HA

D (101671-H

)

VENUE :

Sapphire Room, Mandarin Oriental Hotel, Kuala Lumpur

DATE :

Tuesday, 26 April 2016

TIME :

10.30 a.m.

T H I R T YT H I R D

A N N U A L G E N E R A L M E E T I N G

A B O U T T H E C O V E R

This year’s theme reflects PETRONAS Gas Berhad’s (PGB) continued focus on its ongoing transformation journey. It has been a year with breakthrough

performance despite of challenges and changes, focusing on attaining performance benchmarks as well as enhanced productivity. The journey

continues as we strive to attain sustainable world-class standards befitting our role as a Leading Gas Infrastructure and Utilities Company.

PGB has transformed the Company’s business and operations fundamentals in

order to perform stronger operational excellence and safety performance. Building upon this foundation, we are accelerating our ambitious transformation

efforts in order to elevate our performance to the next level.

We are confident that our overall strategic direction will continue to strengthen our presence and provide a sustainable and resilient future for PGB amidst a

challenging business landscape.

We will endure to stretch our limits to transform the organisation beyond the expectations of our stakeholders by performing to deliver superior results.

Hence, we Transform to Perform as the Results Matter.

174Corporate Governance

10Chairman’s Statement

110Business Review

T H I S R E P O R T

SUPPLY

2,000

530

490

OFFERS MORE THAN

OPERATING

mm

scfd

mm

scfd

mm

scfd

TO PETROCHEMICALCUSTOMERS INKERTIH AND GEBENG

KM

PROCESSING CAPACITY THROUGH

2ND LNG REGASIFICATION TERMINALIN PENGERANG, JOHOR

GAS TRANSMISSION PIPELINEACROSS MALAYSIA

PETRONAS Gas Berhad (PGB) has been in business for more than 3 decades

and is still growing strong

OPERATING

LNGTERMINAL

MORE THAN

FACTS AT A GLANCE

+9.1 %2015: 60 sen

+7.8 %2015: RM2.0 billion

+1.5 %2015: RM4.5 billion

REVENUE DIVIDENDS PER SHARE PROFIT AFTER TAX

+8.5 %2015: RM14.4 billion

+9.7 %2015: RM11.6 billion

+2.4 %2015: RM22.70

TOTAL ASSETS TOTAL EQUITY SHARE PRICE

OUR STRENGTH

GAS PROCESSING PLANTS 6

IN KIMANIS, SABAHMW300

UTILITIES

2,500

INDUSTRIAL

UNDER CONSTRUCTION

REGASIFICATION

3 BLOCKS OF POWER PLANTS

IN SUNGAI UDANG, MELAKA

72KM PIPELINE CONNECTING TO

WHATWE DO

BUSINESS REVIEW

110 Gas Processing

118 Gas Transportation

126 Utilities

134 Regasification

GETTINGS T A R T E D

P E T R O N A S G A S B E R H A D

AT A GLANCE

Facts at a Glance

02 Vision, Mission and Shared Values

04 2015 Key Highlights

06 5-Year Financial Highlights

THE RIGHTRESULTS

MESSAGE TO SHAREHOLDERS

10 Chairman’s Statement

16 MD/CEO’s

Business Review

ABOUT US

26 Our Profile

28 Our Presence and Operations

32 Group Corporate Structure

34 Group Organisational

Structure

36 Corporate Information

38 Board of Directors

40 Profile of Board of Directors

48 Management Committee

50 Profile of Management

Committee

STRATEGY AND OUTLOOK

60 Our Integrated Value Chain

62 Our Group Strategy

64 Strategic Priorities and

Focus Area

70 Our Key Risk Management

74 Overview of Financial Risk

Management

75 Sustainable Value Creation

76 Our Key Relationship

78 Industry Review and

Outlook

PERFORMANCE REVIEW

82 Group Financial Review

90 Key Performance

92 Simplified Group Statement of

Financial Position &

Segmental Analysis

96 Group Quarterly Financial Performance

97 Non-financial Performance Indicator

98 Key Interest Bearing Assets

and Liabilities

98 Statement of Value Added

99 Distribution of Value Added

100 Investor Relations

WE CARE

CORPORATE GOVERNANCE

174 Corporate Governance Statement

185 The Malaysian Code on

Corporate Governance 2012

187 Training Programmes Attended

by Directors

189 Additional Compliance

Information

192 Statement on Risk Management

and Internal Control

207 Business Continuity Management

209 Nomination and Remuneration

Committee Report

213 Nomination and Remuneration

Committee’s Term of Reference

216 Board Audit Committee Report

220 Internal Audit

222 Board Audit Committee’s

Terms of Reference

225 Code of Conduct and

Business Ethics

ACHIEVEMENTS

228 Corporate Milestones:

Our Journey 1983-2016

230 2015 Significant Events

232 2015 Media Milestones

234 2015 Calendar of Events

240 Awards and Achievements

242 Past Awards

SUSTAINABILITY

142 Health, Safety & Environment

144 Innovation

146 Human Capital Development

150 Corporate Responsibility

154 Marketplace

160 Workplace

164 Environment

168 Community

OUR RIGHT RESULTS

246 Statement of Directors’ Responsibility in relation to the Financial Statements

247 Financial Statements

OTHER INFORMATION

334 Analysis of Shareholdings

334 Classification of Shareholders

335 List of Top 30 Shareholders

337 List of Directors’ Shareholdings

337 List of Substantial Shareholders

338 Authorised & Issued Share Capital

339 Summary and Usage of Landed

Property, Plant, and Equipment

350 Top 10 Landed Property Plant &

Equipment

351 Corporate Directory

352 Global Reporting Initiative (GRI)

Content Index

354 Notice of Annual General Meeting

357 Statement Accompanying Notice of

33rd Annual General Meeting

358 Administrative Details for the

33rd Annual General Meeting

ABOUT THIS REPORT

• Proxy Form

For ease of reading our Annual Report, the following icons have been incorporated at the relevant pages to direct you to the relevant section for more detail information.

We are pleased to present our Annual Report to our shareholders. This year, we have embarked

on the integrated reporting journey and progressively we are adopting this evolving area of best

practices and commitment towards sustainability, transparency and effective corporate reporting.

We have also incorporated sustainability reporting, in line with the guidelines by Global Reporting

Initiative (GRI), in our efforts to make our operations sustainable and transparent.

Current Active Section

Related Integrated Reporting Section

Non-active Section

Integrated Reporting cross-referencing

IR

ABOUT US STRATEGY & OUTLOOK

PERFORMANCE REVIEW

A LEADING GAS INFRASTRUCTURE AND

UTILITIES COMPANY

SHARED VALUES

VISIONG4-4

LOYALTY INTEGRITY

2

P E T R O N A S G A S B E R H A D(101671-H)

AT A GLANCE ABOUT USMESSAGE TO SHAREHOLDERS

STRATEGY & OUTLOOK

PERFORMANCE REVIEW

MISSION• WE ARE A BUSINESS ENTITY

• GAS INFRASTRUCTURE AND UTILITIES IS OUR CORE BUSINESS

• WE OPERATE SAFELY, RELIABLY AND COMPETITIVELY

• WE OPTIMISE THE GAS VALUE CHAIN TO MAXIMISE RETURNS FOR OUR STAKEHOLDERS

COHESIVENESSPROFESSIONALISM

3

A N N U A L R E P O R T 2 0 1 5

SUSTAINABILITYBUSINESSREVIEW

CORPORATEGOVERNANCE ACHIEVEMENTS OUR

RIGHT RESULTSOTHER

INFORMATION

SECURED EXTERNAL FINANCING

USD500 MILLION

SUSTAINABLE PROFIT AFTER TAX

RM2.0 BILLION

STURDY TOTAL ASSETS

RM14.4BILLION

60 SEN

TOP MOST DIVIDENDS

HIGHEST EVER REVENUE

RM4.5 BILLION

Our transformation has helped us deliver tremendous results, built upon

strategic top line and bottom line discipline and vigorous delivery of operational performance. We will

continue to Transform to Perform above and beyond expectations to

deliver Results Matter to our shareholders and stakeholders.

4



STRATEGY & OUTLOOK

PERFORMANCE REVIEW

2015 KEY HIGHLIGHTSG4-9

GAS PROCESSING AND GAS TRANSPORTATION AGREEMENTS

Full year implementation

EXEMPLARY PERFORMANCE OF LIQUID PLANT EXTRACTION

8 months Performance Based Structure income

LNG REGASIFICATION TERMINAL PENGERANG PROJECT

Advancing well and on track

On schedule with quick wins achieved 66%

PGB TRANSFORMATION

PLANT REJUVENATION AND REVAMP PROJECT

Completion of the last series for Gas Processing Plant 4

KIMANIS POWER PLANT

Full year commercial operations

5

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

Revenue(RM million)

Dividends Per Share(RM sen)

Year FY2011* FY2012 FY2013 FY2014 FY2015

Revenue (RM million) 2,765.1 3,576.8 3,892.1 4,391.7 4,455.9

Profit After Tax (RM million) 1,080.8 1,404.9 2,078.9 1,842.1 1,985.9

Dividends Per Share (sen) 40 50 55 55 60

Earnings Per Share (EPS) (sen) 54.6 71.0 105.1 93.1 100.4

Total Assets (RM million) 10,746.5 12,438.3 13,222.4 13,260.5 14,382.0

Total Equity (RM million) 8,643.9 9,167.3 10,265.5 10,569.0 11,594.9

Market Capitalisation (RM million) 30,076.7 38,624.8 48,043.6 43,848.7 44,917.2

Share Price (RM) 15.20 19.52 24.28 22.16 22.70

2014 – 4,391.7 2014 – 1,842.1

FY 2014

2014 – 552015 – 4,455.9 2015 – 1,985.9 2015 – 60

2014 – 93.1 2014 – 13,260.5

2014 – 43,848.7 2014 – 22.16

2014 – 10,569.02015 – 100.4 2015 – 14,382.0 2015 – 11,594.9

FY 2015

FY 2012

FY 2011*

FY 2013

2015 – 44,917.2 2015 – 22.70

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

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’11*

’12

’13

’14

’15

Profit After Tax(RM million)

Note:

* Financial year 2011 comprises nine-month period ended 31 December 2011.

6



STRATEGY & OUTLOOK

PERFORMANCE REVIEW

5-YEAR FINANCIAL HIGHLIGHTSG4-9, G4-13

Market Capitalisation(RM million)

Earnings Per Share (EPS)(sen)

Total Equity(RM million)

2014 – 4,391.7 2014 – 1,842.1

FY 2014

2014 – 552015 – 4,455.9 2015 – 1,985.9 2015 – 60

2014 – 93.1 2014 – 13,260.5

2014 – 43,848.7 2014 – 22.16

2014 – 10,569.02015 – 100.4 2015 – 14,382.0 2015 – 11,594.9

FY 2015

FY 2012

FY 2011*

FY 2013

2015 – 44,917.2 2015 – 22.70

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

2014 – 4,391.7 2014 – 1,842.1

FY 2014

2014 – 552015 – 4,455.9 2015 – 1,985.9 2015 – 60

2014 – 93.1 2014 – 13,260.5

2014 – 43,848.7 2014 – 22.16

2014 – 10,569.02015 – 100.4 2015 – 14,382.0 2015 – 11,594.9

FY 2015

FY 2012

FY 2011*

FY 2013

2015 – 44,917.2 2015 – 22.70

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

’11*

’12

’13

’14

’15

Share Price(RM)

Total Assets(RM million)

Note:

* Financial year 2011 comprises nine-month period ended 31 December 2011.

7

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

WE

WILLACHIEVE

our

GOALS.

I am pleased to note that 2015 marked another illustrious year for the Group, as revenue hit the RM4.5 billion milestone with improved profit for the year of RM2.0 billion. Market capitalisation closed the year at RM45.0 billion, testifying to PGB’s strong standing among the prominent corporations listed on Bursa Malaysia.

The deter iorat ion in oi l pr ice performance that began from the second half of 2014 continued unabated in financial year 2015 (FY2015), making it a year replete with challenges not just for the oil and gas sector, but also the Malaysian economy as a whole, given the former’s significant contribution to overall economic wellbeing. Not surprisingly, the Ringgit continued to underperform its peers in the region, experiencing a

“TRANSFORMATION THAT IS ENVISIONED TO TAKE US TO THE

NEXT CHAPTER OF PGB’S GROWTH

STORY”TAN SRI DATO’ SERI SHAMSUL AZHAR BIN ABBAS

ChairmanPETRONAS Gas Berhad

marked decline against the USD, although this was also on account of the US Federal Reserve’s highly anticipated interest rate hike. Despite such challenges, Malaysia managed to sustain commendable economic growth for the full year of 2015 as gross domestic product (GDP) expanded by 5.0%, supported by private sector demand and growth in crucial domestic sectors.

REVENUE

PROFIT AFTER TAX

RM4.5BILLION

RM2.0BILLION

11

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RIGHT RESULTSOTHER

INFORMATION

In the same vein, PETRONAS Gas Berhad (PGB) sustained respectable performance in FY2015 in spite of the aforementioned headwinds on account of accrued benefits arising from the implementation of the Gas Processing A g r e e m e n t ( G P A ) a n d G a s Transportation Agreements (GTA) effective from 1 April 2014. This, in combination with the sure and steadfast dedication of our talented team and support from our stakeholders, help fortify the foundations of PGB’s business further to ensure that we can continue to deliver superior value to all stakeholders despite the various challenges in store.

As the new Chairman of PGB, I am privileged to present to you an overv iew of our f inancia l and operational performance and our ongoing transformation programme termed 3ZERO100 PGB Transformation that is envisioned to take us to the next chapter of PGB’s growth story.

HIGHLIGHTS OF THE YEAR

As aforementioned, our top line continued to receive a boost from the implementation of the GPA and GTA that were signed with PETRONAS effective from 1 April 2014. These agreements, to remain valid for 20 years from the date of activation, provide a two-pronged stimulus to o u r r e v e n u e b a s e v i a h i g h e r reservation charge and capacity booking.

Revenue of our Gas Processing (GP) segment improved by 3.6%. Likewise, we performed better in Overall Equipment Effectiveness (OEE) and reliability for our liquid products, which contributed to our highest-ever GP ethane production last year. Our Gas Transportation (GT) segment experienced commendable expansion f r o m F Y 2 0 1 4 d u e t o h i g h e r transportation capacity reservation arising from the GTA, which resulted in an increase of 1.9% in revenue. GT also maintained its world-class transmission reliability at 99.92%.

Upon completion of all three blocks in November, our Kimanis Power Plant achieved its full 12 months in operations during the year without any major interruptions. This has resulted in improved reliability of electricity supply in Sabah.

At this juncture, I am pleased to announce that we have recently secured a USD500 million term loan facility from Mizuho Bank with the intention to fund our growth projects moving forward. This is our first bank borrowing in years, in line with our objective of achieving an optimal capital structure to maximise returns to our shareholders.

MARKET CAPITALISATION

EARNINGS PER SHARE

DIVIDENDS

RM45.0BILLION

100.4SEN

60SEN

12



PERFORMANCE REVIEWAT A GLANCE

CHAIRMAN’S STATEMENTG4-1

MESSAGE TO SHAREHOLDERS

PERFORMANCE

FY2015 was another illustrious year for PGB with revenue coming in at RM4.5 billion, a step-up of 1.5% or RM0.1 billion from RM4.4 billion in FY2014 due to continued strength in our GP segment, as well as GTA-derived growth in our GT segment.

Our Regasification segment also augmented our earnings, with FY2015 being the second ful l year of operations for our Sungai Udang, Melaka-based liquefied natural gas (LNG) Regas i f i ca t ion Termina l (RGTSU). The sustained performance of our Regasi f icat ion segment buttressed our ability to enhance the security and reliability of gas supply nationwide.

The heartening results above helped mitigate the weakness in our Utilities segment that was premised on lower sales of electricity, steam, and industr ia l gases due to lower customers’ offtake.

Profit for the year registered at RM2.0 billion, an improvement of 7.8% primarily from lower tax expense due to recognition of deferred tax assets (DTA) ar is ing f rom the investment tax allowance (ITA) and reinvestment allowance (RA) granted for our Plant Rejuvenation and Revamp (PRR) project. Excluding such tax incentives and foreign exchange, profit for the year increased by RM1.6 million or 0.1%, in reflection of higher revenue and other income.

TRANSFORMATION PROGRESS

FY2015 saw the continuation of PGB’s unwavering dedication to our 2-year transformation agenda. Indeed, our recent annual reports have variously carried the theme of transformation and our latest 3ZERO100 PGB Transformation programme serves to concret ise our commitment to transform to perform.

The journey continues as we strive to attain sustainable world-class standards befitting our role as A Leading Gas Infrastructure and Utilities Company.

Commencing in December 2014, this initiative aims to make PGB a high-performance organisation by completely eliminating Health, Safety and Environment (HSE) issues, non-compliance and interruptions whilst attaining maximum product delivery reliability. Such goals are to be accomplished via the employment of efficient and sustainable systems and work processes, as well as a highly engaged and capable workforce.

At this juncture, I am pleased to note that significant progress has been made within the year, in particular at our GP and Utilities business divisions, w h e r e c o m m e n d a b l e H S E performance was documented. The progress would certainly spur us in our quest for complete achievement of our transformation programme aimed by the end of FY2016.

My fellow Board members and I will be unrelenting our focus in this respect, given the criticality of our transformation aims in achieving o u t s t a n d i n g a n d s u s t a i n a b l e performance that will help PGB navigate through the potential storms ahead. Indeed, we will continue to request for more stringent applications of safety measures and procedures, in keeping with our responsibility to p r o v i d e o u r e m p l o y e e s a n d surrounding communities with safe a n d h e a l t h y w o r k a n d l i v i n g environments. In addition, we will zero in on our systems and processes to reduce non-compliance and interruptions for maximum reliability in our product delivery.

PROJECT UPDATES G4-13

Despite the myriad challenges in the operating environment, our PRR 4 project at the Gas Processing Plant 4 (GPP4) in Kertih– the last in the series of PRR projects– achieved Initial Acceptance for Kertih Compressor Station B (KCSB) and GPP4 on 25 February 2015 and 1 April 2015, respectively. This status confers on our GP segment the ability to sustain its plant reliability and integrity for another 20 years while helping to prevent the incurrence of any major repair and maintenance costs.

13

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RIGHT RESULTSOTHER

INFORMATION

Construction of our LNG Regasification Terminal in Pengerang (RGTP) is progressing per schedule with aggressive construction of the two storage tanks. This terminal, to be the second in the country, will supplement the business growth of PETRONAS Downstream at the Refinery and Petrochemical Integrated Development (RAPID) in the Pengerang Integrated Complex (PIC) upon commissioning. Despite the gloomy global economic situation, we are on track to complete construction of the first storage tank by end 2017.

The Pengerang Gas Pipeline Project (PGPP) is also on track and is expected to be completed by 2016. This will enable the supply of gas from RGTP to the exist ing Peninsular Gas Utilisation (PGU) pipeline network, or from the PGU to PIC.

Upon signing of the Heads of Agreement for our Air Separation Unit (ASU) project in Pengerang in 2014, we are working closely with our potential partner and moving towards achieving our Final Investment Decision (FID) by the second quarter of 2016.

RETURN TO SHAREHOLDERS

The Group’s resilient performance, coupled with our shareholders’ staunch support, has enabled PGB to achieve an increase in market capitalisation to RM45.0 billion as at end 2015, further bolstering the prominence of our brand in Corporate Malaysia.

In l ight of this, the Board has approved a dividend of 60 sen per ordinary share for the year. This represents a normalised dividend payout ratio of 77.0% – a level that is on par with, if not better than, the industry average.

OUTLOOK G4-8

We believe that a number of factors will stand PGB in good stead to face the challenging times ahead.

Although the global oil and gas sector is expected to remain in the doldrums for an extended period, comfort can be derived from the GPA and GTA, which confer much-coveted stability on our revenue base, particularly from our GP and GT segments. Indeed, we opine that these business activities are sustainable for the foreseeable future, given the stable outlook for gas as an essential component in power generation and industry.

While our Utilities segment should continue performing on the back of demand from petrochemical customers, we expect our Regasification segment to remain profitable on the back of capacity reservation by PETRONAS for regasification and storage fees under the Regasification Service Agreement.

Our steadfast focus on improving company-wide safety and operating efficiencies through our ongoing 3ZERO100 PGB Transformation programme will also serve to enhance our overa l l sus ta inabi l i ty and profitability. Additionally, aside from

our projects in the pipeline that aim to support the growth of PETRONAS’ refining and petrochemical businesses, we are also confident in our ability to secure new business opportunities in PIC ventures that tie in with our four core competencies of gas processing, gas transportation, industrial utilities, and regasification.

APPRECIATION

I hereby take this opportunity to express my gratitude to my esteemed predecessor and colleague, Datuk Manharlal Ratilal, who has during his stint contributed significantly to PGB’s continued profitability. I would also like to recognise the talents in our Management team for their dedication and astute leadership in bringing PGB through a tumultuous year in oil and gas history. To my fellow members of the Board, thank you for being on this journey together. I always appreciate our mutual sharing of insights and experience, for there is always something we can learn from others.

Finally, but no least important, I wish to acknowledge and thank the various federal and s tate government agencies, authorities and regulators for their unstinting support, as well as our valued shareholders for continuing to place their trust in PGB.

Thank you.

Tan Sri Dato’ Seri Shamsul Azhar bin AbbasChairman14



PERFORMANCE REVIEW

CHAIRMAN’S STATEMENT

AT A GLANCE MESSAGE TO SHAREHOLDERS

IN LINE WITH OUR UNWAVERING

COMMITMENT TO MAKING SAFETY A

KEY PRIORITY IN EVERY ASPECT OF OUR OPERATIONS

15

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RIGHT RESULTSOTHER

INFORMATION

CEO’sB U S I N E S S R E V I E W

M D /

YUSA' BIN HASSANManaging Director/Chief Executive Officer

PETRONAS Gas Berhad

F I N A N C I A L Y E A R 2 0 1 5 ( F Y 2 0 1 5 ) M A R K E D

A N O T H E R P O S I T I V E Y E A R F O R P E T R O N A S G A S

B E R H A D ( P G B ) A N D T H E C O M P A N Y R E M A I N S

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

M A T T E R T O O U R S H A R E H O L D E R S . I N A D D I T I O N ,

W E C O N T I N U E T O B E A C C O R D E D W I T H V A R I O U S

A W A R D S A N D R E C O G N I T I O N S O N A C C O U N T O F

O U R C O N T I N U O U S E F F O R T T O I M P R O V E O U R

O P E R A T I O N A N D I N N O V A T I O N .

16



PERFORMANCE REVIEWAT A GLANCE MESSAGE TO

SHAREHOLDERS

CEO’sO u r o n g o i n g t r a n s f o r m a t i o n programme, called the 3ZERO100 PGB Transformation, has been the heartbeat of our organisation. We constantly strengthening our human capital, improving our systems and work processes to ensure safe, reliable and efficient plants and facilities.

These efforts put us in good stead in facing challenging environment as demonstrated in our performance last year . The focus on our core responsibilities would also better prepare us for any future growth opportunities.

With this in mind, I am pleased to present in the following pages of our operating and financial performance for FY2015.

17

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RIGHT RESULTSOTHER

INFORMATION

3ZERO100 PGB TRANSFORMATION

At PGB, we take pride in our forward-looking, progressive stance that permeates at al l levels of the organisation. At the heart of our “Transform to Perform” thrust is our 3ZERO100 PGB Transformation programme that truly encapsulates this preparedness and commitment t o s t a y a b r e a s t o f i n d u s t r y developments, ensuring we adapt in a timely and effective manner to changes in the playing field.

The 3ZERO100 PGB Transformation is conceived with the aim of achieving zero HSE incident, zero interruption, zero non-compliance and 100% product delivery reliability. Various strategic initiatives and focus were drawn up to focus on our asset and asset management strategy, our work processes, our talent development as well as building a High Performance organisation work culture.

During the year under review, our g a s p r o c e s s i n g r e c o r d e d commendable Overall Equipment Effectiveness (OEE) improvement for ethane, propane and butane. Ethane OEE has trended above target for eight months in the year translating into achievement of Performance Based Structure income. Similar trend achieved for propane and butane. In addition, Gas Processing segment r e c o r d e d a n i m p r o v e d H S E achievement with 7.3 million safe manhours.

3ZERO100

ORGANISATIONPERFORMANCEHIGH

KEY ASSETS SYSTEM & PEOPLE& Elimination of all

Bad Actors & proactive prevention to ensure high asset reliability

Maximising Human Reliability through e�ective management system

Achieving sustainability through competency development

and cultural re-engineering

PROCESS CULTURE

0 HSE Incident 0 Non-compliance

0 Interruption 100% ProductDelivery Reliability

E�cient & Sustainable System & Work Process

Highly Engaged & Capable Workforce

STRATEGICTHRUSTS

PGB TRANSFORMATION

We are on track on our transformation with significant milestones achieved in each area under review.

OPERATIONAL PERFORMANCE G4-8

In FY2015, PGB’s Gas Processing Plants (GPP) processed on average 1,682.0 million standard cubic feet per day (mmscfd) of salesgas. The Malaysia-Thailand Joint Development Area channelled 345.9 mmscfd of gas into our Peninsular Gas Utilisation (PGU) pipeline network, while an additional volume of 197.1 mmscfd came from our liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka (RGTSU). These bring the total salesgas transported to PETRONAS’ customers via PGU network to 2,225.0 mmscfd.

Our s teadfas t commitment to excellence is clearly seen in our reliability performance indicators. In our Gas Processing segment, our GPP susta ined their re l iabi l i ty p e r f o r m a n c e w i t h m a r g i n a l performance fluctuation. Our salesgas reliability remained high at 99.2%, while reliability for ethane rose to 95.5%. Likewise, reliability for propane and butane both rose to 96.5% from 95.6% in FY2014. Equally, our Gas Transportation segment also recorded high transmission system reliability and availability at 99.92% and 99.87%, respectively in the year under review.

Notwithstanding some plant-related issues, our Utilities Division achieved s t rong re l iabi l i ty numbers for electricity, steam, and industrial gases a t 96 .4%, 95 .9%, and 94 .4%, respectively on the back of various initiatives to optimise plant operational performance in FY2015.

Our Regasification unit follows similar trend, with significant improvements observed for reliability and availability from FY2014 that ensured our delivery of gas consistently met PETRONAS’ customers demand.

18



PERFORMANCE REVIEW

MD/CEO’S BUSINESS REVIEW


SALESGAS RELIABILITY

ETHANE RELIABILITY

99.2%

95.5%

We are pleased to report that our Kimanis Power Plant (KPP), owned by Kimanis Power Sdn Bhd (KPSB), a joint venture with NRG Consortium (Sabah) Sdn Bhd, an investment arm of Yayasan Sabah and managed by Kimanis O&M Sdn Bhd has its full year of operations during the year with plant availability and reliability of 95.4% and 99.2% respectively. This has positively contributed to the power supply reliability in Sabah. KPSB also maintained zero HSE incident. This three-block, gas-fired 300 MW power plant utilises natural gas from the PETRONAS-owned Sabah Oil and Gas Terminal (SOGT) and figures prominently in the ‘Power Up Sabah’ initiative, established under the Malaysian Economic Transformation Plan (ETP).

In FY2015, in line with our ongoing 3ZERO100 PGB Transformation programme, we cont inued to prioritise good HSE standards and are pleased to note that our concerted efforts to maintain a high level of s a f e t y y i e l d e d i m p r o v e d H S E performance for most aspects of our operations.

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INFORMATION

FINANCIAL PERFORMANCE

PGB had in FY2015 consistently met our obligations under the Gas Processing Agreement (GPA) and Gas Transportation Agreements (GTA) signed with PETRONAS in 2014. As per FY2014, these arrangements provide PGB with a sustainable income stream for delivering our baseline gas processing performance, while offering the opportunity to secure Performance Based Structure (PBS) income.

As such, we are pleased to report that PGB achieved total revenue of RM4.5 billion, a 1.5% or RM0.1 billion increase from RM4.4 billion recorded in FY2014. This accomplishment was primarily attributable to higher gas processing and gas transportation revenue in line with higher reservation charge and capacity booking by PETRONAS under the GPA and GTA.

Our profit for the year rose 7.8% to RM2.0 billion from FY2014, attributed to tax incentives for our Plant Rejuvenation and Revamp (PRR)project totalling RM443.1 million. Normalised profit after tax for the year rose by RM1.6 million or 0.1%. This yields a 7.3 sen increment to earnings per share to 100.4 sen for FY2015, in tandem with higher net prof i t at t r ibutable to ordinary shareholders of the Company.

Unrealised foreign exchange losses, however, impacted on our Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA), which came in lower by 10.8% at RM2.8 billion. Excluding this effect, EBITDA fell just 6.1%.

PROJECT PROGRESS UPDATES G4-13

Effective transformation requires an in-depth, systematic approach that takes prudent practices and long-term perspectives into account. In aiming to extend the useful life of our fac i l i t ies , we had successfu l ly completed our PRR4 project at Gas Processing Plant 4 (GPP4), Dew Point Control Unit 2, and Kertih Compressor Station B (KCSB), all of which are located in our Gas Processing Kertih (GPK) complex. Of note, PRR4 had achieved Initial Acceptance on 1 April 2015 adding at least an additional 20 years life to the asset. We will continue to carry out this initiative from time to time to ensure sustained reliability of our gas processing performance and Malaysia’s gas supply as a whole.

REVENUE

PROFIT AFTER TAX

RM4.5BILLION

RM2.0BILLION

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In a similar manner, our Regasification segment undertook various capital expenditure projects in FY2015, including the Regasification Minimum Send Out Capability Improvement ( R G T E C ) p r o j e c t t o o p t i m i s e PETRONAS’ overall supply chain and increase p lant re l iab i l i t y and availability. The project is partly completed, with full completion targeted for December 2016.

In similar vein, our LNG Regasification Terminal project in Pengerang, which will be fuelling the business growth of PETRONAS Pengerang Integrated Complex (PIC) is progressing well towards successful commissioning in 2017. Another ancillary facility that we are currently working on towards achieving Final Investment Decision with our potential joint-venture partner is the Air Separation Unit (ASU) in Pengerang. ASU Pengerang will be integral to the supply of industrial gases to Operating Units in the PIC, with a target to meet the PIC’s Refinery First Start-Up by fourth quarter of 2018.

Our Gas Transportation segment’s Pengerang Gas Pipeline Project is close to 80% completion as of end-2015. This project, upon completion in 2016, will connect gas from our a f o r e m e n t i o n e d u p c o m i n g regasification terminal to provide fuel requirements for PIC and able to flow gas into the Peninsular Gas Utilisation (PGU) pipeline network and vice versa from existing PGU pipeline network to PIC. Another major project is the Tebong City Gate in Melaka, which was completed in December 2015. This facility serves to meet additional demand from Gas Malaysia Berhad.

Gas Transportation segment is also embarking on an Operations and Maintenance Benchmarking exercise in 2016 to identify areas for further improvement, and further cost optimisation.

CORPORATE RESPONSIBILITY

Our Corporate Responsibility (CR) focuses on three pillars – education, community wellbeing and development as well as environment – at the Marketplace and Workplace; and in the Environment and Community.

Corporate Responsibility at the Marketplace

As a listed entity, we practise open communication channels with our various stakeholders to elevate their understanding of our business and also the role of gas as a clean and efficient energy source.

Aside from welcoming delegation visits to our facilities, we also engage proactively with the investment community through our structured Investor Relations Programme and our intuitive and informative website, which serves as an easily accessible online repository of information on o u r f i n a n c i a l p e r f o r m a n c e a s documents such as our press statements, announcements to Bursa Malays ia , and analyst br ief ing materials are uploaded timely for public consumption.

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Corporate Responsibility at the Workplace G4-SO3

W e h a v e t h r o u g h o u t F Y 2 0 1 5 endeavoured to strengthen our existing human capital through rigorous capability development programmes such as the Technical Manager Competency Assessment Programme for our Business Technical Managers, as well as the Downstream Grounding Programme for all our new technical personnel. Internal mobility of talent was encouraged via i n t e r d e p a r t m e n t a l t r a n s f e r s , promotions, and succession planning.

Indeed, at PGB, we strive to create a workplace where employees are not only able to develop their careers, but are also able to do so in a h a r m o n i o u s e n v i r o n m e n t characterised by inclusiveness and acceptance. We pride ourselves in our upholding of the Human Rights Act in Malaysia where all our policies and procedures are a lways in compliance with all elements of the said Act. Care has also been taken to draw up an optimal organisational s t ructure to fac i l i ta te a c lear understanding of roles and enable effective empowerment throughout the organisat ion for enhanced motivation of the employees.

Our Management team is also actively engaged with staff at all levels through formal and informal channels to facilitate proper dissemination and understanding of information such as the Company’s strategic direction and transformation programmes. We have created “Tell Me” sessions for staff to air their views on how to improve our systems and processes for greater effectiveness and efficiency, and fosters greater sense of ownership towards the Company.

PGB has put in place a proper mechanism for personnel at all levels to judiciously and systematically deal with grievances and mitigate the d o w n s i d e r i s k s t o e m p l o y e e motivation levels.

At PGB, integrity is of our top priority. We have taken steps to ensure each level of the organisation, from the Board of Directors and senior management to our non-executive staff, is aligned with this stance propagated by PETRONAS through its pol ic ies for ethical behaviour. A w a r e n e s s p r o g r a m m e s w e r e organised throughout the year for all new and existing staff to understand the Company’s policies and procedures and where they can be found for easy reference. Similar to our grievance management system, we have instituted avenues for safe and discreet whistleblowing of corruption and other unscrupulous acts.

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Corporate Responsibility in the Environment G4EN12, G4-EN13, G4-S01, OG4

PGB views the environment as an integral partner that supports the continued growth of our operations, and thus bel ieves s t rongly in preserving the environment as best as we can.

In FY2015, strategic measures were implemented to monitor and control our greenhouse gas emissions, optimise our consumption of energy and water, and manage our waste disposal through active recycling and recovery. We had also committed s i g n i f i c a n t r e s o u r c e s t o t h e conservation of Malaysia’s precious biodiversity, including establishing collaborations with Non-Governmental organisations to safeguard natural habitats like the Sungai Paka riverine system, a swathe of wetlands and some wildlife sanctuaries in the East Malaysian state of Sabah.

Corporate Responsibility in the Community G4-SO1

PGB shares our fruits of success with the community in which we operate.

Our responsibility to the community encompasses: education, community wellbeing and development. We ensure that all our community-centric p r o g r a m m e s a r e e f f e c t i v e i n addressing the diverse needs of the communities.

In education, we offered financial and educational support to underperforming primary-school students in low-income families under PETRONAS’ Program Sentuhan Ilmu, which saw these students participating in activities that increased their mental and technical preparedness for the Ujian Penilaian Sekolah Rendah (UPSR).

Our community wel lbeing and development activities included the organisation of various programmes t o i m p r o v e t h e l i v e l i h o o d o f underprivileged communities in our spheres of influence. This took the form of our inaugural PGB Free Market (our unique take on the conventional flea market to benefit underprivileged families), flood relief aid in cash and in-kind for flood-affected victims in the worst-hit state of Kelantan, as well as PETRONAS’ Program Sentuhan Kasih, which involved the distribution of 10 kg bags of rice to low-income families during the Ramadan month.

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INFORMATION

RECOGNITION G4-15

We are pleased that the industry has recognised our efforts in FY2015 as an organisation that makes excellence commitment in everything that we do.

Our Gas Processing segment received several awards and certifications in acknowledgement of its high operating standards. Such recognitions include:

• Institut Kimia Malaysia’s Excellence Award, presented to three of our gas processing laboratories (GPK, Gas Processing Santong, and Tanjung Sulong Export Terminal);

• The Annual Productivity and Innovat ion Conference and Exposition (APIC) 2015’s Gold Medal for emphasising productivity and quality gains in operations; and

Our Utilities arm likewise received commendations that include:

• Institut Kimia Malaysia’s Excellence Award, presented to two of Utilities’ laboratories (Utilities Kertih and Utilities Gebeng); and

• Recognised Innovat ive and Creative Circle (ICC) practitioners by PETRONAS Carigali Sdn Bhd for best-practice sharing of Kaizen/Improvement Team activities and ICC achievements.

Our PGB 2014 Annual Report won the National Annual Corporate Report Awards (NACRA)’s Industry Excellence Award for the “Industrial Products and Technology” category . In addition, we have been bestowed by Focus Malaysia to be the 9th Most Transparent Big Stock Award.

We were also among the top 10 constituents of the FTSE4Good Bursa Malaysia Index, which was selected from the top 200 Malaysian stocks in the FTSE Bursa Malaysia EMAS Index and screened in accordance

wi th t ransparent and def ined Environmental, Social and Governance (ESG) criteria. The index has been designed to identify Malaysian companies with recognised corporate responsibility practices, expanding the range of the benchmarks of the FTSE Bursa Malaysia Index Series for the Malaysian Markets.

These commendations serve a two-pronged function of recognising our past efforts and inspiring us to continue striving for greater heights of success.

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CONCLUSION

All that we have accomplished in FY2015 would not have been possible without support of our people from various levels of organisation, whose contributions are collectively built for future success.

Moving forward, PGB needs to immediately react to the changing landscape of the oil and gas industries in particular maintaining our cost competitiveness and we need to stretch our limit to accelerate our 3ZERO100 PGB Transformation - stronger operational excellence and safety performance. In addition, we have immediately started to focus on long term sustainability efforts which is aimed at improving productivity and efficiency at high competitiveness level towards realising our vision of b e c o m i n g A L e a d i n g G a s Infrastructure and Utilities Company. To achieve this would require the whole organisation to Transform to Perform and deliver Results that Matter.

On behalf of PGB, I wish to thank our former Chairman and Non-independent Director, Datuk Manharlal Ratilal, who helmed the PGB Board of Directors from his appointment to the Board in June 2014 until August 2015. We are thankful for his guidance and astute leadership during his stint, and would extend our best wishes to him for his continued involvement in the PETRONAS family as the Executive Vice-President and Group Chief Financial Officer.

In much the same vein, I wish to thank our present Chairman and Non-Independent Non-Executive Director, Tan Sri Dato’ Seri Shamsul Azhar bin Abbas, who is also the former Group President and Chief Executive Officer of PETRONAS and a respected figure in the oil and gas industry. Tan Sri Shamsul’s appointment to PGB’s Board reinforces the Company’s commitment to further strengthen the mix of competencies and experience of our Board of Directors. We are certainly benefiting from Tan Sri S h a m s u l ’ s e x t e n s i v e p r a c t i c a l experience and business insights in the formulation of PGB’s strategies as well as stewardship of the Company.

I would also like to thank our majority shareholder PETRONAS for i ts unwavering support of PGB. In addition, I am grateful to the various Federal and State Government authorities and agencies, our partners, clients and customers, as well as our employees and shareholders for all of your valued contributions in the past year that continue to make PGB the trusted organisation.

Thank you, and we look forward to your continued support to PGB.

YUSA’ BIN HASSAN

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INFORMATION

P E T R O N A S G A S B E R H A D ( P G B ) W A S

I N C O R P O R A T E D I N 1 9 8 3 A N D W A S L I S T E D

O N T H E M A I N M A R K E T O F B U R S A M A L A Y S I A

S E C U R I T I E S B E R H A D O N 4 S E P T E M B E R 1 9 9 5

O U RP R O F I L E


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26

The Company was initially the wholly-owned subsidiary of PETRONAS, the Malaysia’s national oil corporation, which upon listing owns 60.63% of its shares while the remaining 39.37% is held by financial institutions and retail shareholders.G4-7

Today, it is one of the largest companies on the local bourse, in terms of market capitalisation. The Company is also Malaysia’s leading gas infrastructure and utilities company with core businesses in Gas Processing and Utilities (GPU) and Gas Transmission and Regasification (GTR).G4-4

The Company processes PETRONAS’ natural gas piped from offshore fields, transports the processed gas via Peninsular Gas Utilisation (PGU) pipeline network to PETRONAS’ customers in Malaysia and Singapore. In addition, the Company also supplies steam and industrial gases for its customers at Kertih Integrated P e t r o c h e m i c a l C o m p l e x i n Terengganu and Gebeng Industrial Area in Pahang.

In 2013, PGB further broadened its business portfolio with the commissioning of the liquefied natural gas (LNG) Regasification Terminal, the Malaysia’s first regasification facility, in Sungai Udang, Melaka.

Over the years, the Company has expanded its business and this includes venturing into power generation in Sabah in 2011, through its 60% joint venture company, Kimanis Power Sdn Bhd, which commenced full commercial production of electricity end of 2014.

60.66%PGB

OWNED BY PETRONAS

The Company has a staff strength of 2,187 employees nationwide. The majority of the staff are based at its plant operations located in Kertih and Santong, Terengganu and in Gebeng, Pahang.G4-9, G4-10

PGB operates from its headquarter at the PETRONAS Twin Towers in Kuala Lumpur as well as nine regional offices in Peninsular Malaysia and two in East Malaysia.G4-5

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INFORMATION

OUR PRESENCE AND OPERATIONSP E T R O N A S G A S B E R H A D ( P G B )

P O R T F O L I O I S D I V I D E D I N T O

F O U R B U S I N E S S S E G M E N T S :

G A S P R O C E S S I N G , G A S T R A N S P O R T A T I O N ,

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

MAIN PIPELINE LENGTH GAS – IN

PGU I : Kertih - Teluk Kalong 32 km 1983

PGU II 713 km

Sector I : Teluk Kalong - Segamat 265 km 1991

Sector II : Segamat - Kapar 241 km 1991

Sector III : Segamat - Plentong 208 km 1991

PGB TOTAL PIPELINE LENGTH (IN OPERATION) LENGTH (km)

Main 1,690

Lateral 429

Liquid 373

Sarawak 39

RGTSU 30

Total 2,561

COMPLEX GPP CAPACITY(mmscfd)

GPK 1 310

GPK 2 250

GPK 3 250

GPK 4 250

GPS 5 500

GPS 6 500

Total 2,060

SALESGAS CUSTOMERS (PENINSULAR MALAYSIA)

1. TNB Paka2. YTL Paka3. TNB Pasir Gudang4. YTL Pasir Gudang5. Senoko Energy6. Keppel Energy7. Pahlawan Power, Tanjung Kling8. Panglima Power, Teluk Gong9. Powertek, Teluk Gong10. TNB Tuanku Jaafar

11. Port Dickson Power12. Genting Sanyen Power13. TNB Serdang14. TNB Connaught Bridge15. TNB Kapar16. GB3 Lumut17. Segari Energy Ventures18. Prai Power19. TNB Gelugor20. Technology Tenaga Perlis Consortium

SALESGAS CUSTOMERS (EAST MALAYSIA)

1. SESCO Miri Power Station2. Sarawak Gas Distribution System3. Bintulu Edible Oils Sdn Bhd4. Syarikat Sebangun Sdn Bhd5. Sime Darby Austral Sdn Bhd6. Biport Bulkers Sdn Bhd

MAIN PIPELINE LENGTH GAS – IN

PGU III 450 km

Sector I : Meru - Lumut 184 km 1996

Sector II : Lumut - Gurun 130 km 1996

Sector III : Gurun - Pauh 136 km 1996

Loop 1 : Kertih - Segamat 266 km 1999

Loop 2 : Segamat - Meru 228 km 2000

SARAWAK

Miri

Bintulu

SABAH

Kimanis

Industry

Kimanis Power Plant Gas Processing Plant (GPP)

Utilities Plant

Compressor Station

Tenaga Nasional BerhadPower Station

Independent Power Producer Power Station

LNG Regasification Terminal

RGT Pipeline

N

PULAUPINANG

GPS

Utilities Kertih

Utilities Gebeng

GPK

STRAITSOF MELAKA

SOUTH CHINA SEA

SOUTH CHINA SEA

PERAK

SELANGORPAHANG

KEDAH

KELANTANTERENGGANU

MELAKAJOHOR

SINGAPORE

NEGERISEMBILAN

PERLIS

LEGEND

28


STRATEGY & OUTLOOK

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OUR PRESENCE AND OPERATIONSG4-6, G4-8

SARAWAK

Miri

Bintulu

SABAH

Kimanis

Industry

Kimanis Power Plant Gas Processing Plant (GPP)

Utilities Plant

Compressor Station

Tenaga Nasional BerhadPower Station

Independent Power Producer Power Station

LNG Regasification Terminal

RGT Pipeline

N

PULAUPINANG

GPS

Utilities Kertih

Utilities Gebeng

GPK

STRAITSOF MELAKA

SOUTH CHINA SEA

SOUTH CHINA SEA

PERAK

SELANGORPAHANG

KEDAH

KELANTANTERENGGANU

MELAKAJOHOR

SINGAPORE

NEGERISEMBILAN

PERLIS

LEGEND

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INFORMATION

GAS PROCESSING

Gas Processing 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, Gas Processing Kertih (GPK) and Gas Processing Santong (GPS), which have a combined capacity to process over 2,000 million standard cubic feet per day (mmscfd) of feedgas for PETRONAS and receives gas processing fees, comprising mainly fixed reservation charges under a 20-year Gas Process ing Agreement (GPA) wi th PETRONAS. The six plants have the capability to produce salesgas, ethane, propane and butane for PETRONAS’ customers.

GAS TRANSPORTATION

Gas Transportation is operated by our Gas Transmission and Regasification (GTR) Division, whereby we manage the gas transmission 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 2,521 km PGU pipeline. Our current PGU pipeline network has the capacity to transport up to 3,000 mmscfd of gas. 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. We receive gas transportation fees based on capacity booking following the 20-year Gas Transportation Agreements (GTA) with PETRONAS.

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OUR PRESENCE AND OPERATIONSG4-9

REGASIFICATION

Regasification is operated by our GTR Division. We operate and maintain our offshore liquefied natural gas (LNG) Regasification Terminal Sungai Udang (RGTSU) in Melaka, which began commercial operations in the second quarter of 2013. The facility receives vessels carrying PETRONAS’ LNG imported from around the world, stores it in two floating storage units and converts the LNG into gas before injecting it into the PGU pipeline network for distribution to PETRONAS’ customers. We receive regasification fee based on capacity underwritten from the 20-year Regasification Service Agreement (RSA) with PETRONAS.

UTILITIES

Utilities is operated by our GPU Division and divided into the two complexes of Utilities Kertih (UK) in Terengganu and Utilities Gebeng (UG) in Pahang. Both are strategically located at Kertih Integrated Petrochemical Complex and Gebeng Industrial Area respectively 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, demin water, raw water, cooling water and boiler feed water. We receive utilities revenue from the volume of products sold to customers.

PGB’s four core business segments are Gas Processing, Gas Transportation, Utilities and Regasification.

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PETRONAS GAS BERHAD

SUBSIDIARIES JOINT VENTURES

PENGERANG LNG (TWO) SDN BHD

INDUSTRIAL GASES SOLUTIONS SDN BHD

REGAS TERMINAL (LAHAD DATU) SDN BHD

REGAS TERMINAL (SG. UDANG) SDN BHD

KIMANIS POWER SDN BHD*

REGAS TERMINAL (PENGERANG) SDN BHD

KIMANIS O&M SDN BHD*

65%PETRONAS GAS BERHAD





25%DIALOG LNG SDN BHD

50%LINDE MALAYSIA SDN BHD

40%NRG CONSORTIUM (SABAH)

SDN BHD

40%NRG CONSORTIUM (SABAH)

SDN BHD

10%STATE SECRETARY JOHOR

(INCORPORATED)


100% PETRONAS GAS BERHAD

32


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


GROUP CORPORATE STRUCTURE

ASSOCIATE

GAS MALAYSIA BERHAD

37%MMC-SHAPADU BERHAD

29%PUBLIC SHAREHOLDERS

19%TOKYO GAS-MITSUI HOLDINGS


* Although the Group has more than 50% ownership in the equity interests of Kimanis Power Sdn Bhd and Kimanis O&M Sdn Bhd, the Group treats these companies as joint ventures in accordance with Malaysian Financial Reporting Standards. This is in consideration that it does not have sole control over these investees as strategic and financial decision of these investees required unanimous consent by all shareholders.

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INFORMATION

BOARDOF DIRECTORS

INTERNALAUDIT*

BOARD AUDITCOMMITTEE

NOMINATIONAND REMUNERATION

COMMITTEE

MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER

MANAGEMENTCOMMITTEE

34


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


GROUP ORGANISATIONALSTRUCTURE

GAS PROCESSINGAND UTILITIES

HEALTH, SAFETY AND ENVIRONMENT AND OPERATIONAL EXCELLENCE

FINANCE

COMMERCIALAND CORPORATESERVICES

GAS TRANSMISSION AND REGASIFICATION

HUMAN RESOURCEMANAGEMENT

PLANNINGAND RISKMANAGEMENT

LEGAL ANDCORPORATESECRETARIAT*

* Internal Audit and Legal and Corporate Secretariat functions are

undertaken by Group Internal Audit, PETRONAS and Group Legal,

PETRONAS respectively.

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INFORMATION

T A N S R I D A T O ’ S E R I S H A M S U L A Z H A R B I N A B B A S

Y U S A ’ B I N H A S S A N

H A B I B A H B I N T I A B D U L

L I M B E N G C H O O N

D A T O ’ N . S A D A S I V A N N . N . P I L L A Y

D A T U K R O S L I B I N B O N I

I R . P R A M O D K U M A R K A R U N A K A R A N

D A T O ’ A B . H A L I M B I N M O H Y I D D I N

DIRECTORS

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CORPORATE INFORMATION

BOARD AUDIT COMMITTEE*

HABIBAH BINTI ABDULDATO’ N. SADASIVAN N. N. PILLAYDATO’ AB. HALIM BIN MOHYIDDINDATUK ROSLI BIN BONILIM BENG CHOON

NOMINATION AND REMUNERATION COMMITTEE*

LIM BENG CHOONHABIBAH BINTI ABDULDATO’ N. SADASIVAN N. N. PILLAY

COMPANY SECRETARIESINTAN SHAFINAS (TUTY) BINTI HUSSAIN(LS 0009774)

YEAP KOK LEONG(MAICSA 0862549)

REGISTRARSYMPHONY SHARE REGISTRARS SDN BHD(378993-D)LEVEL 6, SYMPHONY HOUSEPUSAT DAGANGAN DANA 1JALAN PJU 1A/4647301 PETALING JAYASELANGOR DARUL EHSANT: +(603) 7841 8000F: +(603) 7841 8151

AUDITORSMESSRS KPMG

BANKING SERVICES PROVIDERPETRONAS INTEGRATED FINANCIAL SHARED SERVICES CENTRE (IFSSC)**

STOCK EXCHANGE LISTINGMAIN MARKET OF BURSA MALAYSIA SECURITIES BERHAD

REGISTERED OFFICE AND BUSINESS ADDRESSTOWER 1PETRONAS TWIN TOWERSKUALA LUMPUR CITY CENTRE50088 KUALA LUMPURMALAYSIAT: +(603) 2051 5000F: +(603) 2051 6555

WEBSITEwww.petronasgas.com

* As at 24 February 2016.** Banking requirements are managed centrally by IFSSC to enable more efficient banking management for the Group and the Company.

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DIRECTORSB O A R D O F

4. HABIBAH BINTI ABDUL Senior Independent Non-Executive Director

1. YEAP KOK LEONG Company Secretary

2. DATO’ N. SADASIVAN N.N. PILLAY Non-Independent Non-Executive Director

3. DATO’ AB. HALIM BIN MOHYIDDIN Independent Non-Executive Director

5. TAN SRI DATO’ SERI SHAMSUL AZHAR BIN ABBAS Chairman Non-Independent Non-Executive Director

From left:


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DIRECTORS6. YUSA’ BIN HASSAN

Managing Director/ Chief Executive Officer Non-Independent Executive Director

7. LIM BENG CHOON Independent Non-Executive Director

8. IR. PRAMOD KUMAR KARUNAKARAN Non-Independent Non-Executive Director

10. INTAN SHAFINAS (TUTY) BINTI HUSSAIN Company Secretary

9. DATUK ROSLI BIN BONI Non-Independent Non-Executive Director

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39

Appointed as Director and Chairman of PETRONAS Gas Berhad on 1 September 2015.

QUALIFICATION, SKILLS AND EXPERIENCE

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas holds a bachelor’s degree in Political Science and Economics from Universiti Sains Malaysia, Pulau Pinang; Masters of Science (MSc) in Energy Management from University of Pennsylvania, United States of America; and Technical Diploma in Petroleum Economics from Institute Francaise du Petrole, France.

He was the former President and Chief Executive Officer of Petroliam Nasional Berhad (PETRONAS) from 10 February 2010 to 31 March 2015, a company he joined since 1975 and served in various capacities during his 40-year tenure.

During his leadership, he guided PETRONAS in undertaking strategic landmark projects such as the Pengerang Integrated Refinery and Petrochemical Project (RAPID) in Johor, Bintulu Train 9 Project in Sarawak, PETRONAS Floating LNG Project and the LNG Regasification Terminal Project in Sungai Udang, Melaka.

Tan Sri Dato’ Seri Shamsul Azhar further strengthened PETRONAS’ position through the acquisition of Progress Energy Canada and the development of shale gas to LNG via the Pacific North West LNG project.

He has also served as Chairman of PETRONAS Carigali Sdn Bhd, President/Chief Executive Officer of MISC Berhad and Chairman of MISC Berhad. He also held various directorships within the PETRONAS Group.

EXTERNAL APPOINTMENT

Public listed company

• Chairman, MMC Corporation Berhad• Chairman, NCB Holdings Berhad• Director, Enra Group Berhad (formerly known as Perduren (M) Berhad)

Tan Sri Dato’ Seri Shamsul Azhar has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended two Board meetings since his appointment.

TAN SRI DATO’ SERI SHAMSUL AZHAR BIN ABBASChairmanNon-Independent Non-Executive Director Malay, Malaysian (age 63, Male)

40


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


PROFILE OFBOARD OF DIRECTORS

Appointed to the Board of PETRONAS Gas Berhad as Managing Director/Chief Executive Officer (MD/CEO) on 1 July 2013.


Yusa’ graduated with a Bachelor of Science in Mechanical Engineering from West Virginia University, United States of America in 1984.

His career spans over 30 years in PETRONAS covering Petrochemical, Refinery and Gas businesses in operations, projects and commercial areas. He joined PETRONAS’ first Petrochemical plant, ASEAN Bintulu Fertilizer Sdn Bhd (ABF) in 1985 as an Engineer, moving up the ranks holding various engineering positions until 1997.

In 1997, after the completion of ABF’s second plant revamp, he moved to PETRONAS Ammonia Sdn Bhd (now known as PETRONAS Chemicals Ammonia Sdn Bhd – PCASB), where he was involved in the design, construction and commissioning of a new greenfield Ammonia Syngas project. Upon the commercial operations of PCASB he moved to hold various plant senior and top management positions in PETRONAS Penapisan (Terengganu) Sdn Bhd and MTBE Malaysia Sdn Bhd (now known as PETRONAS Chemicals MTBE Sdn Bhd).

During the formation of PETRONAS Chemicals Group in 2010, he was appointed as the first Head of Fertiliser and Methanol Business Division and later assumed the position of Head of Olefins and Derivatives Business in June 2011.

In July 2013, he was appointed to his current position as MD/CEO of PETRONAS Gas Berhad. He is also PETRONAS Skill Group Advisor for Mechanical Engineers SKG12, a position which he has held since 2001.

Yusa’ is also the Chairman of Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd, Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd and Pengerang LNG (Two) Sdn Bhd. He also sits on the Board of several companies within the PETRONAS Group.



• Director, Gas Malaysia Berhad

Yusa’ has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended six Board meetings.

YUSA’ BIN HASSANManaging Director/Chief Executive OfficerNon-Independent Executive DirectorMalay, Malaysian (age 53, Male)

41

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

HABIBAH BINTI ABDULSenior Independent Non-Executive DirectorMalay, Malaysian (age 60, Female)

Appointed to the Board of PETRONAS Gas Berhad on 13 September 2013.


Habibah binti Abdul graduated with a Bachelor of Economics (Accounting) from the University of Malaya. She is a Member of the Institute of Chartered Accountants in England and Wales, Malaysian Institute of Certified Public Accountants and Malaysian Institute of Accountants.

She has 34 years of experience in providing audit and business advisory services to several large public listed, multinational and local corporations. She was a former member of the Securities Commission from 1999 to 2002.



• Director, KLCC Property Holdings Berhad

Habibah is also a Director of CIMB Islamic Bank Berhad, a non-listed public company.

COMMITTEE MEMBERSHIP

• Chairman, Board Audit Committee• Member, Nomination and Remuneration Committee

Habibah has no family relationship with any director and/or major shareholder of PGB. She has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, she attended six Board meetings and two Nomination and Remuneration Committee meetings.

42


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



LIM BENG CHOONIndependent Non-Executive DirectorChinese, Malaysian (age 56, Male)

Appointed to the Board of PETRONAS Gas Berhad on 4 August 2011.


Lim Beng Choon holds a Bachelor of Science (First Class Honours) in Mathematics and Computer Science from the Australian National University, Canberra, Australia and has attended numerous Accenture Management Training Programmes in the United States of America and the IMD Leadership Programme in Switzerland.

He was the Country Managing Director in Accenture, the global consulting, technology and outsourcing giant before he retired in 2009. He has held various positions during his 28-year tenure in Accenture, including that of Managing Partner for Accenture’s Resources Industry Group (Oil and Gas, Chemicals, Utilities and Natural Resources) in South Asia. He also had oversight of the Management Consulting practice across industries in ASEAN.

Lim also has extensive experience in management consulting which spans strategy formulation, operational consulting and mergers, and has led complex projects to deliver transformational change for multinationals as well as top Malaysian companies. Prior to moving into management consulting, he was involved in technology consulting covering IT Strategies and System Integration work.



• Director, PETRONAS Dagangan Berhad• Director, MISC Berhad


• Member, Board Audit Committee• Chairman, Nomination and Remuneration Committee

Lim has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended six Board meetings and two Nomination and Remuneration Committee meetings.

43

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

DATO’ N. SADASIVAN N.N. PILLAYNon-Independent Non-Executive DirectorIndian, Malaysian (age 76, Male)



Dato’ N. Sadasivan N.N. Pillay graduated in Economics from the University of Malaya in 1963.

Upon graduation, he began his career at the Economic Development Board Singapore where he stayed until 1967. In 1968, he joined the Malaysian Industrial Development Authority (MIDA) and was appointed as its Director-General in 1984, a position he served until his retirement in 1995.



• Director, APM Automotive Holdings Berhad

Dato’ Sadasivan is also a Director of Bank Negara Malaysia and sits on the Boards of seven private companies.


• Member, Board Audit Committee• Member, Nomination and Remuneration Committee

Dato’ Sadasivan has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended six Board meetings, five Audit Committee meetings and two Nomination and Remuneration Committee meetings.

44


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



DATUK ROSLI BIN BONINon-Independent Non-Executive DirectorMalay, Malaysian (age 59, Male)

Appointed to the Board of PETRONAS Gas Berhad on 1 November 2010.


Datuk Rosli bin Boni graduated with a Bachelor of Science in Petroleum Engineering from the University of Wyoming, United States of America in 1979.

He has 35 years of experience in the petroleum industry and began his career with PETRONAS in 1980 as a Petroleum Engineer. He served as a Field Asset Manager for five years from 1996 to 2000. From July 2000 to March 2004, he was involved in several overseas assignments at managerial level with Premier Oil in United Kingdom, an oil development project in Chad, and exploration project in Bahrain.

From April 2004 to February 2010, he served as the General Manager of the Petroleum Management Unit in the Exploration and Production Division; Senior General Manager of the Operations Division in charge of all production operations in Malaysia and overseas and Senior General Manager of the Corporate Human Resources Shared Services.


Datuk Rosli is also the Chief Executive Officer of Malaysia-Thailand Joint Authority.


• Member, Board Audit Committee

Datuk Rosli has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended six Board meetings and five Audit Committee meetings.

45

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

IR. PRAMOD KUMAR KARUNAKARAN Non-Independent Non-Executive DirectorIndian, Malaysian (age 56, Male)

Appointed to the Board of PETRONAS Gas Berhad on 25 July 2011.


Ir. Pramod Kumar Karunakaran holds a Bachelor of Science in Communication (Electronics) Engineering from Leeds Polytechnic, United Kingdom.

He joined PETRONAS in 1984 and is currently the PETRONAS Vice President of Infrastructure and Utilities, Downstream Business. Prior to assuming this position, he has held various senior positions including as the Managing Director/Chief Executive Officer of PETRONAS Chemicals Ethylene Sdn Bhd, Senior General Manager and Head of Group Plant Performance Management, Group Technology Solution and General Manager (Plant) of ASEAN Bintulu Fertilizer Sdn Bhd. Ir. Pramod is also the present President of Malaysian Gas Association.

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

Ir. Pramod has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended six Board meetings.

46


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



DATO’ AB. HALIM BIN MOHYIDDIN Independent Non-Executive DirectorMalay, Malaysian (age 70, Male)



Dato’ Ab. Halim bin Mohyiddin graduated with a Bachelor of Economics in Accounting from the University of Malaya in 1971, following which he joined the Faculty of Economics of Universiti Kebangsaan Malaysia in Bangi, Selangor as a Faculty member.

He obtained his Master of Business Administration from the University of Alberta, Edmonton, Alberta, Canada in 1973 and subsequently a Diploma in Accountancy from the University of Malaya in 1975.

Dato’ Ab. Halim is a Council Member of The Malaysian Institute of Certified Public Accountants (MICPA) and a Member of the Malaysian Institute of Accountants. He also sits as the Chairman of the Education and Training Committee MICPA. He is a past member of the Education Committee of the International Federation of Accountants and represented Malaysia in the Committee from 2001 to 2005.

He joined KPMG/KPMG Desa Megat & Co in 1977 and had his early accounting training in both Malaysia and the United States of America. He was made a Partner of KPMG in 1985. During his 17-year tenure as a partner, he has held various designations in KPMG and acted as a receiver and manager and liquidator for several companies.

At the time of his retirement on 1 October 2001, he was the Partner in Charge of the Assurance and Financial Advisory Services Division and was also looking after the firm’s Secured e-Commerce Practice.



• Chairman/Director, MISC Berhad• Chairman/Director, Amway (Malaysia) Holdings Berhad• Chairman/Director, KNM Group Berhad


• Member, Board Audit Committee

Dato’ Ab. Halim has no family relationship with any director and/or major shareholder of PGB. He has no conflict of interest with PGB and has never been charged for an offence.

During the financial year under review, he attended six Board meetings and five Audit Committee meetings.

47

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

1. YUSA’ BIN HASSAN Managing Director/

Chief Executive Officer

2. MOHD KABIR BIN NOORDIN Head of Gas Processing and

Utilities Division

3. ABDUL RAZAK BIN SAIM Head of Commercial and

Corporate Services Division

4. AIDA AZIZA BINTI MOHD JAMALUDIN

Head of Finance Division

5. IRWAN BIN ABDUL LATIF Head of Health, Safety and

Environment and Operational Excellence Department

1 2

4

3 5

48


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


M A N A G E M E N TC O M M I T T E E

6. INTAN SHAFINAS (TUTY) BINTI HUSSAIN

Head of Legal and Corporate Secretariat

7. MOHD FAIROS BIN ROSLAN Head of Planning and Risk

Management Department

8. NORARNIZAR BIN ALI AMRAN Head of Gas Transmission and

Regasification Division

9. BARISHAH BINTI MD HANIPAH Head of Human Resource

Management Division

6 7

8 9

49

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

Yusa’ assumed his current position on 1 July 2013.


Yusa’ graduated with a Bachelor of Science in Mechanical Engineering from West Virginia University, United States of America in 1984.

His career spans over 30 years in PETRONAS covering Petrochemical, Refinery and Gas businesses in operations, projects and commercial areas. He joined PETRONAS’ first Petrochemical plant, ASEAN Bintulu Fertilizer Sdn Bhd (ABF) in 1985 as an Engineer, moving up the ranks holding various engineering positions until 1997.

In 1997, after the completion of ABF’s second plant revamp, he moved to PETRONAS Ammonia Sdn Bhd (now known as PETRONAS Chemicals Ammonia Sdn Bhd – PCASB), where he was involved in the design, construction and commissioning of a new greenfield Ammonia Syngas project. Upon the commercial operations of PCASB he moved to hold various plant senior and top management positions in PETRONAS Penapisan (Terengganu) Sdn Bhd and MTBE Malaysia Sdn Bhd (now known as PETRONAS Chemicals MTBE Sdn Bhd).

During the formation of PETRONAS Chemicals Group in 2010, he was appointed as the first Head of Fertiliser and Methanol Business Division and later assumed the position of Head of Olefins and Derivatives Business in June 2011.

In July 2013, he was appointed to his current position as MD/CEO of PETRONAS Gas Berhad (PGB). He is also PETRONAS Skill Group Advisor for Mechanical Engineers SKG12, a position which he has held since 2001.

Yusa’ is also the Chairman of Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd, Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd and Pengerang LNG (Two) Sdn Bhd. He also sits on the Board of several companies within the PETRONAS Group.


Director, Gas Malaysia Berhad

NATIONALITYMalaysian

AGE53 Years

YUSA’ BIN HASSANManaging Director/Chief Executive Officer (MD/CEO)

50


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


PROFILE OFMANAGEMENT COMMITTEE

Mohd Kabir assumed his current position on 1 July 2015.


Mohd Kabir holds a Degree in Chemical Engineering from University of Leeds, United Kingdom.

His career in PETRONAS began in 1991 as a member of Production Technology at PETRONAS Penapisan (Terengganu) Sdn Bhd. Then he moved to PETRONAS Penapisan (Melaka) Sdn Bhd (PPMSB) in 1993 until 1998 as a Production Specialist.

Mohd Kabir then went on a two-year full scholarship under PETRONAS’ Staff Development Programme where he pursued his study in Chemical Engineering at the University of Leeds, United Kingdom. Upon returning to Malaysia in 2000, he had a short stint at PETRONAS’ Human Resource Management as an Executive.

Soon afterwards, he rejoined PPMSB as a Manager of Production Department and held various positions for about 10 years, until he became the General Manager of Production.

Later in 2011, Mohd Kabir was appointed as the General Manager of Operations at Malaysia LNG Sdn Bhd. He then moved to PGB, where he was entrusted to be the Head of Gas Processing and Utilities Division in July 2015 until now.

He is also a Director of Industrial Gases Solutions Sdn Bhd.


AGE50 Years

MOHD KABIR BIN NOORDINHead of Gas Processing and Utilities Division

51

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

Norarnizar assumed his current position in November 2011.


Norarnizar holds a Bachelor Degree in Chemical Engineering from Universiti Teknologi Malaysia, Johor and Diploma in Mechanical Engineering from the then Institut Teknologi MARA, now known as Universiti Teknologi MARA (UiTM).

He has been in the gas industry for more than 30 years since he began his career as a Project Engineer in the Gas Processing Plant (GPP) Project in 1984, where he was involved in the design and project implementation of the gas processing facilities.

Norarnizar has also acquired vast experience in the gas transmission operation from his assignment in PGB, as the Pipeline Executive, Regional Manager and finally as Senior Manager Operation in 2005.

Prior to his appointment to the current position, he was the Senior Manager of the Operation Engineering Department.

He is currently responsible for the gas transmission and regasification operations of the Company. He also assumes the position of Chief Executive Officer of Regas Terminal (Sg. Udang) Sdn Bhd and Alternate Director on the Board of Pengerang LNG (Two) Sdn Bhd.


Director, Transasia Pipeline Company Pty Ltd


AGE54 Years

NORARNIZAR BIN ALI AMRANHead of Gas Transmission and Regasification Division

52


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



Aida Aziza assumed her current position in September 2012.


Aida Aziza holds a Bachelor of Accounting and Finance from the University of Lancaster, United Kingdom. She is a Fellow of the Association of Chartered Certified Accountant of United Kingdom.

Aida Aziza began her career with PETRONAS in October 1996 as an Executive in the Budget Department of PETRONAS and in the ensuing years, held various positions in the PETRONAS Group, including serving as General Manager for the Finance and Accounts Services Department of PETRONAS.

Aida Aziza has more than 19 years of experience in accounting and finance-related assignments. She has led several implementation of Financial Reporting Standard (FRS) and Malaysian Financial Reporting Standard (MFRS) for PETRONAS Group of Companies as well as the implementation of the SAP ECC6.0 for PETRONAS.

She is responsible for the management of all financial and fiscal aspects of the Group, as well as investor relations and procurement. In addition, Aida Aziza is also a Director of Pengerang LNG (Two) Sdn Bhd, Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd and Gas District Cooling (UTP) Sdn Bhd.


Alternate Director, Gas Malaysia Berhad


AGE42 Years

AIDA AZIZA BINTI MOHD JAMALUDINHead of Finance Division

53

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

Abdul Razak assumed his current position in February 2013.


Abdul Razak holds a Degree in Mechanical Engineering (Hons) from the University of Wollongong, New South Wales, Australia.

Abdul Razak has been in the gas industry for the past 24 years. He began his career as a Procurement Executive in PGB Transmission Operation Division (currently known as Gas Transmission and Regasification) in 1992. He later held various technical positions within PGB.

In 2002, Abdul Razak was seconded to East Australia Pipeline Marketing Pty Ltd based in Sydney, where he managed the capacity marketing for the 3,000 km Moomba-Sydney gas pipeline. He was also involved in the development of the Papua New Guinea–Queensland pipeline project.

He was then appointed as the Manager for Gas Supply Planning at Gas Business Unit, PETRONAS in 2006 and headed the department from 2008 until 2011. He later led the Gas Business Development Department before joining PGB in 2013.

Abdul Razak is currently responsible for all commercial and corporate services for PGB. He is the Chairman of Industrial Gases Solutions Sdn Bhd as well as a Director of Regas Terminal (Lahad Datu) Sdn Bhd and Gas District Cooling (UTP) Sdn Bhd and Alternate Director on the Board of Pengerang LNG (Two) Sdn Bhd.

He was appointed as the Chief Operating Officer and Board member of Bekalan Air KIPC Sdn Bhd, a subsidiary of PETRONAS.


Director, Transasia Pipeline Company Pty Ltd


AGE50 Years

ABDUL RAZAK BIN SAIMHead of Commercial and Corporate Services Division

54


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



Barishah assumed her current position in March 2013.


Barishah graduated in 1986 with a Bachelor in Business Administration (Cum Laude) from the University of Toledo, Ohio, United States of America.

She began her career with PETRONAS in February 1988 as an Executive at the Education Sponsorship. She then held various positions within HRM of PETRONAS from 1991 to 2004 in the areas of remunerations, people development and capability development.

In January 2005, she was assigned as Manager (HR Planning) in PGB. Subsequently, in 2006 she took on the role of Manager, HRM in PETRONAS Chemicals Fertiliser (Kedah) Sdn Bhd.

In December 2011, she was appointed as Manager of Sponsorship and Talent Sourcing at Talent Sourcing and Employee Relations Department, HRM Division, PETRONAS.

Among her major accomplishments during her 28 years of service include the implementation of HRIS/SAP System and the outsourcing of medical administration for PETRONAS, the decentralisation of talent sourcing initiative as well as recruitment brand enhancement initiatives.

She is currently responsible for HRM of PGB. Barishah is also the joint secretary of the Nomination and Remuneration Committee of PGB.


AGE52 Years

BARISHAH BINTI MD HANIPAHHead of Human Resource Management (HRM) Division

55

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

Intan Shafinas assumed her current position in March 2012.


Intan Shafinas holds an LLB (Hons) from the University of Leicester, United Kingdom and Certificate in Legal Practice (Legal Profession Qualifying Board, Malaysia). She is also a licensed Company Secretary.

Prior to joining PETRONAS, Intan Shafinas had garnered five years of experience, having worked at several banks. Her career in PETRONAS started in 2001 as Legal Executive with the Petrochemical Business.

In 2007, she was attached to the Corporate Services and Technology Department, Legal Division, providing legal advisory services in the area of intellectual property and commercialisation of technologies. Then in 2010, Intan Shafinas was appointed as PETRONAS Senior Legal Counsel of Corporate Services.

After a one-year stint, she joined PETRONAS Chemicals Group Berhad in 2011. A year later in March 2012, she was appointed as the Senior Manager of Legal and Corporate Secretariat Department, PETRONAS Gas Berhad.

She is currently the Company Secretary, as well as Senior Legal Counsel, Infrastructure and Utilities, PETRONAS Legal Downstream, responsible for all legal affairs and company secretarial services of the Group.

In addition, she is the Company Secretary for Regas Terminal (Sg. Udang) Sdn Bhd, Regas Terminal (Pengerang) Sdn Bhd, Regas Terminal (Lahad Datu) Sdn Bhd, Gas District Cooling (UTP) Sdn Bhd, Industrial Gas Solutions Sdn Bhd, Kimanis Power Sdn Bhd, Kimanis O&M Sdn Bhd and Pengerang LNG (Two) Sdn Bhd.


AGE43 Years

INTAN SHAFINAS (TUTY) BINTI HUSSAINHead of Legal and Corporate Secretariat

56


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



Mohd Fairos assumed his current position since June 2014.


Mohd Fairos holds a Bachelor of Science in Mechanical Engineering from the University of Tulsa, Oklahoma, United States of America.

He started his career with PETRONAS in 1996 as a Shift Supervisor at PGB’s Gas Processing Plants. He spent the majority of his time in the plant holding various positions in the areas of Plant Operations and Production Planning. He was then assigned to lead the Operating Performance Improvement (OPI) department at Centralised Utility Facilities (CUF) responsible for the performance of its plants.

Mohd Fairos gained experience in business management while serving as Business Development Manager in PGB’s Head Office. Subsequently, in 2011, he was seconded to the Kimanis Power Plant (KPP) project where he served as the Head of Commercial, responsible for project financing, commercial agreements and project procurement.

He is currently responsible for the Company’s business development, planning, risk management and overseeing PGB Joint Venture companies.


AGE43 Years

MOHD FAIROS BIN ROSLANHead of Planning and Risk Management Department

57

A N N U A L R E P O R T 2 0 1 5



RIGHT RESULTSOTHER

INFORMATION

Irwan assumed his current position on 1 January 2015.


Irwan graduated with a Bachelor in Petroleum Engineering from Universiti Teknologi Malaysia, Johor in 1997.

His career in PGB spans over 18 years in Gas Processing and Utilities Business, covering plant technical and operations areas. He started his career in 1997 as the first batch of Process Supervisor in Operation Department of Gas Processing Santong in Paka, Terengganu.

From 1997 to 2010, he progressed to hold managerial position in Operation Department and then as Asset Manager at Utilities Kertih, Terengganu, before being appointed as the Head of Central Engineering Department in 2013.

In 2014, Irwan assumed the position of Head of Health, Safety and Environment (HSE) and Operational Excellence (OE) of PGB, where he is responsible for developing and implementing strategies to ensure sustainable plant operational performance.

He is also responsible for effective implementation of HSE Policy and assurance framework within the PGB Group.


AGE43 Years

IRWAN BIN ABDUL LATIFHead of Health, Safety and Environment and Operational Excellence Department

58


STRATEGY & OUTLOOK

PERFORMANCE REVIEW



“MANAGEMENT IS EFFICIENCY IN CLIMBING

THE LADDER OF SUCCESS; LEADERSHIP

DETERMINES WHETHER THE LADDER IS LEANING

AGAINST THE RIGHT WALL.”

— Stephen R. Covey

59

Note:

Location of our activities and processes are provided on page 28 – 29.

GasTransportation

GasTransportation

GasTransportation

PETRONASUPSTREAM

PETRONASLNG CARGO

MALAYSIA-THAILAND

JOINTDEVELOPMENT AREA

RE

GA

SIFI

CA

TIO

NU

TILI

TIE

S P

LAN

T (U

T)G

AS

PR

OC

ESS

ING

PLA

NTS

(GP

P)

Export

Pengerang Gas Pipeline Project (PGPP)Pip

elin

e ne

two

rk m

ore

than

2,5

00km

acr

oss

Pen

insu

lar

Mal

aysi

a

27km onshore

pipeline3km offshorepipeline

Power Substation

Power Substation

ExportTerminal

Air Separation UnitPengerang Project

(ASU)

LNG RegasificationPengerang

Project

SalesgasLNGLNG

Air

Raw Water

Storage in FSU

RegasificationUnit

Pro

duc

ts

Salesgas

Ethane

Propane

Butane

Chemical

Salesgas

Feedgas

Feedgas

UG

UK

GPS

GPK

Activities and Processes Growth

Petrochemical PlantsLarge industries

Independent Power Producers (IPP)Senoko/Keppel

TNB

Smallindustries

Smallcommercial

Residential

PETRONAS and PGB customers

Resources

Products

PGU pipeline

Electricity TransmissionGrid

UT pipelineto KIPC complex

Legend

Refinery and Petrochemical

Integrated Development

(RAPID)

GasTransportation

SalesgasSalesgas

Input from GPP

GasTransportation

INPUTS

FinancialEquity fundingDebt fundingInternally generated cash flows

NatureGas consumptionAir consumptionWater consumptionPhysical locations

AssetPlantsPipeline

IntellectualSystem and process

Human CapitalEngaged workforceEthical valuesSpecific knowledge and skills

Social and RelationshipSuppliersCustomersInvestorsCommunityGovernment authorities

OUTPUTS

• Gas Processing Services Processes PETRONAS’ upstream feedgas delivered from offshore Peninsular Malaysia into salesgas (methane) and other by-products such as ethane, propane and butane.

• Gas Transportation Services Transports gas to PETRONAS’ end customers through Peninsular Gas Utilisation (PGU) pipeline network and smaller distribution system in Miri and Bintulu

• Utilities Products Steam Electricity Industrial Gases Others • Regasification Services Receives imported Liquefied natural gas (LNG), store it in Floating Storage Units (FSU) and converts LNG to salesgas

VALUE CREATED

• Optimising Financial Capital Growth opportunities Prudent gearing levels Sustainable returns for investors

• Managing Natural Resources Energy efficiency

• Elevating Asset Performance ZERO HSE Incident ZERO Interruption

• Leveraging Intellectual Capital World class performance of asset reliability ZERO Non-compliance

• Nurturing People Job creation Highly engaged and capable workplace

• Engaging Stakeholders Key supplier of electricity and gas in the country Taxation contribution to economy

Others

Industrialgases

Steam

Electricity

GOVERNANCE page 174IR9 STRATEGY page 62IR1 SUSTAINABILITY page 142IR7 RISK page 70 – 73IR10

IR8IR2

Our integrated value chain model targets long term value creation for its stakeholders by delivering sustainable profitability and continuous growth of the business.

60


STRATEGY & OUTLOOK


PERFORMANCE REVIEW

OUR INTEGRATED VALUE CHAING4-8

GasTransportation

GasTransportation

GasTransportation

PETRONASUPSTREAM

PETRONASLNG CARGO

MALAYSIA-THAILAND

JOINTDEVELOPMENT AREA

RE

GA

SIFI

CA

TIO

NU

TILI

TIE

S P

LAN

T (U

T)G

AS

PR

OC

ESS

ING

PLA

NTS

(GP

P)

Export

Pengerang Gas Pipeline Project (PGPP)Pip

elin

e ne

two

rk m

ore

than

2,5

00km

acr

oss

Pen

insu

lar

Mal

aysi

a

27km onshore

pipeline3km offshorepipeline

Power Substation

Power Substation

ExportTerminal

Air Separation UnitPengerang Project

(ASU)

LNG RegasificationPengerang

Project

SalesgasLNGLNG

Air

Raw Water

Storage in FSU

RegasificationUnit

Pro

duc

ts

Salesgas

Ethane

Propane

Butane

Chemical

Salesgas

Feedgas

Feedgas

UG

UK

GPS

GPK

Activities and Processes Growth

Petrochemical PlantsLarge industries

Independent Power Producers (IPP)Senoko/Keppel

TNB

Smallindustries

Smallcommercial

Residential

PETRONAS and PGB customers

Resources

Products

PGU pipeline

Electricity TransmissionGrid

UT pipelineto KIPC complex

Legend

Refinery and Petrochemical

Integrated Development

(RAPID)

GasTransportation

SalesgasSalesgas

Input from GPP

GasTransportation

INPUTS

FinancialEquity fundingDebt fundingInternally generated cash flows

NatureGas consumptionAir consumptionWater consumptionPhysical locations

AssetPlantsPipeline

IntellectualSystem and process

Human CapitalEngaged workforceEthical valuesSpecific knowledge and skills

Social and RelationshipSuppliersCustomersInvestorsCommunityGovernment authorities

OUTPUTS

• Gas Processing Services Processes PETRONAS’ upstream feedgas delivered from offshore Peninsular Malaysia into salesgas (methane) and other by-products such as ethane, propane and butane.

• Gas Transportation Services Transports gas to PETRONAS’ end customers through Peninsular Gas Utilisation (PGU) pipeline network and smaller distribution system in Miri and Bintulu

• Utilities Products Steam Electricity Industrial Gases Others • Regasification Services Receives imported Liquefied natural gas (LNG), store it in Floating Storage Units (FSU) and converts LNG to salesgas

VALUE CREATED

• Optimising Financial Capital Growth opportunities Prudent gearing levels Sustainable returns for investors

• Managing Natural Resources Energy efficiency

• Elevating Asset Performance ZERO HSE Incident ZERO Interruption

• Leveraging Intellectual Capital World class performance of asset reliability ZERO Non-compliance

• Nurturing People Job creation Highly engaged and capable workplace

• Engaging Stakeholders Key supplier of electricity and gas in the country Taxation contribution to economy

Others

Industrialgases

Steam

Electricity

GOVERNANCE page 174IR9 STRATEGY page 62IR1 SUSTAINABILITY page 142IR7 RISK page 70 – 73IR10

IR8IR2

IR2 To read more about our business segment, refer page 110 to page 141

IR8 Details of value created can be found on page 75

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OTHERINFORMATIONSUSTAINABILITYBUSINESS

REVIEWCORPORATE

GOVERNANCE

W E A R E C O M M I T T E D

T O R E A L I S E O U R

V I S I O N O F B E C O M I N G

A L E A D I N G G A S

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

A N D U T I L I T I E S

C O M P A N Y.


OUR GROUP STRATEGY


STRATEGY & OUTLOOK

PERFORMANCE REVIEW

62

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

1. HEALTH, SAFETY & ENVIRONMENT (HSE)

Robust HSE governance and assurance

• W e a r e c o m m i t t e d t o exhibiting leadership in the area of safety and ensuring our compliance with the various HSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times to safeguard lives, a s s e t s a n d o u r o v e r a l l business continuity.

Institutionalisation of Process and Behavioural Safety

• W e a r e d e t e r m i n e d t o increase our efforts to instil safety-at-heart in all members of our workforce, to achieve safe operationalisation of the Company’s assets.

2. OPERATIONAL EXCELLENCE

Superior product delivery and reliability

• We are striving to elevate our O v e r a l l E q u i p m e n t E f fec t i veness (OEE) fo r equipment reliability, which would translate into higher product del ivery to our customers.

Sustainable improvement of key operational indicators

• We are committed to improve a n d s u s t a i n o u r p l a n t operational performance in optimising the value delivered to our stakeholders.

3. VALUE OPTIMISATION & GROWTH

Optimum cost control and asset utilisation

• We endeavour to minimise value leakages and improve overall asset utilisation, which would translate into higher returns to shareholders.

Improved energy efficiency

• We are committed to utilising energy-efficient technologies to reduce energy per-unit cost of production, which translates into lower production cost and a reduction in overall energy intensity and carbon footprint.

S t r a t e g i c g r o w t h i n g a s infrastructure and utilities

• We are determined 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 our shareholders.

Excellence in project delivery

• W e a r e f o c u s e d o n implementing a seamless project execution strategy for all projects which translates into on-time and on-budget project completion and delivery.

THESE STRATEGIES ARE SUPPORTED BY THE ON-GOING TWO-YEAR

3ZERO100 PGB TRANSFORMATION PROGRAMME TO ACHIEVE ZERO

HSE INCIDENT, ZERO NON-COMPLIANCE, ZERO INTERRUPTION AND

100% PRODUCT DELIVERY RELIABILITY.

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CORPORATEGOVERNANCE ACHIEVEMENTS FINANCIAL

STATEMENTSOTHER

INFORMATION

63

64

O U R G R O U P S T R A T E G Y

F O C U S E S O N D R I V I N G

P G B ’ S T R A N S F O R M A T I O N

T H A T W I L L E L E V A T E T H E

C O M P A N Y ’ S P E R F O R M A N C E

T O T H E N E X T L E V E L , W H I L E

P R E P A R I N G T H E W H O L E

O R G A N I S A T I O N F O R T H E

N E X T W A V E O F G R O W T H .

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STRATEGIC PRIORITIES AND FOCUS AREA

3ZERO100







PROCESS CULTURE





STRATEGICTHRUSTS

PGB TRANSFORMATION

PETRONAS Gas Berhad (PGB) embarked on a transformation journey called 3ZERO100 PGB Transformation in December 2014 to strengthen its foundations and stimulate further growth within its core competencies. Through this transformation, PGB is determined to achieve ZERO Health, Safety and Environment (HSE) incidents, ZERO non-compliance and ZERO interruptions as well as 100% product delivery reliability for all assets by end of 2016. Various strategic initiatives have been outlined and are being implemented under this transformation journey to drive the organisation towards HSE and operational excellence through three key strategic thrusts namely Assets, System & Process and People & Culture.

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INFORMATIONSUSTAINABILITYBUSINESSREVIEW

The Progress and Results

As at December 2015, the Transformation programme is progressing well and heading on the right track. We are beginning to taste the fruits of our labour with improvement in ethane delivery under Gas Processing segment, demonstrating commendable reliability and availability of both the Utilities facilities and sustaining the world class performance of our Gas Transmission. Significant reliability improvement was also demonstrated at our Regasification facility despite operational issues that need to be mitigated.

In addition, good progress was also noted in the standardisation and alignment of Work Process and Operational Excellence Management System (OeXMS) across the Company. Specific focus is also given towards shaping our culture and nurturing our capabilities to ensure sustainable safe and reliable performance.

KEY STRATEGIC THRUSTS

Focus on corrective (resolution of all bad actors) and preventive/predictive/proactive program to sustain high reliability.

Focus on standardisation and alignment of work process to ensure consistency in practices, operating discipline, continuous improvement and retention of knowledge.

Focus on building capabilities and a culture of accountability to deliver sustainable high performance.

SYSTEM & PROCESS

PEOPLE & CULTURE

ASSETS

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Target 2016 Key Results Area (KRA) Achieved in 2015

0 HSE INCIDENT

ZERO fatality

REDUCTION in number of accidents by 52%

0 NON COMPLIANCE ZERO number of non-compliance to LEGAL and STATUTORY requirements

0 INTERRUPTION REDUCTION in asset interruptions by 25%

100% PRODUCT DELIVERY

RELIABILITY

GAS PROCESSING • Eight months Performance Based Structure (PBS) incentive achieved• Timely completion of major shutdowns and plant improvement projects

GAS TRANSPORTATION • Sustained world class reliability performance

UTILITIES • Sustained Industrial Gases Overall Equipment Effectiveness (OEE) performance of

above 99%.

REGASIFICATION • Trended higher reliability against the target

GROWTH • Progressing well for LNG Regasification Terminal project in Pengerang

EFFICIENT & SUSTAINABLE

SYSTEM & WORK PROCESS

SUCCESSFULLY completed the implementation of STANDARDISED WORK PROCESS at Gas Processing Santong (GPS)

Development of OPERATIONAL EXCELLENCE MANAGEMENT SYSTEM (OeXMS) is progressing well for the first Management System Review in Quarter 2, 2016

HIGHLY ENGAGED &

CAPABLE WORKFORCE IR7

RECRUITMENT OF TECHNICAL PROFESSIONALS AND EXPERIENCED STAFF to fill up critical and vacant positions

IMPROVED TECHNICAL STAFF COMPETENCY through in-house Gas Academy and Transmission Academy

HEALTHY work climate

GOOD PROGRESS achieved in cultural transformation

AFTER 13 MONTHS INTO PGB’S TRANSFORMATION JOURNEY, OUR STRATEGY REMAINS ON COURSE

IR2 Read more about our segment KRA from page 110 – 141

IR7 For details of how we build our human capital capability, see page 146 – 149

IR10 Key risks affecting KRA is on page 73

IR2 IR10

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PETRONAS CULTURAL BELIEFS

RESULTS MATTER

NURTURETRUST

SHARED SUCCESSTELL ME

FOCUSEDEXECUTIONOWN IT!

I stretch my limits to deliver superior results

I always keep my promise and build mutual trust

I seek, give and act positively on feedback

I collaborate for greater good of PETRONAS

I own the results and don’t blame others

I plan, commit, and deliver with discipline

To accelerate the transformation progress, PGB has run a cultural development programme adopting PETRONAS CULTURAL BELIEFS to strengthen personal accountability in delivering results.

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Note:

1 Barometer survey is an internal initiative conducted by PGB to determine the level of staff satisfaction. The highest score is 4.00.2 This effort was initiated by PETRONAS Downstream to track the adoption of PETRONAS Cultural Beliefs by the employees. PGB scored 4.15 out of 5.00.3 PGB Desired Culture (C2) is demonstrated by having a high accountability and ownership towards safe, reliable and competitive organisation.

DEVELOPED PGB DESIRED CULTURE (C2)in creating a culture of accountability

CULTURAL BELIEFS

100

2.981

4.152

190

82

40

1,371

Executives Completed the Session

staff awarded at the end of 30 days challenge to complete PGB Desired Culture3

A healthy organisationalculture with employee

BAROMETER SCORE OF

PETRONAS DownstreamCultural Track

Survey SCORE OFengagements conducted in

& BECAME CERTIFIED!

participated in at least 1 challenge!

engagements involved MD/CEO2015

%

%

WHAT WE DID

PETRONAS CULTURAL BELIEFS

Moving Forward

With the focus of being brilliant at basics and high competitiveness in productivity and efficiency, PGB is committed in powering this transformation programme towards achieving 3ZERO100 PGB Transformation targets. We have also identified long term sustainability efforts to ensure continuous improvement in our operational performance towards lean, efficient and empowered organisation in realising our vision of becoming A Leading Gas Infrastructure and Utilities Company.

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RISK MANAGEMENT POLICY

During the year, PETRONAS Gas Berhad (PGB) Risk Management Policy was enhanced to further reflect our commitment in effectively implementing risk management.

The revised Risk Policy encompasses three areas of business resiliency namely, Enterprise Risk Management (ERM), Crisis Management (CM)* and Business Continuity Management (BCM), to strengthen the current practices and further emphasise on PGB Management’s expectations on risk management implementation and business continuity practices.

P G B G R O U P R I S K M A N A G E M E N T P R A C T I C E S H A V E B E E N

A N I N T E G R A L P A R T O F O U R O R G A N I S A T I O N A L P R O C E S S E S

A N D F I R M L Y E M B E D D E D I N T H E M A N A G E M E N T S Y S T E M .

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

A S S E S S I N G , T R E A T I N G A N D M O N I T O R I N G R I S K S T O

E N H A N C E T H E O R G A N I S A T I O N ’ S A B I L I T Y T O A C H I E V E

O U R S T R A T E G I C O B J E C T I V E S .

“ PGB shall adopt and implement risk management best practices by identifying, assessing, treating and monitoring risks as well as effectively responding to crises. In the event of prolonged disruption, business continuity practices shall be adopted to restore and ensure continuity of PGB key business activities.”

* CM encompasses contingency planning and BCM in page 207

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OUR KEY RISK MANAGEMENT

RISK MANAGEMENT FRAMEWORK

Our Risk Management adheres to the PETRONAS Resiliency Model, which entails an enhanced PETRONAS Enterprise Risk Management (ERM) F r a m e w o r k t h a t a d o p t s I S O 31000:2009 R isk Management requirements.

IR9 For more comprehensive report on the

framework, refer page 194

RISK OVERSIGHT STRUCTURE

Our risk oversight structure adopts the 3-Lines of Defense Model and allows clear and timely risk information flow for effective oversight on risk management implementation at all levels.

At Division level, the Plant Leadership Teams, chaired by the Head of Divisions, take up the responsibility in ensuring effective risk management implementation for our plants and facilities.

At Group level , the R isk and Compliance Committee (RCC), which commenced its first sitting in January 2015 and chaired by the Managing Director/Chief Executive Officer (MD/CEO), is obliged to ensure that an appropr iate and ef fect ive r isk 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.

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 on the Group, on a quarter ly 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.

ENTERPRISE RISK PROFILING

E n t e r p r i s e R i s k P r o f i l i n g a n d Assessment follows a structured p r o c e s s w h i c h e n s u r e s a comprehensive and consis tent approach in assessing and analysing risks faced by PGB. Risks are reviewed annually with involvement from Management and Subject Matter Experts (SMEs) from divisions and departments across the Company.

PGB Risk Oversight Structure

Board

BAC

Risk &ComplianceCommittee

Head, Planning & Risk Management Department

Risk & Compliance Unit

MD/CEO

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OTHERINFORMATION

CORPORATEGOVERNANCE

BUSINESSREVIEW

CONTEXT SETTING

Prior to risk profiling and assessment activities, various inputs are analysed in set t ing the context o f the assessment, which include both internal and external factors that may impact our business and operations. The Group’s annual risk profiling and assessment process is 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, other various operational risk profiles namely project risks, new business venture risks as well as plant and facilities risks under Gas Processing and Utilities (GPU) and Gas Transmission and Regasification (GTR) Divisions are reviewed to identify significant risks to be escalated to the Enterprise Risk Profile (ERP). Other key discussions include recent Health, Safety, and Environment (HSE) or audit findings, operational issues as well as project issues.

From an external context, any recent changes in regulatory/statutory requirements as well as shifts in industry outlook and landscape are also analysed as they may have direct or indirect impact to the Group’s operations.

IR9 Further information on PGB 2015/16 ERP

is provided on page 195

RISK ASSESSMENT AND TREATMENT

Each risk is mapped based on a five-scale matrix which specifies its likelihood and impact. Likelihood rating specifies how likely it is for the risk to happen whilst impact rating indicates the extent of its impact if it did happen. Risk impact is analysed from both qualitative and quantitative perspectives.

PGB Enterprise Risk Matrix is adopted from PETRONAS ERM Framework and adapted based on the PGB risk appetite and tolerance level.

Depending on r i sk t rea tment strategies adopted, mitigation plans are outlined to mitigate the risks to an acceptable level.

Key Risk Indicators (KRIs) are identified to facilitate monitoring of the risks which provide an early warning signal on potential emerging risks. Risk Owners, Risk Mitigation Owners and Risk Focal Persons are assigned for each risk to ensure the risk mitigations d e v e l o p e d a r e a p p r o p r i a t e l y i m p l e m e n t e d , m o n i t o r e d a n d regularly reported.

IR9 Refer to page 196 for our Risk Assessment

process

PGB Enterprise Risks are rated based on the above 5x5 matrix which are determined based on their likehood and impact

LIK

ELIH

OO

D

Almost Certain

M H H VH VH

Likely L M H H VH

Possible L L M H H

Unlikely L L L M H

Remote L L L L M

Insignificant Minor Moderate Major Catastrophic

IMPACT

Note:

M: MediumH: High

L: LowVH: Very High

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OUR KEY RISK MANAGEMENT

The Group has identified three main key risks mainly in the area of Assets in the Key Strategic Thrusts as described in detail below:

Business Strategy

IR1

Risk Category

IR9

Top Risks

IR2

Implications Treatment Measures

HSE Excellence

Health, Safety &

Environment Risk

• Occurrence of major HSE a n d P r o c e s s S a f e t y incidents

• N o n - c o m p l i a n c e t o H S E r e g u l a t o r y requirements/policies

Occurrence of the risks will hinder PGB from achieving its aspirations and Vision to b e A L e a d i n g G a s Infrastructure and Utilities Company and as a result erode its value and returns to its stakeholders

As PGB is aggressively driving its Transformation e f f o r t s i n a c h i e v i n g 3ZERO100 by 2016, these top r isks need to be effectively mitigated and managed

• Strengthen HSE processes and behaviours amongst both staff and contractors

• Focus on closure of audit findings

• E n h a n c e c a p a b i l i t i e s a n d accountability of key personnel

Operational Excellence

Operation & Project Risk

• Plant & facilities reliability issues affecting supply of salesgas, ethane and utilities to customers

• Project delays

• Rectifications and upgrading of plant and facilities which have direct impact on salesgas, ethane and utility production and delivery improvements

People & Culture

Human Capital Risk

• I n s u f f i c i e n t n u m b e r o f r e a d i l y a v a i l a b l e successors to assume plant critical positions

• R i g o r o u s c a p a b i l i t i e s deve lopment o f ident i f ied successors and strengthening staff mobility processes

Top key risks identified under the PGB Enterprise Risk Profile are regularly monitored to ensure timely completion of their mitigations

IR1 Our achievements resulting from Key Strategic Thrusts is provided on page 67

IR2 For details on key risk and mitigation relevant to each business segment, refer page 116, 124, 132 and 140

IR9 For a comprehensive disclosure of our material risk, refer to page 197 to 199

CONTINUOUS IMPROVEMENTS

We cont inue to enhance r i sk m a n a g e m e n t a w a r e n e s s a n d capabi l i ty bui ld ing across the Company and our subsidiar ies through various sharing of information and application of best practices.

In addition, we benefit from being part of the PETRONAS Group, which has an established Board Governance and

Risk Committee that primarily provides guidance and reviews strategies and pol ic ies on R isk Management implementation. The Company is also part of various Community of Practice (CoP) discussions driven by PETRONAS Downstream Business, which provides platforms for PETRONAS Downstream Companies to share and learn best practices, discuss on issues and improvements relat ing to Risk Management and BCM implementation.

Efforts are also ongoing to reinforce risk assurance exercises within the Company to validate controls and mitigations supporting its risks, as part of its aspirations to achieve operational excellence and strive for zero non-compliance.

We will also continue our focus on institutionalisation of risk management as a culture throughout the Group.

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OTHERINFORMATION

CORPORATEGOVERNANCE

BUSINESSREVIEW

P E T R O N A S G A S B E R H A D ( P G B ) I S S U B J E C T E D T O D I V E R S E

F I N A N C I A L R I S K S T H A T A R E S P E C I F I C T O I T S C O R E

B U S I N E S S W H I C H A R I S E I N T H E N O R M A L C O U R S E O F T H E

B U S I N E S S .

These risks comprise credit risk, liquidity risk and market risk relating to interest rates and foreign currency exchange rates. Failure to manage the risk could hamper profitable opportunities for the Company. PGB has policies and guidelines in place that set the foundation for a consistent approach towards establishing an effective financial risk management across the Group. IR9

Credit Risk Liquidity Risk Market risk

• Credit risk is the potential exposure of the Group and of the Company to losses in the event of non-performance by counterparties.

• The Group’s and the Company’s exposure to credit risk arise from its operating activities, primarily receivables from customers and fund investments.

• The credit risk arising from the Group’s and the Company’s normal operat ions is control led by individual operating units in line with PETRONAS’ policies and guidelines.

• Liquidity risk is the risk that suitable sources of funding for the Group’s and the Company’s business activities may not be available.

• In managing liquidity risk, the Group and the Company maintain s u f f i c i e n t c a s h a n d l i q u i d marketable assets.

• Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of the business.

• The market price changes that the Group and the Company are exposed to include interest rates, foreign currency exchange rates and other indices that could adversely affect the value of the Group’s and of the Company’s financial assets, l iabilit ies or expected future cash flows.

IR9 For other risks, refer to Statement on Risk Management and Internal Control from page 197 to 199

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OVERVIEW OF FINANCIAL RISK MANAGEMENT

W E C R E A T E V A L U E T H R O U G H T H E O P E R A T I O N O F Q U A L I T Y

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

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

D E L I V E R O U R O B L I G A T I O N S T O S H A R E H O L D E R S W H I L S T

M E E T I N G S O C I E T Y ’ S N E E D S I N A R E S P O N S I B L E M A N N E R .

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

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

Sustainable Value Creation

ManagingNatural Resources

Engaging Stakeholders

OptimisingFinancial Capital

Nurturing people

LeveragingIntellectual Capital

Elevating Asset Performance

Aiming to minimise the impact of our business on the environment and promotion of energy efficiency

IR7 Refer to Corporate Responsibility – Environment on page 164

Engagement with government bodies and societies to address social issues and needsG4-15

IR3 Refer to Our Key Relationship on page 76

Long term sustainable returns to our investors, based on solid business model under agreements signed with PETRONAS

IR2 Refer to revenue structure under business review from page 114 to 138

Internal controls and processes that protect the value creation process of our business

IR9 Refer to Our Corporate Governance Statement on page 174

Challenging, meaningful and fulfilling careers for our people in a value-driven organisation

IR7 Refer to Corporate Responsibility – Workplace on page 161

Ongoing capital investment in our plants and equipment enables us

to operate the assets safely, reliably and competitively for an

extended period

IR1 Refer to Our Group Strategy on page 66

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OTHERINFORMATION

SUSTAINABLE VALUE CREATION

SUSTAINABILITY CORPORATEGOVERNANCE

BUSINESSREVIEW

In delivering the business, PETRONAS Gas Berhad (PGB) takes into account the stakeholders’ view in formulating strategic direction and priorities. The relationships are sustained through continuous interactions guided by the Company’s Corporate Strategy in adding more value throughout the business value chain. Building credibility, trust and mutual respect with the stakeholders are crucial to PGB’s sustainability.

The framework of PGB strategic key relationships with its stakeholders is illustrated below.

Stakeholder Group IR4

Stakeholders’ key interest IR8

How PGB Interact with stakeholders

Why it is important to PGB

Impact to PGB Strategy IR1

Investors & funding institutions

• Returns on investment• Dividends• Sustainable growth• Transparency• Corporate governance• Liquidity and gearing

• Quarterly result briefings• F i n a n c i a l R e s u l t

Announcements • Conferences • Annual General Meeting• Analyst & Investor briefings• PGB website• Plant visits• Media releases

• Investors and funding institutions are the sources of capital for growth.

• Transparent communication is vital for PGB business to understand their concerns and align the expectation.

• Growth

Government & regulatory bodies

• Taxation• C o n f o r m a n c e t o

legislation and license requirements

• Sustainable economy• C o r p o r a t e s o c i a l

investment and job creation

• Reduction in waste generation

• Continuous engagement through formal and informal events

• Construct ive feedback sessions

• Participate in surveys, forum and reporting

• Seek consultation• Corporate Integrity Pledge

• Government established the policy that enables PGB to do the business within its boundaries.

• Regulatory bodies provide the license to operate which PGB needs to ensure the compliance and understand the impacts to economy, social and environment.

• ZERO HSE Incident• ZERO Non-Compliance• Efficient & Sustainable

System & Work Process• Highly Engage & Capable

Workforce

Customers • Quality products and services

• Security of supply• Integrated and value

added activities• R e s p o n s i v e t o

customers’ need and feedback

• Satisfaction survey• Customers feedback system• Customers relat ionship

managers• PGB website• Consultation meetings• One to one engagement

• Providing the right experience to the customers based on their needs are essential for PGB to remain relevant in the business in driving the profitability, enhancing the reputation and securing opportunities for growth.

• ZERO Non-Compliance• ZERO Interruption• 100% Product Delivery

Reliability• Efficient & Sustainable

System & Work Process

IR1 To read more on PGB strategy, refer page 62

IR4 There are six main capitals for PGB Group, refer page 60 to understand PGB key drivers

IR8 To read more on how PGB creates value towards these key shareholders, refer page 75

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OUR KEY RELATIONSHIPG4-8, G424, G4-25, G4-27

Stakeholder Group IR4

Stakeholders’ key interest IR8

How PGB Interact with stakeholders

Why it is important to PGB

Impact to PGB Strategy IR1

Business partners, suppliers and tenants

• Fair treatment• Timely payment• Business opportunity• Profit sharing

• One to one engagement• Contractors forum• Joint venture meetings• Supply chain management• No Gift Policy• Code of Conduct and

Business Ethics• Corporate Integrity Pledge

• The business partners, suppliers and tenants are equally important to PGB in d e l i v e r i n g t h e r i g h t experience consistently to the customers

• ZERO Non-Compliance• ZERO Interruption• 100% Product Delivery


System & Work Process

Communities • Social economy• P h i l a n t h r o p i c

assistance• Sponsorship/Donation

• Through Corporate Social Investment Programmes

• Providing once-off relief a s s i s t a n c e t o t h e underprivileged families in area of our operations

• Responding to request from our strategic stakeholders t h r o u g h m o n e t a r y contributions

• Regular engagements with the community where we operate is essential to allow the community to understand our business operation which eventually help PGB to focus on its key business

• Increase the brand value• E n s u r e c u s t o m e r s /

shareholders loyalty• S t r e n g t h e n t h e

customers/shareholders trust toward our capability

Employees & unions

• Job security• P e r f o r m a n c e

Management• C o m p e t i t i v e

remuneration• Career progression• C o m p e t e n c y a n d

c a p a b i l i t y Management

• H e a l t h & s a f e t y assurance

• Engagement

• Employee survey• Performance management

system• Periodic union meetings• Training and attachment

programme• R e g u l a r l e a d e r s h i p

engagement sessions• Internal newslet ters &

intranet• Badan Rekreasi & Kebajikan

Sukan (BRKS)• Badan Kebajikan Islam

• Employee is PGB core asset to execute the business strategies and work plans in d e l i v e r i n g t h e r i g h t experience to the customers

• Understanding the needs, addressing the challenges a n d p r o v i d i n g t h e opportunities to fulfil their aspiration are always remain as top priority to PGB

• ZERO HSE Incident• ZERO Non-Compliance• ZERO Interruption• 100% Product Delivery


System & Work Process• Highly Engage & Capable

Workforce

IR1 To read more on PGB strategy, refer page 62

IR4 There are six main capitals for PGB Group, refer page 60 to understand PGB key drivers

IR8 To read more on how PGB creates value towards these key shareholders, refer page 75

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RIGHT RESULTSOTHER

INFORMATION

The oil price shock commenced in earnest in 2014, with the downtrend persisting for much of 2015 on account of supply increases from the Organisation of the Petroleum-Exporting Countries (OPEC) and Iran, as well as demand pullback due to fragi le global sent iment. Such developments wrought havoc on the profitability – and indeed, sustainability – of many players in the exploration and production sector of the industry.

The consequences were swift and severe – capital expenditure was slashed with major capital projects put on the backburner , whi le o p e r a t i n g e x p e n d i t u r e a n d headcounts were reduced dramatically in some cases. Malaysia was not spared – big name oil players embarked on cost-optimisation exercises while adopting a cautious, “wait and see” stance. However, as the national oil and gas company, our

holding company Petroliam Nasional Berhad (PETRONAS) s t rove to minimise headcount loss and is expected to continue giving priority to certain projects with significant long-term impact.

Nonetheless, the oil and gas industry has some cause for optimism. There are incipient signs that automotive consumers in the United States (US) are responding to lower oil prices by purchasing more – and bigger – cars to facilitate their mobility. Also, China continues to urbanise and has announced the abandonment of its “one child” policy in October 2015. When taken together, these factors paint a picture of improving demand for oil on the back of growing transportation and energy needs. Oil prices could also receive help from declining oil production on the back of significant cutbacks in current and future capacity, a trend that is expected to persist in 2016.

Specifically on natural gas, it is noteworthy that growth in US natural gas production was unhindered by moderate prices, as such price levels actually encouraged demand from the residential, commercial, industrial, and power generation markets of the world’s largest economy. Petrochemical investments also expanded, spurred by affordable gas prices.

Going forward, natural gas is widely deemed to be a cleaner alternative to coal as a source of energy. With the landmark climate agreement reached in Paris by 195 nations in December 2015 to cut carbon emissions by half the levels required to stave off the worst effects of global warming, natural gas prospects could certainly gain a leg up.

IR1 For a comprehensive outlook on our

business segment, refer page 110 to 141

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

T O A D J U S T T O T H E N E W N O R M O F “ L O W E R F O R L O N G E R ”

– A C O N T E M P O R A R Y C A T C H P H R A S E C O I N E D T O

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

E S T I M A T E S R E M A I N I N G L O W F O R A N E X T E N D E D P E R I O D .

78


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


INDUSTRY REVIEW AND OUTLOOK

However, cost-cutting measures still look to be on the agenda for most industry players, as cost-structure improvements hitherto remain dwarfed by the precipitous decline in oil and gas prices. Still, there is wisdom in remaining cognisant of the cyclicality of the sector, and using this downturn to strategically weed out inefficiencies and plan for where longer-term value and efficiency gains can be achieved.

Closer to home, Malaysia’s gas demand is expected to experience minimal growth as higher coal used in national fuel mix for electricity generation.

Despite these challenges, as a gas infrastructure provider, the Group performance is expected to remain steady backed by its solid business m o d e l s u n d e r o u r l o n g t e r m Gas Processing Agreement, Gas Transportation Agreements and Regasification Service Agreement signed with PETRONAS respectively. For Utilities segment, performance will be dependant on demand from petrochemical customers.

79

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SUSTAINABILITY CORPORATEGOVERNANCE ACHIEVEMENTS OUR

RIGHT RESULTSOTHER

INFORMATIONBUSINESS

REVIEW

AIDA AZIZA BINTI MOHD JAMALUDINHead of Finance Division

P E T R O N A S G A S B E R H A D ( P G B ) G R O U P

R E C O R D E D A N O T H E R Y E A R O F S O L I D

F I N A N C I A L P E R F O R M A N C E I N F Y 2 0 1 5 ,

S U P P O R T E D B Y I T S S T R O N G B U S I N E S S

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

G A S T R A N S P O R T A T I O N A N D

R E G A S I F I C A T I O N . P R O F I T A F T E R T A X

R O S E T O R M 2 . 0 B I L L I O N O N T H E B A C K

O F R M 4 . 5 B I L L I O N R E V E N U E .

1.5%

10.4%

7.8%

7.8%

8.5%

RM4.5

RM2.8

100.4

RM2.0

RM14.4

BILLION

BILLION

SEN

BILLION

BILLION

REVENUESustained revenue strength, driven by full year impact of the Gas Processing Agreement and Gas Transportation Agreements.

OPERATING CASH FLOWHigher by RM269.0 million mainly due to lower tax paid during the year attributed to utilisation of tax incentives.

EARNINGS PER SHARE (EPS)Improved by 7.3 sen in tandem with higher net profit attributable to shareholders.

PROFIT AFTER TAX (PAT)Surged on the back of lower tax expenses, aided

by the tax incentives for Plant Rejuvenation and Revamp project, coupled with higher revenue.

ASSETSStrengthened by RM1.1 billion supported

by strong Group’s cash balance and property, plant and equipment.

82


PERFORMANCE REVIEW


STRATEGY & OUTLOOK

GROUP FINANCIAL REVIEW

OVERVIEW

PGB Group delivered a solid financial performance for the year ended 31 December 2015 (FY2015) on the back of sustainable revenue streams from all segments. Revenue sustained at RM4.5 billion, reflecting a full year impact of the new terms under the Gas Processing Agreement (GPA) and Gas Transportation Agreements (GTA), and resulting in growth at the rate of 4.1% per annum for the past five years.

In FY2015, PGB completed the last series of its Plant Rejuvenation and Revamp (PRR) project, allowing us to recognise the tax incentives granted amounting to RM443.1 million.

This led to a higher PAT of RM2.0 billion, an increase of 7.8% from RM1.8 billion in FY2014 which was partially offset by unrealised foreign exchange (forex) loss on USD finance lease liabilities totalling RM199.9 million due to the weakening of RM against USD and higher operating costs.

Excluding tax incentives and forex, PAT would have increased by 0.1%, in line with higher revenue and other income but offset by higher operating costs.

Similarly, profit after tax grew steadily, reflecting an upward trend of 3.9% per annum.

Notes:

* Financial year 2011 comprises nine-month period ended 31 December 2011

** Excluding tax incentives and forex (FY2013: RM567.7 million, FY2014: RM101.0 million, FY2015: RM243.2 million)

’11* ’12 ’13 ’14 ’15

2,76

5.1 3,57

6.8

CAGR : 4.1%

3,89

2.1

4,39

1.7

4,45

5.9

’11* ’12 ’13 ’13** ’14 ’14** ’15**’15

1,08

0.8

1,40

4.9

2,07

8.9

1,51

1.2

CAGR : 3.9%

1,84

2.1

1,98

5.9

1,74

2.7

1,74

1.1

Revenue (RM million)

Profit After Tax (RM million)

CAGR: Compounded Annual Growth Rate

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REVIEW

“PGB HAS ACHIEVED ITS

HIGHEST EVER REVENUE, DRIVEN

BY THE FULL YEAR IMPLEMENTATION

OF THE GAS PROCESSING AGREEMENT

AND GAS TRANSPORTATION

AGREEMENTS”.

GROUP FINANCIAL PERFORMANCE

Revenue

In the year under review, the Group recorded revenue of RM4,455.9 million, an upsurge of RM64.2 million (1.5%) from RM4,391.7 million recorded in FY2014 primarily driven by the full year implementation of the GPA and GTA signed with PETRONAS. The Group generated higher gas processing revenue by RM53.4 million (3.6%) and higher gas transportation revenue by RM24.9 million (1.9%), reflecting higher reservation charge and higher capacity booking fees by PETRONAS to the tune of RM1,533.6 million and RM1,311.6 million respectively.

Regasification revenue rose to RM637.1 million from RM616.2 million recorded in the previous year, contributed by higher storage fees consistent with strengthening of USD against RM. However, the higher storage fees were offset by lower throughput and regasification fees as a result of the downward revision of Regasification Service Agreement (RSA) tariff which took effect from June 2014.

These increases in revenue across the different segments were marginally offset by decrease in Utilities revenue of RM35.0 million (3.5%) due to lower product offtake by our customers. However, the impact was cushioned by the upward revision of steam and industrial gas prices in line with the fuel gas price revision.

669

Gas Processing

Gas Transportation

Utilities

Regasification616.2

637.1

1,008.6

973.6

1,480.2

1,286.7

1,311.6

FY2014FY2015

1,533.6

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PERFORMANCE REVIEW



STRATEGY & OUTLOOK

Cost of Revenue

Cost of revenue for the Group increased by RM137.0 million (6.3%) to RM2,316.5 million in FY2015, mainly due to higher repair and maintenance costs driven by our focus to improve asset integrity under the 3ZERO100 PGB Transformation programme.

FY2014

Gas Processing

Gas Transportation

Utilities

Regasification308.3

812.7

837.8

778.5

280.0

339.6

FY2015

836.6

302.5

Gas Processing

Gas Transportation

Utilities

Regasification307.9

297.5

195.9

135.8

701.7

697.0

1,006.7

6691,009.1

FY2014FY2015

Other Income

Other income for the Group was higher by RM71.3 million, mainly due to higher performance incentives resulting from fuel gas efficiency achieved in the gas processing operations and reimbursement of project cost which was previously written off.

Other and Administrative Expenses

Other expenses for the Group rose by RM123.7 million. This was primarily due to higher unrealised forex loss on finance lease liabilities totalling RM199.9 million from the weakening of RM against USD, offset by impairment losses on plant assets in the corresponding year.

Share of Profit After Tax (PAT) of Associate and Joint Ventures

The Group’s associate, Gas Malaysia Berhad, contributed share of PAT of RM17.7 million whilst our joint ventures, Kimanis Power Sdn Bhd (KPSB), Kimanis O&M Sdn Bhd, and Industrial Gases Solutions Sdn Bhd, contributed a combined share of PAT of RM57.5 million.

The total share of PAT of our equity accounted associate and joint ventures amounted to RM75.2 million, a reduction of RM213.5 million (74.0%) from FY2014 as a result of higher contribution from KPSB in the corresponding year due to the recognition of one-off deferred tax assets arising from the investment tax allowance (ITA) granted by the Ministry of Finance (MOF), following commercial operations of all three blocks in FY2014.

Tax Expenses

Tax expenses were lower by RM496.2 million (96.8%) compared with RM512.4 million in FY2014 predominantly due to recognition of tax incentives granted to our PRR project.

Profit

As a result, the Group recorded PAT of RM1,985.9 million for the year, a surge of RM143.8 million (7.8%) from RM1,842.1 million recorded in the previous year. Excluding tax incentives and forex, profit for the year increased by RM1.6 million or 0.1%, in line with higher revenue and other income but offset by higher operating costs.

Gross Profit

Gross profit for the year declined by RM72.8 million (3.3%) from RM2,212.2 million in the corresponding year to RM2,139.4 million in FY2015 in view of lower contribution from Utilities by RM60.1 million, Regasification by RM10.4 million and Gas Processing by RM4.7 million, mainly due to higher operating costs.

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REVIEW

Gas Processing

Gas Processing contributed RM697.0 million (32.6%) of the Group’s gross profit.

Segment revenue for the year improved to RM1,533.6 million, mainly attributable to higher reservation charge under the new GPA.

However, segment gross profit dropped by RM4.7 million (0.7%) from FY2014, mainly due to higher cost of revenue as a result of higher repair and maintenance costs to improve asset integrity. IR2

Gas Transportation

Gas Transportation contributed RM1,009.1 million (47.2%) of the Group’s gross profit.

Segment revenue for the year stood at RM1,311.6 million, representing an increase of RM24.9 million (1.9%) on the back of higher transportation capacity booked by PETRONAS.

However, segment gross profit only improved by RM2.4 million (0.2%) due to higher repair and maintenance costs. IR2

Utilities

Utilities contributed RM135.8 million (6.3%) of the Group’s gross profit on the back of RM973.6 million revenue.

Segment revenue was lower by RM35.0 million from FY2014, primarily due to lower offtake by customers.

Segment gross profit decreased by RM60.1 million (30.7%) mainly on account of higher cost of revenue as a result of higher repair and maintenance costs. IR2

Regasification

Regasification contributed RM297.5 million (13.9%) of the Group’s gross profit. Revenue was RM637.1 million as a result of higher storage fees due to the strengthening of USD against RM.

Segment gross profit decreased by RM10.4 million (3.4%) mainly due to higher cost of revenue as a result of higher lease and depreciation expenses. IR2

Gas Processing Gas Transportation Utilities Regasification

973.6

1,311.61,533.6

637.1

REVENUE(RM million)

297.5

697.0

1,009.1

135.8

GROSS PROFIT

(RM million)

IR2 To read more about our segment’s operational performance, refer to

page 110 – 141

86


PERFORMANCE REVIEW



STRATEGY & OUTLOOK

Assets

The Group’s total assets remained strong at RM14,382.0 million as at 31 December 2015, representing an improvement of RM1,121.5 million (8.5%) from the RM13,260.5 million of the corresponding year.

Property, Plant and Equipment (PPE)

Property, plant and equipment increased by RM465.3 million (4.3%) from RM10,858.5 million as at 31 December 2014 to RM11,323.8 million as at 31 December 2015 mainly resulting from capital expenditure spent on major projects in the reporting period.

Cash and Cash Equivalents

The Group generated RM2,845.6 million cash from operations. This was sufficient to sustain the current year dividend payments to the shareholders of RM1,147.7 million and the Group’s capital investments. Consequently, the Group’s cash and cash equivalents increased by RM593.0 million (93.0%) from RM637.8 million as at 31 December 2014.

1,183.0

644.4

11,323.8 1,230.8637.8

608.7

1,155.5

10,858.5

Trade and Other Receivables

Trade and other receivables increased by RM35.7 million (5.9%) from RM608.7 million as at 31 December 2014 mainly due to transactions with our holding company during the year.

Other Assets

Other assets increased by RM27.5 million (2.4%) from RM1,155.5 million as at 31 December 2014 to RM1,183.0 million as at 31 December 2015 mainly due to the appreciation in investment in our joint ventures.

Property, Plant and Equipment Trade and Other Receivables Other Assets Cash and Cash Equivalents

Assets (RM million)

FY2015RM14,382.0

FY2014RM13,260.5

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INFORMATIONBUSINESS

REVIEW

Liabilities

Total liabilities for the Group rose by RM95.6 million (3.6%) from RM2,691.5 million as at 31 December 2014 to RM2,787.1 million as at 31 December 2015.

The increase was mainly due to higher finance lease liabilities by RM176.0 million (19.9%) due to higher unrealised forex losses arising from year end translation following the weakening of RM against USD. Trade and other payables also increased by RM128.3 million (19.2%) in tandem with higher repair and maintenance costs.

However, the increase in liabilities was partially offset by lower deferred tax liabilities of RM110.7 million (10.7%) resulting from the recognition of ITA for our PRR project during the year.

Equity

Total equity of the Group attributable to shareholders of the Company as at 31 December 2015 of RM11,438.8 million rose by RM904.9 million (8.6%) from RM10,533.9 million as at 31 December 2014, primarily contributed by higher profit attributable to shareholders of the Company, and partially offset by dividend payments.

Reserves Deferred Tax Liabilities Share Capital Finance Lease Liabilities Others

1,978.7

922.6

9,460.1

1,058.3

962.3

FY2015RM14,382.0 882.3

1,978.7

1,033.3

8,555.2

811.0

Equity & Liabilities (RM million)

FY2014RM13,260.5

88


PERFORMANCE REVIEW



STRATEGY & OUTLOOK

Earnings Per Share (EPS)

EPS for the Group increased by 7.3 sen (7.8%) from 93.1 sen to 100.4 sen in line with higher profit after tax. Excluding impact of tax incentives and forex, EPS would have remained sustainable at 88.0 sen in line with the stable profit after tax of RM1,742.7 million.

Earnings before interest, taxes, depreciation and amortisation (EBITDA)

EBITDA was lower by 10.8% in line with lower profit before taxation. Excluding forex, EBITDA decreased by 6.1% mainly due to higher operating costs.

Note:

1 excluding tax incentives

14.0

14.0

15.015.0

17.0

20.0

20.060.0 55.0

First Interim dividend

Second interim dividend

Third interim dividend

Fourth interim dividend

’15 ’14

Dividends

During the financial year, the Company declared four interim dividends totalling 60 sen per share. This amounted to RM1,187.2 million for FY2015, the highest ever payout to shareholders.

Indeed, this represents a dividend payout ratio of 77.0% on normalised1 PAT attributable to shareholders of the Company, on par with – if not better than – the industry average.

Net Dividends Per Share (sen)

89

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REVIEW

The financial indicators assess the Group’s current year performance as compared to the corresponding year.

GROUP PERFORMANCE RATIOS

All analysis below is after excluding impact of tax incentives and foreign exchange.

41.9%

39.1%

39.6%

Net Profit Margin

44.6%

17.5%

17.4%15.2%

16.5%

Return on Equity

13.9%

12.1%

13.1%

Return on Assets

13.8%

2.3

1.6

Current Ratio

Sustained at healthy levels.

Respectable returns from investments.

In line with steady net profit and sturdy assets.

Higher cash resulted from lower tax paid during the year and phasing of dividend payments.

Net profit margin is defined as a ratio of net profit after tax to revenue.

ROE is defined as profit attributable to shareholders divided by the average shareholders’ equity for the financial year.

ROA is an indicator that measures the Company’s efficiency in using the total assets to generate profit.

Current ratio is defined as the Company’s ability to meet its short-term obligations.

NET PROFIT MARGIN

RETURN ON EQUITY (ROE)

RETURN ON ASSETS (ROA)

CURRENT RATIO

2015

2015

2015

2015

2014

2014

2014

2014

Including impact of tax incentives and foreign exchange.

Movement within +/– 1%.

90


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


KEY PERFORMANCE

INVESTORS RATIOS

All analysis below is after excluding impact of tax incentives and foreign exchange.

93.2 sen

88.1 sen 100.4 sen

88.0 sen

Total Shareholders Return (TSR)

60 sen

55 sen

Dividends Per Share (DPS)

77.0%

64.5%

Dividend Payout Ratio

5.1%

-6.5%

Total Shareholders Return (TSR)

In line with steady profit for the year.

Higher dividend payout in respect of FY2015 in tandem with stronger performance of the Group.

Within the industry average of DPR.

Due to higher rate of appreciation of share price during the year.

EPS represents the portion of the Company’s distributable income allocated to each equity share.

DPS is dividends declared for the shareholders divided by the number of ordinary shares issued.

DPR is defined as the percentage of earnings paid to shareholders in dividend.

TSR is measure of share price performance and dividends paid during the year, divided by the opening share prices.

EARNINGS PER SHARE (EPS)

DIVIDENDS PER SHARE (DPS)

DIVIDEND PAYOUT RATIO (DPR)*

TOTAL SHAREHOLDERS RETURN (TSR)

2015

2015

2015

2015

2014

2014

2014

2014

Including impact of tax incentives and foreign exchange.

* Excluding impact of tax incentives only.

Movement within +/– 1%.

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INFORMATION

Investment in joint vectures

Cash and cash equivalents

Property, plant & Equipment

Trade and other receivables

Fund and other investments

Investment in associate

Deferred tax assets

Trade and other invectories

Investment in joint vectures

Cash and cash equivalents

Property, plant & Equipment

Trade and other receivables

Fund and other investments

Investment in associate

Deferred tax assets

Trade and other invectories

2015

2014

TOTAL ASSETSRM14.4 billion

TOTAL ASSETSRM13.3 billion

Property, plant & equipment 79% Cash and cash equivalents 9% Investment in joint ventures 4% Trade and other receivables 4% Deferred tax assets 3% Investment in associate 1% Trade and other inventories 0%* Fund and other investments 0%*

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

* insignificant percentage (%)

92


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


SIMPLIFIED GROUP STATEMENT OFFINANCIAL POSITION & SEGMENTAL

ANALYSIS

Non-controlling interest

Reserves

Share Capital

Non-Current Borrowings

Deferred income

Deferred tax liabilities


Current borrowings

Trade and other payables

Taxation

Non-controlling interest

Reserves

Non-Current Borrowings

Deferred income



Current borrowings

Trade and other payables

Taxation

Share Capital

2015

2014

TOTAL LIABILITIES & SHAREHOLDER’S EQUITYRM14.4 billion

TOTAL LIABILITIES & SHAREHOLDER’S EQUITYRM13.3 billion

Reserves 66% Share capital 14% Non-current borrowings 7% Deferred tax liabilities 6% Trade and other payables 6% Non-controlling interest 1% Deferred income 0%* Current borrowings 0%* Taxation 0%*

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

* insignificant percentage (%)

93

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INFORMATION

4,046.352014

2015

2014

2015

4,292.3 2,437.8 1,265.1 4,046.3

4,046.35

1,480.2 1,286.7 1,008.6

973.6

616.2

701.7 1,006.7 195.9




308.0

1,533.6 1,311.6 4,389.28637.1

2014

2015

697.0 1,009.2 135.8 4,389.28297.6

4,376.4 2,575.1 1,184.5 4,389.3

4,046.352014

2015

2014

2015

4,292.3 2,437.8 1,265.1 4,046.3

4,046.35

1,480.2 1,286.7 1,008.6

973.6

616.2

701.7 1,006.7 195.9




308.0

1,533.6 1,311.6 4,389.28637.1

2014

2015

697.0 1,009.2 135.8 4,389.28297.6

4,376.4 2,575.1 1,184.5 4,389.3

4,046.352014

2015

2014

2015

4,292.3 2,437.8 1,265.1 4,046.3

4,046.35

1,480.2 1,286.7 1,008.6

973.6

616.2

701.7 1,006.7 195.9




308.0

1,533.6 1,311.6 4,389.28637.1

2014

2015

697.0 1,009.2 135.8 4,389.28297.6

4,376.4 2,575.1 1,184.5 4,389.3

2014

2014

2014

SEGMENT OPERATING REVENUEfor the financial year ended 31 DecemberRM4.4 billion

SEGMENT ASSETSfor the financial year ended 31 DecemberRM12.0 billion

SEGMENT GROSS PROFITfor the financial year ended 31 DecemberRM2.2 billion

94


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


SIMPLIFIED GROUP STATEMENT OFFINANCIAL POSITION & SEGMENTAL ANALYSIS

4,046.352014

2015

2014

2015

4,292.3 2,437.8 1,265.1 4,046.3

4,046.35

1,480.2 1,286.7 1,008.6

973.6

616.2

701.7 1,006.7 195.9




308.0

1,533.6 1,311.6 4,389.28637.1

2014

2015

697.0 1,009.2 135.8 4,389.28297.6

4,376.4 2,575.1 1,184.5 4,389.3

4,046.352014

2015

2014

2015

4,292.3 2,437.8 1,265.1 4,046.3

4,046.35

1,480.2 1,286.7 1,008.6

973.6

616.2

701.7 1,006.7 195.9




308.0

1,533.6 1,311.6 4,389.28637.1

2014

2015

697.0 1,009.2 135.8 4,389.28297.6

4,376.4 2,575.1 1,184.5 4,389.3

4,046.352014

2015

2014

2015

4,292.3 2,437.8 1,265.1 4,046.3

4,046.35

1,480.2 1,286.7 1,008.6

973.6

616.2

701.7 1,006.7 195.9




308.0

1,533.6 1,311.6 4,389.28637.1

2014

2015

697.0 1,009.2 135.8 4,389.28297.6

4,376.4 2,575.1 1,184.5 4,389.3

2015

2015

2015

RM4.5 billion

RM2.1 billion

RM12.5 billion

95

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INFORMATION

In RM MillionFirst

QuarterSecondQuarter

ThirdQuarter

FourthQuarter

Year2015

Operating revenue 1,101.3 1,083.6 1,134.3 1,136.7 4,455.9

Operating profit 568.4 545.0 415.6 487.9 2,016.9

Profit before taxation 571.3 527.1 415.5 488.2 2,002.1

Profit attributable to equity holders of the Company 450.0 818.0 305.0 414.5 1,987.5

Earnings per share (sen) 22.7 41.4 15.4 20.9 100.4

Dividend per share (sen) 14.0 14.0 15.0 17.0 60.0

In RM MillionFirst

QuarterSecondQuarter

ThirdQuarter

FourthQuarter

Year2014

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

Operating profit 545.5 583.5 552.6 460.5 2,142.1

Profit before taxation 543.2 578.9 549.2 683.2 2,354.5

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

Earnings per share (sen) 21.1 22.0 21.1 28.9 93.1

Dividend per share (sen) 20.0 20.0 15.0 55.0

2015

2014

96


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


GROUP QUARTERLY FINANCIAL PERFORMANCE

Actual

92.8

94.0

88.8

90.8

89.5 89.8

89.8

Target

Salesgas, C1 Ethane, C2 Propane,C3 Butane,C4

88.6

Actual

92.8

94.0

88.8

90.8

89.5 89.8

89.8

Target

Salesgas, C1 Ethane, C2 Propane,C3 Butane,C4

88.6

85.7

87.1

87.6 91.0

92.188.8

92.1

Reliability Reliability

98.092.1

99.1 86.3

92.1

Reliability Reliability

98.092.1

99.1 86.3

99.94 99.87

Reliability Availability

99.92 99.57

OVERALL EQUIPMENT EFFECTIVENESS (OEE)

Defined as the ratio of actual production over plant production capacity.

Gas Processing

RELIABILITY

Define as the ratio of unscheduled downtime over total running time.

Gas Transportation

Utilities

Regasification

Regasification

Salesgas, C1

Higher than target due to higher plant reliability and availability.

Lower than target due to higher downtime hours.

Ethane, C2

Higher than target due to higher product recovery.

Electricity

Higher than target due to higher plant availability.

Steam


Higher than target due to higher facilities availability.

Industrial Gases


Lower than target due to operational issues.

Actual Target

NON-FINANCIAL PERFORMANCE INDICATOR

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INFORMATION

2015RM mil

2014RM mil

Revenue 4,455.9 4,391.7

Purchase of goods and services (1,254.0) (1,055.1)

Value added by the Group 3,201.9 3,336.6

Other Expenses

Other Income and Expenses (32.9) 4.7

Financing costs (90.1) (76.3)

Share of profit after tax of equity accounted associate and joint ventures 75.2 288.7

Value added available for distribution 3,154.1 3,553.7

FY2015 FY2014

As at 31 DecemberRM’million

Effective Interest

Rate%

Interest Income/

(Expenses)RM’million

As at 31 DecemberRM’million

Effective Interest

Rate%

Interest Income/

(Expenses)RM’million

Interest earning assets

Cash and cash equivalents 1,229.4 3.9 31.8 637.6 4.0 36.9

Interest bearing liabilities

Finance lease liabilities 1,058.3 9.1 (90.1) 882.3 9.1 (76.3)

KEY INTEREST BEARING ASSETS AND LIABILITIES

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STATEMENT OF VALUE ADDED

2015RM mil

2014RM mil

To employees Employment costs 373.1 368.1

To government Taxation 71.9 368.4

To shareholdersDividends 1,147.8 1,583.0 Non-controlling interest (1.5) (1.1)

Retained for reinvestment and future growthDepreciation and amortisation 778.9 831.1Deferred tax expense/(income) (55.7) 144.0 Retained profit 839.6 260.2

3,154.1 3,553.7

DISTRIBUTION OF VALUE ADDED

To government = 2%

To shareholders = 36%

Retained for investment and future growth = 50%

To employees = 12%

To government = 10%

To shareholders = 45%

Retained for investment and future growth = 35%

To employees = 10%

To employees 12% To government 2% To shareholders 36% Retained for reinvestment and future growth 50%

To employees 10% To government 10% To shareholders 45% Retained for reinvestment and future growth 35%

FY2015 FY2014

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INFORMATION

INTRODUCTION

PGB remains committed to satisfy the interest of investors by engaging investors, analysts and shareholders through various programmes. The programmes and engagements are spelled out clearly in our Investor Relations Policy which are available in our website and comprising amongst others plant visit, conference, analyst briefing, and financial result announcements.

Investor relations activities are led by our designated spokespersons, i.e. Managing Director/Chief Executive Officer (MD/CEO) Yusa’ bin Hassan, Head of Finance Aida Aziza binti Mohd Jamaludin and Head of Investor Relations Harris bin Harun.

HIGHLIGHTS

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

( P G B ) I S C O M M I T T E D T O E N G A G E , C O M M U N I C A T E A N D

B U I L D A P R O F E S S I O N A L R E L A T I O N S H I P W I T H I T S

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

S T A K E H O L D E R S T H R O U G H A S T R U C T U R E D I N V E S T O R

R E L A T I O N S P R O G R A M M E , I N L I N E W I T H

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

C O R P O R A T E G O V E R N A N C E 2 0 0 0 ( R E V I S E D 2 0 1 2 ) A N D

“ I N V E S T O R R E L A T I O N S P U T I N T O P R A C T I C E ” A S

P U B L I S H E D B Y B U R S A M A L A Y S I A .

– Investor Relations Policy

3PLANT VISITS

28INVESTORMEETINGS

3NON-DEAL

ROADSHOWS & CONFERENCE

4FINANCIAL

RESULT BRIEFINGS

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INVESTOR RELATIONS

INVESTOR CALENDAR

Investor Conference/Non-Deal Roadshows

During the year, PGB participated in one conference in Thailand and two non-deal roadshows in Singapore and Japan. We also held various investor meetings with local and foreign investors as part of our plan to have regular engagements with investors community. Such interactions contributed to elevating our foreign shareholding level which reached its highest point in PGB’s history at 8.5% in December 2015.

Our management team also continued to share on the Company’s mission, vision and objectives, coupled with discussions on our operational structure, financial performance and project updates. We met with a total of 28 analysts at our investor briefings and 28 potential investors during our conference and non–deal roadshows.

Investor Conference/Non-Deal Roadshows

1st RHB Signature Conference, Phuket Thailand 20 April 2015

Nomura Non Deal Roadshow, Tokyo Japan 11 August 2015

Nomura Non Deal Roadshow, Singapore Singapore 24 August 2015

Analyst and Institutional Meetings

Face to face sessions 25

Teleconferences 3

Total 28

Annual General Meeting (AGM)

Our 32nd AGM was held on 30 April 2015. The MD/CEO presented the key highlights of the Company’s performance for the year under review. Shareholders were given the opportunity to actively participate at the AGM where they communicated their views and raised queries on PGB. The notice of AGM was published and disseminated on 7 April 2015. All proposed resolutions were duly passed.

Minutes of the meeting has subsequently made available on our website.

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Financial Result Announcement & Briefing

PGB’s financial result briefing has evolved from a simple teleconference in 2014 to an interactive webcast to engage with analysts. During the year, PGB held four such briefings to provide updates on our quarterly results and address enquiries from the investment community on the state of the Company’s financial and operational performance. The result announcements were hosted by our Head of Investor Relations with the presence of our MD/CEO and Head of Finance.

Our presentation packs and recorded webcasts are made available on the Company’s website to enable the investment community to stay abreast of our performance in each quarter.

Announcement Date Result for Briefing Date Mode of communications

PGB Quarterly Results Briefing

12 May 2015 Qtr 1 2015 13 May 2015 Webcast + Conference call

4 August 2015 Qtr 2 2015 5 August 2015 Webcast + Conference call

30 October 2015 Qtr 3 2015 2 November 2015 Webcast + Conference call

24 February 2016 Qtr 4 2015 25 February 2016 Webcast + Conference call

Plant Visit

Plant visits are keenly anticipated by our shareholders. Held thrice a year, such visits aim to educate and familiarise shareholders with PGB’s extensive plant and business operations and inspire confidence in the Company’s business fundamentals in the process.

Shareholders were given a guided tour of our premises in compliance with our stringent health, safety & environment (HSE) requirements. These plant visits were not only informative, but also proved to be a good platform to enhance relations between PGB and our investors.

Venue Participants Date

LNG Regasification Terminal Sungai Udang, Melaka Institutional Shareholders 26 March 2015

Gas Processing Santong and Utilities Kertih, Terengganu Retail Shareholders 12 August 2015

Segamat Operations Centre, Johor Retail Shareholders 6 October 2015

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PERFORMANCE REVIEW


INVESTOR RELATIONS

PGB’S SHAREHOLDING

A surge in global demand

PGB has a diversified shareholder base with a total of 2.0 billion ordinary shares as at 31 December 2015. For more detailed information, please refer to page 334 for an in-depth analysis of our shareholding structure.

Highest foreign shareholdings percentage (%) in PGB history

2008 2009 2010 2011 2012 2013 2014 2015

2.02.4

7.4

8.5

4.3

6.4 6.6

2.1

Despite the prevailing economic uncertainty and weak global sentiment, PGB’s foreign shareholding rose to 8.5% in FY2015, the highest level in PGB’s history. This testifies to the steadfast confidence that foreign investors have in PGB, as a result of our frequent and proactive engagements with the investment community.

• PGB shareholders are mainly local investors. Of this group, 77.6% of shares held belong to nominee companies.

• The body corporate category comprises mainly banks, finance companies, investment trusts, foundations, as well as charities.

Quick facts

Foreign Shareholdings – 8.5%

Local Shareholdings – 91.5%

Body Corporate – 13.2%

Individual – 0.6%

Institutions – 0.1%

Nominees – 77.6%

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INFORMATION

PERFORMANCE OF SHARES

Resilient share price despite tough year

Share price (RM)

FBM KLCI Index

PETGAS

FBM KLCI (’000)

2015

13May 15Q1

2015

5Aug 15Q2 2015

2Nov 15Q3

2015

25Feb 16Q4

25.00

24.50

24.00

23.50

22.50

23.00

Ana

lyst

R

epo

rts

As at 31 December 2015

22.00

21.50

21.00

20.50

20.00

Jan Feb Jan FebMar Apr May June July Aug Sep Oct Nov Dec

Market CapitalisationRM45 billion

2014

18Feb 15

Q4

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

• Earning forecast raised slightly• Stable year ahead

• A strong 2014

• Margin boost • Resilient earnings • Lack of catalyst

• More tax credits• No Surprise

• Could have been a better FY15

• Throughput Services to the rescue

• Healthy margin expansion

• Resilient play

Highest, RM23.72

Lowest,RM20.70

Note:

The analyst reports displayed were extracted from Bursa Malaysia’s website. For more analyst reports, visit Research Repository on www.bursamalaysia.com.

PGB’s share price opened at RM22.16 on 2 January 2015 and continued to remain stable during the year, averaging between RM21.00 to RM23.00 despite challenging economic conditions. The share price closed the year at RM22.70, indicating a growth of 130% over five years.

The share price peaked in February 2015 at RM23.72, and plunged to its lowest in August 2015 at RM20.70.

On another note, total shareholder returns exceeded last year’s performance through appreciation in share price and higher dividend payments.

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INVESTOR RELATIONS

Dividends

Sustainable capital return to shareholders in line with industry average dividends payout ratio.

PETRONAS Gas Berhad has embarked on a quarterly dividend payment instead of semi-annual dividend plan for better shareholders’ gratification.

Dividends Payout Ratio (%)

Note:

Financial year 2011 comprises reporting period from 1 April to 31 March1 For the nine-month period ended 31 December 20112 Based on normalised PAT (excluding tax incentives)

Q1 Q2

Q3 Q4

14 sen Payment date: 16 June 2015

14 sen Payment date: 11 Sept 2015

15 sen Payment date: 15 Dec 2015

17 sen Payment date: 23 Mar 2016

’06 ’07 ’08 ’09 ’10 ’11 ’111 ’12 ’13 ’14 ’15

82%

40

4550 50

40

50 50 5055 55

60

71%

91%

107% 105%

69% 73%

60%

76%2

64%2

77%2

Dividends Per Share (Sen)

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INFORMATION

DIVIDENDS PER SHARE

60 SEN2014: 55 SEN

EARNINGS PER SHARE

100 SEN2014: 93 SEN

MARKET CAPITALISATION

RM45 BILLION

2014: RM44 BILLION

TOTAL SHAREHOLDER‘S

RETURN

5%2014: -6%

SHARE PRICE

RM22.702014: RM22.16

Awards and Recognition

PGB received various awards and recognition during the year, namely the NACRA Industry Excellence Awards 2015 for the Industrial Products and Technology category, the 9th Most Transparent Big Stock Award by Focus Malaysia and the FTSE4Good Bursa Malaysia recognition.

Research House Coverage

As of December 2015, we had analyst coverage from 13 equity research houses, reflecting strong interest in our stock.

Best Excellence Award in the Industrial Products and Technology

9th Most Transparent BigStock Award by Focus

Malaysia

Obtained the prestigious Certificate of Membership for inclusion in the

FTSE4Good Index

NACRA 2015

1 2 3 4 5 6 7 8 9 10 11 12 13

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INVESTOR RELATIONS

Common Questions Posed by Analysts

Our Investor Relations programmes serve as an excellent platform for us to engage and build lasting relationship with the investment community. During these sessions, investors are encouraged to pose questions to our Investor Relations team. These are five commonly asked questions.

(1) What are the growth and expansion plans of the Company?

Answer: Our future growth will be premised on a pipeline of projects that support PETRONAS’ expansion of its refining and petrochemical businesses, namely the LNG Regasification and Air Separation Unit in Pengerang. We will continue exploring growth opportunities within our core competencies

(2) What is the impact of the electricity tariff rebate on PGB?

Answer: Increases in electricity tariff rebates do not materially affect our processing, transportation and regasification operations, as electricity costs for these businesses are not significant to PGB.

For Utilities, the electricity tariff rebate has resulted in a revenue reduction compared to the corresponding year.

(3) Does PGB have any dividend policy?

Answer: We do not have a specific dividend policy that we announce publicly. However, we aspire to declare dividends based on industry average payout ratios, after taking into account current working capital and capital requirements.

(4) Will there be any other tax incentives after the expiry of the current tax incentives?

Answer: When undertaking a new project, PGB will explore the possibility of apply ing tax incent ives to optimise returns for the Company.

(5) What is the impact of the drop in oil prices on fuel gas prices?

Answer: Given that fuel gas prices are largely regulated, a drop in oil prices will not have a significant bearing on domestic fuel gas prices.

F o r G a s P r o c e s s i n g a n d Transportation segments, fuel gas is provided by PETRONAS for utilisation within agreed operating parameters.

For our Ut i l i t ies segment , however, any changes in cost will be passed on to customers except e lectr ic i ty which is dependent on the electricity tariff regulated by Government.

Website

Our PGB website can be accessed at www.petronasgas.com.

O u r I n v e s t o r R e l a t i o n s u n i t maintains updated information on investor relations related events, such as quarterly results, corporate updates, replies to the Minority Shareholder Watchdog Group (MSWG), announcements to Bursa Malaysia, minutes of AGMs and corporate development briefings.

Email

Please send your feedback, suggestions, and enquiries on PGB to [email protected]

Investor Relations (IR) Policy

Our IR Policy was officially approved by PGB Board on 27 May 2014 as a statement of PGB’s commitment to transparent, consistent, accurate, non-selective, timely and coherent communications with our investing community and other stakeholders. Visit our website to read more about our IR Policy.

Quick facts

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A YEAR IN REVIEW

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

B U S I N E S SR E V I E WBR

GAS PROCESSING

OPERATIONAL PERFORMANCE

HEALTH, SAFETY & ENVIRONMENT (HSE)

HUMAN CAPITAL

PRODUCTIVITY CAPITAL

7.3

1,013

million safe manhours achieved

employees

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.

days of training anddevelopment5,534

Reliability (%) 99.2%

96.5%95.5%

96.5%

C1

Reliability

C2

C3

C4

0 LTIF

0 FATALITY

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99.7

99.4

90.1

95.1

95.5

89.1

99.2

99.9

98.399

.9

96.5

96.599

.3

99.3

91.7

91.7

91.3

91.395

.6

95.6

’11 ’12 ’13 ’14Salesgas (C1) Ethane (C2) Propane (C3) Butane (C4)

’15 ’11 ’12 ’13 ’14 ’15 ’11 ’12 ’13 ’14 ’15 ’11 ’12 ’13 ’14 ’15

Note:

Financial year 2011 comprises nine-month period ended 31 December 2011.

higher by

4on the back of full year implementation of Gas Processing Agreement (GPA)

%

33%

67%


REVENUE

RM1.5 BILLION

gross profit contribution to PGB Group

33 %

0.7decrease in gross profit

%RM697.0 MILLION

1,29

9.9 1,

480.

2

1,53

3.6

1,51

1.2

1,49

7.4

’11 ’12 ’13 ’14 ’15

720.

8

701.

7

697.

0

768.

7

751.

3

’11 ’12 ’13 ’14 ’15

Gross Profit (RM million)


Performance


• Outstanding HSE performance with 7.3 million safe manhours achieved and a breakthrough performance in HSE incident reduction. GP also recorded 100% reduction in LTIF from 0.6 to 0 during the year.

• Consistently high salesgas reliability of 99.2% while the reliability for ethane was at 95.5%. Propane and butane reliability both stood at 96.5% respectively.

• Atta ined commendable Overal l Equipment Effectiveness (OEE) and reliability for liquid products, reflecting results of the various efforts undertaken under the 3ZERO100 PGB Transformation Programme.

• Gas Processing Plant 5 and Gas Processing Plant 6 Ethane Recovery Improvement initiative contributed to the highest ever ethane production.

• GP achieved completion of the last series of its Plant Rejuvenation and Revamp (PRR) project for Gas Processing Plant 4, which added another 20 years to its useful life.

• Revenue surged by RM53.4 million from RM1,480.2 million in 2014, attributed to the higher reservation charges on the back of the full year implementation of the Gas Processing Agreement (GPA).

• Contribution to the Group’s gross profit declined by RM4.7 million on higher operating costs particularly for repair and maintenance, in line with the Company’s effort to improve asset integrity.

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INFORMATION

WHO WE ARE

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, which are Gas Processing Kertih (GPK) and Gas Processing Santong (GPS).

In the beginning, GPP1 and Tanjung Sulong Export Terminal (TSET) were commissioned and commenced operations in 1984. In view of increasing national gas demand, G P P 2 , G P P 3 a n d G P P 4 w e r e 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 mil l ion standard cubic feet per day (mmscfd), these plants currently process feedgas (raw gas) from off-shore 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 n o n - p o w e r s e c t o r s v i a P G B ’ s Peninsular Gas Utilisation pipeline network.

In return for the gas processing services, PGB receives gas processing fees comprising mainly fixed reservation charges under the 20-year GPA.

Simplified Process Flow Diagram

GPK GPS

FeedgasFeed pre-

treatment unitAcid gas

removal unit

Dehydration unit

Low temperatureseparation unit

Productrecovery unit

Ethane Salesgas

Propane

Butane

Remove water and chloride

Remove hydrogen sulphide (H2S) and

carbon dioxide (CO2)

Remove moisture in gases

Separate feedgas to salesgas

Separate feedgas to ethane, propane and butane

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BUSINESS REVIEW

BUSINESS STRATEGY 1. HEALTH, SAFETY &

ENVIRONMENT (HSE)


GP is committed to exhibiting leadership in the area of safety and ensuring our compliance with the various HSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times to safeguard lives, assets and our overall business continuity.


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.



GP is striving to elevate its Overall Equipment Effectiveness (OEE) of its assets, which would translate into higher product delivery to our customers.


GP is committed to improve and sustain its plant operational performance in optimising the v a l u e d e l i v e r e d t o o u r stakeholders.

GP was accredited with several awards and certifications as a result of the high standards in its operations, such as:

• The IKM ( Inst i tut K imia Malaysia) Excellence Award accorded to three GP labs (GPK, GPS, TSET);

• The GOLD Medal in Annual Productivity & Innovation, awarded at the Annual Productivity & Innovation Conference and Exposition (APIC) 2015; and

• Recognised Innovative and C r e a t i v e C i r c l e ( I C C ) practitioner by PETRONAS Carigali Sdn Bhd for best practice sharing of Kaizen Improvement Team activities and ICC achievements.

Even more encouragingly, GP delivered 99.2% reliability and sustained 100% product delivery reliability for salesgas (C1) production.

Results

OEE of ethane production improved to 90.8% from 87.6% in 2014. This was partly contributed by a higher ethane recovery rate of 8% resulting from commissioning of our De-Methaniser Revamp (DMR) 5 project and sustenance of our DMR 6 optimisation which c o n t r i b u t e d p o s i t i v e l y t o Performance Based Structure (PBS) income.



GP is dedicated to minimising value leakages and improving overall asset utilisation, which would translate into higher returns to its shareholders.


GP is committed to utilising energy efficient technologies to reduce energy per unit cost of gas processing, which translates into lower production cost and a reduction in overall energy intensity and carbon footprint.

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

GP is determined 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.


GP is focused on implementing a seamless project execution strategy for all projects such as the Terengganu Gas Terminal (TGAST)-Onshore Slug Catcher (OSC)- Gas Processing Plant (GPP) pipeline modification project to improve asset reliability and enhance P E T R O N A S ’ v a l u e c h a i n . Meanwhile, our Cogeneration (COGEN) project has commenced operations during the year in ensuring reliability of power supply to the plant.

Despite various challenges, GP f inal ly completed i ts Plant Rejuvenation and Revamp project (PRR) with the last series of PRR, i.e. PRR 4, achieving commissioning on 1 April 2015. This allowed GP to sustain its plant reliability and integrity for an additional 20 years while preventing the incurrence of major repair and maintenance costs.

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INFORMATION

3ZERO100







PROCESS CULTURE





STRATEGICTHRUSTS

PGB TRANSFORMATION

4. 3ZERO100 PGB TRANSFORMATION PROGRAMME

Our 3ZERO100 PGB transformation journey moves us towards a high performance organisation with aspirations to achieve zero HSE incident, zero interruption, zero non-compliance and 100% product delivery reliability by the end of 2016.

Various strategic initiatives have been outlined to drive the organisation towards HSE and operational excellence through the key strategic thrusts of Assets, System & Process and People & Culture.

Improved asset reliability and availability

GP is dedicated to improve overall asset reliability and availability through the implementation of Key Results Area (KRA) for ethane and Industrial Effluent Treatment System (IETS) to eliminate the Bad Actors for these assets.

Revenue structure consists of 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 and PBS income for performance of plant liquid extraction exceeding targets as governed by our GPA.

Cost structure comprises mainly depreciation and operating costs, namely repair and maintenance, materials and supplies, as well as professional and purchased services.

Assets consist of six operating plants and terminal facilities, namely GPP1, GPP2, GPP3, GPP4, GPP5, GPP6 and TSET located at Kertih, Santong and Tanjung Sulong.

Activities of this segment revolve around processing PETRONAS’ feedgas from offshore Peninsular Malaysia.

Key resources for this segment consist of 1,013 employees from both technical and non-technical backgrounds, with a male to female ratio of 8:1.

Output from the process is salesgas (C1), mainly consists of methane, as well as other by-products, such as ethane (C2), propane (C3) and butane (C4).

Customer for our services is solely PETRONAS, which is the main aggregator of gas from upstream in Peninsular Malaysia. The salesgas is subsequently distributed to PETRONAS’ power and non-power customers, including petrochemical plants.

BUSINESS MODEL

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

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PERFORMANCE REVIEW


BUSINESS REVIEW

OPERATIONAL REVIEW


I N L I N E W I T H P G B ’ S T R A N S F O R M A T I O N

T O A C H I E V E 3 Z E R O 1 0 0 T A R G E T S , O U R

G P H A S S H O W N D E C R E A S I N G L O S T T I M E

I N J U R Y F R E Q U E N C Y ( L T I F ) A N D P L A N T

I N T E R R U P T I O N S , B E S I D E S M E E T I N G

P R O D U C T D E L I V E R Y R E L I A B I L I T Y ( P D R ) .

During the year under review, GP has recorded commendable OEE improvement for ethane, propane and butane. This is in line with PGB’s Transformation plan which focuses on operational excellence, reflecting a true performance of PGB as an infrastructure services provider.

The OEE for ethane improved significantly by 3.2% to 90.8% due to higher product recovery for C2 extraction efficiency, while propane and butane registered at 88.6% and 89.8%, respectively.

The reliability of salesgas at 99.2%, was world class, although slightly lower than the 99.4% recorded last year. Reliability for ethane and propane stood at 95.5% and 96.5% respectively, surpassing the world class performance benchmark of 95.0% mainly due to reduced unplanned downtime during the year.

Coupled with improved OEE, we accelerated our production rate of ethane to 15% metric tonne (Mt) per hour, translating into production of 1,179,507 Mt. Production for propane and butane stood at 1,002,943 Mt and 700,912 Mt respectively.

What we do to achieve 3ZERO100

• Plant improvement activities which have contributed to enhancing ethane OEE:

0 Improvement of Key Rotating, Electr ical and Instrument Equipment reliability

0 Enhancement of Cooling Water, Acid Gas Removal Unit (AGRU), Steam, Dehydration Unit (DHU) and Instrument Air systems

• Completion of plant turnaround activities for GPP2, PRR for GPP4 and TSET.

• Completion of major projects such as the (TGAST)-(OSC)-(GPP) pipeline modification, the Resak pipeline, as well as the Cogeneration (COGEN) and De-Methaniser Revamp (DMR).

1,02

4,92

0

15%

7%

9%

1,17

9,50

7

939,

072

1,00

2,94

3

642,

108

700,

912

’14 ’15 ’14 ’15 ’14 ’15C2 C3 C4

Liquid Production Volume (Mt)

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FINANCIAL REVIEW

GP’s contribution to PGB’s gross profit slightly decreased by RM4.7 million as a result of higher repair and maintenance in line with efforts to intensify plant reliability and production.

KEY RISKS & MITIGATION

GP managed i ts r isks v ia our Enterprise Risk (ERR) and Plant & Facilities Risk Management (PFRM). Under ERR and PFRM, risks relevant to the Division were assessed, monitored and reported to the respective Division Plant Leadership Team (PLT) and PGB Risk Compliance Committee (RCC). Mitigations for each high and medium risk have been assigned in reducing and eliminating the risk associated with business, HSE and operational. The

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

O F R E V E N U E B Y R M 5 3 . 4 M I L L I O N C O M P A R E D W I T H 2 0 1 4 ,

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

D U E T O T H E F U L L 1 2 M O N T H S I M P L E M E N T A T I O N O F T H E

G P A W H I C H T O O K E F F E C T F R O M 1 A P R I L 2 0 1 4 .

mitigations have been implemented through HSE and Process Safety Management (PSM) enhancement programme, initiatives such as our Mechanical Integrity (MI) and Loss of P r i m a r y C o n t a i n m e n t ( L O P C ) Frameworks, as well as improvement projects and transformation activities through KRA taskforce. With the e s t a b l i s h e d M I F r a m e w o r k , a noticeable 67% reduction in total m i n o r L O P C i n c i d e n t s w a s experienced in 2015.

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SUSTAINABILITY

Environment

GP acknowledges our responsibility to ensure all processes and systems are efficient and safe at all times to minimise our impact on the environment. This is achieved through:

• sustaining a Flare Gas Recovery Unit (FGRU) at GPK and GPS to reduce black smoke.

• discharging on-specif icat ion industrial effluent in compliance wi th the Industr ia l E f f luent Regulation (IER) 2009.

• keeping abreast of potential regulations to be introduced by regulatory bodies, such as the Clean Air Regulation (CAR) 2014 and undertaking the necessary actions to ensure compliance.

Community

GP also established and sustains close relations with local communities through its Corporate Social Investment (CSI) activities such as:

• The “Sayangi Sungai Paka” programme in collaboration with the Malaysian Nature Society (MNS), PETRONAS East Coast Regional Office (ECRO), and government agencies. The event focuses on environmental awareness and conservation. The fish released into S u n g a i P a k a a t t h e e v e n t emphasised on the well-being of the r i ver and the habi ta ts surrounding the area that GP operates.

• Led Occupational Safety and Health (OSH) open day in collaboration with other PETRONAS subsidiaries to foster closer relationships 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 programme such as:

• The "No Polystyrene" campaign at our cafeteria to reduce harmful impact of food packaging on the environments.

• Medical counselling carried out by our Occupational Health Doctor aimed to promote healthy lifestyles to employees;

• A series of “Hari Bertemu Pelanggan” to increase health awareness among staff, including carrying out medical screenings at GPK, GPS and TSET; and

• Healthy lifestyle programme such as zumba exercise, measurement of Body Mass Index (BMI), blood donations and others.

Marketplace

GP is focused on further strengthening relationships with our stakeholders through such means as:

• Teambuilding with PETRONAS Chemical Group Berhad (PCG) and engagement with DOSH personnel;

• Contractors forums for two-way communication between GP and our contractors; and

• Recreation activities with local authorities.

OUTLOOK

• Relying on our revised GPA which strengthens reservation charges, GP is expected to deliver another sustainable performance next year.

• In 2016, our aspiration is to incorporate best practices and further improve our performance, which focuses on reducing interruptions to assets to deliver world-class performance and reliability.

• In line with the 3ZERO100 PGB Transformation journey, GP is expected to continue enhancing asset performance through critical project initiatives, such as Heat Exchanger replacement, TSET flare rectification and Acid Gas Removal Unit (AGRU) pump upgrading to further improve C2, C3 and C4 reliability.

• Furthermore, GP will continue to enhance its work processes and to complete the Operational Excellence Management System (OeXMS) in order to improve productivity.

• In maintaining a highly engaged and capable workforce, GP will drive the remaining initiatives under the key strategic thrust for people and cul ture , inc luding Gas Academy, Root Cause Failure Analysis (RCFA) enhancement and HSE generative culture.

• GP is also expected to extract higher ethane volume from higher feedgas composition received from our TGAST facilities, once the TGAST project is completed by PETRONAS Carigali Sdn Bhd.

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INFORMATION

A YEAR IN REVIEW

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


GAS TRANSPORTATION


99.92%99.87%

Reliability

Availability

Reliability and Availability (%)

99.9

2

99.8

7

99.9

8

99.9

2

99.9

9

99.9

9

99.9

8

99.9

5

99.9

2

99.8

5

Reliability Availability’11 ’12 ’13 ’14 ’15 ’11 ’12 ’13 ’14 ’15

HUMAN CAPITAL


3.8

442


employeesdays of training and development4,996



0 LTIF

0 FATALITY

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PERFORMANCE REVIEW



REVENUE

RM1.3 BILLION

gross profit contribution to PGB Group

47 %

2increase in revenue

%

0.2increase in gross profit

%RM1.0 BILLION

803.

5

1,28

6.7

1,31

1.6

1,11

9.4

1,18

9.4

’11 ’12 ’13 ’14 ’15

572.

2

1,00

6.7

1,00

9.1

839.

3

902.

4

’11 ’12 ’13 ’14 ’15

47%

53%



Performance

Note:



• GT achieved 3.8 million safe manhours and 100% reduction in LTIF to zero during the year.

• GT continued to record world class performance with transmission reliability and availability sustaining at 99.9% for both.

• GT recorded revenue of RM1,311.6 million, an increase of RM24.9 million (1.9%) from FY2014. This increase was attributed to higher transportation capacity reservation arising from the new Gas Transportation Agreements (GTA) that took effect on 1 April 2014.

• GT recorded a gross profit of RM1,009.1 million, marginally higher by RM2.4 million from FY2014, in tandem with the increase in revenue but partially negated by higher operating costs during the year.

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INFORMATION

WHO WE ARE

G T i s o p e r a t e d b y o u r G a s Transmission and Regasification (GTR) Division. Through this business, we manage the gas t ransmiss ion 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 2,521 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.

GT also acts as the operations and maintenance (O&M) operator for Sabah-Sarawak Gas Pipeline (SSGP) and Trans Thai-Malaysia (M) Sdn Bhd’s pipeline from the northern Malaysian border to Seberang Prai in Pulau Pinang.

PIPELINE NETWORK

Salesgas

Salesgas delivered to customers

Pipeline Compressorstation

PipelineMeteringstation

Pressurise gas to transport it from one location to another

Measure the gas flow rate


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PERFORMANCE REVIEW


BUSINESS REVIEW

BUSINESS STRATEGY



GT is committed to exhibiting leadership in the area of safety and ensuring our compliance with the various HSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times to safeguard lives, assets and our overall business continuity.


GT 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.



GT is striving to sustain its asset reliability for superior operational excellence.


GT is committed to improve and sustain our transmission operational performance in optimising the value delivered to our stakeholders.

Results

Both GT reliability and availability remained high at 99.9%. Zero fatality and Loss Time Injury (LTI) recorded in 2015.


Optimum cost control and asset reliability

GT is dedicated to minimise value leakages and improving overall asset reliability, which would translate into higher returns to its shareholders.


GT is committed to utilising energy-efficient technologies to reduce energy per unit cost of transmission, which translates into lower production cost, and reduction in overall energy intensity and carbon footprint.

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

GT is determined to pursue, explore and execute new business v e n t u r e s w i t h i n t h e c o r e competencies of the Company to establish new revenue streams and value for its shareholders.


GT is focused on implementing a seamless project execution strategy across all of its projects such as the Pengerang Gas Pipeline Project (PGPP), which translates into timely and within-budget project delivery.


Our 3ZERO100 PGB Transformation journey moves us towards a high-performance organisation with aspirations to achieve zero HSE incident, zero interruption, zero non-compl iance and 100% product delivery reliability by the end of 2016.

Various strategic initiatives have been outl ined to drive the organisation towards HSE and operational excellence through Key Strategic thrusts of Assets, System & Process and People & Culture.


GT is dedicated to improving i ts overal l asset re l iabi l i ty and availability through the implementation of Key Results Area (KRA) for the elimination of GT's Bad Actors.

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INFORMATION

Revenue structure consists of capacity reservation which is based on capacity booking at tariff per gigajoule (GJ) governed by the GTA.

Cost structure comprises depreciation and other operational costs, namely repair and maintenance, materials and supplies, and others.

Assets consist of transmission pipelines covering much of West Malaysia (known as the Peninsular Gas Utilisation (PGU) pipeline network) as well as smaller distribution systems in Miri and Bintulu in East Malaysia which transport gas to PETRONAS’ customers.

Activities of this segment include transportation of gas processed by our gas processing plants as well as from the Joint Development Area in Thailand and our LNG Regasification Terminal in Sungai Udang, Melaka to PETRONAS’ customers in Peninsular Malaysia and Singapore. This includes transportation of gas to PETRONAS’ customers in Sabah and Sarawak.

Key resources for this segment consist of 442 employees from both technical and non-technical backgrounds with a male to female ratio of 6:1.

Output is the gas transportation services of salesgas consist of mainly as well as ethane, propane and butane.

Customer is solely PETRONAS.

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

BUSINESS MODEL

3ZERO100







PROCESS CULTURE





STRATEGICTHRUSTS

PGB TRANSFORMATION

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PERFORMANCE REVIEW


BUSINESS REVIEW

OPERATIONAL REVIEW


G T H A S S H O W N W O R L D C L A S S

P E R F O R M A N C E I N T E R M S O F

R E L I A B I L I T Y A N D A V A I L A B I L I T Y . W E

C O N T I N U E T O E N S U R E U N I N T E R R U P T E D

G A S D E L I V E R Y , I N L I N E W I T H P G B ’ S

T R A N S F O R M A T I O N A G E N D A .

PGB's transformation journey, commencing in 2014, continued to strive for positive impact on our transmission system reliability and availability of 99.92% and 99.87% respectively.

The segment ensured uninterrupted gas delivery to PETRONAS’ customers, managing the transport and supply of a total of 2,225 million standard cubic feet per day (mmscfd) of salesgas during the year.

GT achieved zero supply curtailment through effective management of our send-out plan for LNG Regasification Terminal in Sungai Udang.

The year also saw the operations and maintenance of SSGP shifted from SSGP Operation Readiness phase to Initial Operations phase since July 2015 as per the Technical Operation & Maintenance Agreement (TOMA).

GT is also enduring in its commitment to institutionalise the capability development in the organisation through its Transmission Academy’s scope expansion to cover the entire staff population via structured learning and development programmes.

Another major project completed in December 2015 was the Tebong City Gate in Melaka which is expected to meet new demand from Gas Malaysia Berhad for their customers in the Lipat Kajang Industrial Park.


Key Results Area initiatives, such as:

• Enhancement of Equipment Reliability Strategy (ERS).

• Inspection of Above Ground Piping system.

• Pipeline Integrity Enhancement Programme.

Complet ion of Department of Occupational Safety and Health (DOSH) Turnaround for Segamat Compressor Station.

Commencement of Transmission Academy to accelerate capability of new staff.

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INFORMATION

FINANCIAL REVIEW

R E V E N U E F R O M G T I N C R E A S E D B Y R M 2 4 . 9 M I L L I O N T O

R M 1 . 3 B I L L I O N F O R T H E Y E A R U N D E R R E V I E W . T H E R I S E

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

O F T H E G T A , W H I C H T O O K E F F E C T F R O M 1 A P R I L 2 0 1 4 ,

A N D I N C O R P O R A T E S A H I G H E R B O O K I N G C A P A C I T Y . I T

W A S F U R T H E R S U P P O R T E D B Y A F U L L Y E A R O F

O P E R A T I O N S W I T H C O N S I S T E N T L Y H I G H R E L I A B I L I T Y

A N D A V A I L A B I L I T Y O F 9 9 . 9 2 % A N D 9 9 . 8 7 % R E S P E C T I V E L Y .

GT contributed RM1,009.1 million to the Group’s gross profit, an increase of RM2.4 million from FY2014 on the back of higher revenue for the year.


In 2015, GT also re-evaluated its risk profile in anticipating new challenges in its operations, resulting in a few major mitigation activities being enabled, such as the acceleration of the Asset Life Study (ALS) & Safety Equipment Criticality (SCE) and establishment of Pipeline Weldment Integrity Assurance through our Key Results Area (KRA) initiative under the 3ZERO100 PGB Transformation programme.

Business Continuity Plans (BCP) are in place to address operational disruptions, and will be activated in the event of salesgas supply disruption to PETRONAS’ customers. During the year under review, GT successfully conducted a Tier-3 Emergency Response Exercise (Ex-Tiga Ratus) in collaboration with the National Security Council at Seberang Prai, Pulau Pinang that simulated the pipeline explosion incident at SSGP in Lawas, Sarawak, which occurred in 2014. The programme is periodically tested to ensure operational continuity and effective response to crises.

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SUSTAINABILITY

GT is committed to the preservation of our environment for our future generations.

Work-life balance is also a focus that is essent ia l to susta in workforce performance. GT employees are involved in various sport activities through internal events and events organised by Kelab Sukan dan Rekreasi PETRONAS. GT employees also contributed to society through various Corporate Social Responsibility (CSR) programmes with communities around the nine regional offices of GT. GT was also involved in the Corporate Social Investment (CSI) on initiative to improve the livelihood of the residents of Kampung Paya Pulai, Segamat. This was done in collaboration with Yayasan Salam.

GT was also involved in the Program Sentuhan Ilmu PETRONAS (PSIP) with Sekolah Kebangsaan Batu Anam. Out of the 40 students who participated in the programme, four managed to attain excellent UPSR results.

OUTLOOK

GT is expected to deliver another solid performance next year on the back of its capacity reservation under the GTA with PETRONAS.

In line with the 3ZERO100 PGB Transformation journey, GT is expected to continue maintaining its assets performance, enhance work processes and the Operational Excellence Management System (OeXMS)’s completion to improve productivity.

Meanwhile, our major projects are also on track. The Pengerang Gas Pipeline Project is progressing well and as at the end of 2015, the project was almost 80% completed. The 72 km pipeline is intended to have bi-flow capacity and will connect the new LNG Regasif ication Terminal in Pengerang to the PGU. Upon completion in 2016, it will ensure the security of gas supply to Pengerang Integrated Complex and vice versa to PGU.

GT will also embark on an Operations and Maintenance Benchmarking exercise in 2016. The benchmarking exercise is to identify gaps and learn best practices from similar operators in the industry, as well as find opportuni t ies for fur ther cost optimisation.

Transmission Academy was rolled out in 2014 to build the knowledge and skill of our personnel. The first batch of 19 staff have been trained at this Academy during the year. The next batch is scheduled for 2016 to involve another 16 staff from GT and 13 Operations and Maintenance (O&M)staff from Pengerang LNG (Two) Sdn Bhd (PLNG2). Our GTR Engineering team is also in collaboration with INSTEP to provide training to other industry players in Cathodic Protection in the first quarter of 2016.

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INFORMATION



UTILITIESA YEAR IN REVIEW

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

99.8

97.8

94.9

97.9

95.998

.1

96.499

.0

99.7

98.0

94.499

.9

95.6

98.6

99.0

’11 ’12 ’13 ’14Electricity Steam Industrial Gases

’15 ’11 ’12 ’13 ’14 ’15 ’11 ’12 ’13 ’14 ’15


Reliability (%)

96.4%95.9%94.4%

Electricity

Steam

IndustrialGases

HUMAN CAPITAL


1.3

357


employeesdays of training and development2,047


Reliability

0 LTIF

0 FATALITY

126


STRATEGY & OUTLOOK

PERFORMANCE REVIEW


Note:



• Concerted efforts in maintaining high safety level which translated into excellent performance of HSE throughout the year with 1.3 million safe manhours achieved. UT also recorded zero LTIF.

• Despite facing challenges with its plant operations, UT continued to deliver commendable performance with reliability at 96.4% for electricity, 95.9% for steam and 94.4% for industrial gases.

6%

94%

31gross profit declined by

%

lower by

4attributable to lower offtake by customers

%


REVENUE

RM973.6 MILLION

gross profit contributionto PGB Group

6%

RM135.8 MILLION66

1.8

1,00

8.6

973.

6

946.

2

867.

2

’11 ’12 ’13 ’14 ’15

124.

8

195.

9

135.

8162.

0

127.

7

’11 ’12 ’13 ’14 ’15



Performance

• In FY2015, UT recorded a marginal decrease of 3.5% in revenue driven by lower offtake by customers for electricity, steam and industrial gases.

• UT’s contribution to PGB’s gross profit decreased by RM60.1 million as a result of lower revenue and higher plant repair and maintenance costs in line with initiatives to improve asset integrity.

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INFORMATION

WHO WE ARE

UT is operated by our Gas Processing and Utilities (GPU) Division, divided into the 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 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 petrochemica l p lants and surrounding industries with reliable supply of electricity, steam, industrial gases and other by-products like liquid oxygen, liquid nitrogen, demin 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 customer 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 i ts sa le of products i s conducted as per the respective sales and purchase agreements.

UK UG

Air Separationunit

Cogenerationunit

Demineralised water unit

Demineralised Water

Industrial GasesElectricity

Steam

Convert atmosphere air into gases

Generate electricity and steam

Remove mineral from water


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BUSINESS REVIEW

BUSINESS STRATEGY1. HEALTH, SAFETY &

ENVIRONMENT (HSE)


UT is committed to exhibiting leadership in the area of safety and ensuring our compliance with the various HSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at a l l t imes to safeguard lives, assets and our overall business continuity.


UT is determined to increase its efforts to instil safety-at-heart in all members of our workforce, achieve safe operationalisation of the Company’s assets.



UT is striving to elevate its plant reliability and Overall Equipment Effectiveness (OEE) such as gap i d e n t i f i c a t i o n t o i m p r o v e equipment reliability, obsolescence and increase system robustness f o r e l e c t r i c i t y g e n e r a t i o n , protection and distribution which would translate into higher product delivery to our customers.


UT is committed to improve and sustain our plant operational performance in optimising the value delivered to our stakeholders.

UT is accredited with several awards and certifications as a result of the high standards in its operations, such as:

• The IKM (Institut Kimia Malaysia) Excellence Award to two Utilities labs (UK and UG); and

• Recognised Innovative and C r e a t i v e C i r c l e ( I C C ) practitioner by PETRONAS Carigali Sdn Bhd for best practice sharing of Kaizen Improvement Team activities and ICC achievements

Results

OEE of electricity and steam production decreased marginally to 87.1% and 88.8% respectively, f r o m 8 9 . 3 % a n d 9 1 . 7 % respectively in 2014. This resulted from higher planned activities conducted during the year to improve plant reliability and performance.

Plant reliability for electricity and steam slightly decreased to 96.4% and 95.9% respectively due to higher activities conducted at UG.



UT is dedicated to minimising value leakages and improving overall asset utilisation, which would translate into higher returns to its shareholders.


UT is committed to utilising energy efficient technologies to reduce energy per unit cost of production, which translates into lower production cost and a reduction in overal l energy intensity and carbon footprint.

Strategic growth in utilities

UT is determined 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.


UT is focused on implementing a seamless project execution strategy for all projects to and enhance PETRONAS’ value chain such as Feeder C project which timely completed in December 2015 to support additional power supply to BASF PETRONAS Chemicals (BPC) Sdn Bhd.


Our 3ZERO100 PGB Transformation programme moves us towards a high performance organisation with aspirations to achieve zero HSE incidents, zero interruptions, zero non-compliance and 100% product delivery reliability by the end of 2016.

Various strategic initiatives have been outl ined to drive the organisation towards HSE and operational excellence through the thrusts of Assets, System & Process and People & Culture.


UT is dedicated to improving overall asset reliability and availability through the implementation of Key Results Area (KRA) for Air Separation Unit (ASU) and execution of preventive maintenance for our gas turbines at UK and UG.

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INFORMATION

3ZERO100







PROCESS CULTURE





STRATEGICTHRUSTS

PGB TRANSFORMATIONKEY

ASSETS SYSTEM & PEOPLE & Elimination of all





PROCESS CULTURE

STRATEGICTHRUSTS

ASSETS

CUSTOMERS

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

BUSINESS MODEL Revenue structure is based on volume of products sold to customers at prices stipulated in our sales and purchase agreements with prices comprising fixed cost, variable cost and inflation.

Cost structure consists of depreciation and operational costs such as repair and maintenance, materials and supplies, as well as professional and purchased services.

Assets consist of four operating plants namely our Cogeneration plant, Air Separation plant, Water plant and Nitrogen Generation plant located at UK and UG.

Activities of this segment comprise manufacturing, supplying and marketing power and a range of industrial utilities to the various petrochemical businesses and third parties.

Key resources for this segment consist of 357 employees from both technical and non-technical backgrounds with male to female ratio of 8:1.

Output from our processes encompasses electricity, steam, industrial gases and other products such as liquid oxygen, liquid nitrogen, demin water, raw water, cooling water and boiler feed water.

Customers of our products are mainly from petrochemical plants and third parties.

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BUSINESS REVIEW

OPERATIONAL REVIEW

I N L I N E W I T H P G B ’ S T R A N S F O R M A T I O N

T O A C H I E V E I T S 3 Z E R O 1 0 0 T A R G E T S ,

U T H A S S H O W N A D E C R E A S I N G T R E N D

I N L T I F A N D P L A N T I N T E R R U P T I O N S ,

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

R E L I A B I L I T Y ( P D R ) .

During the year, UT experienced a slight decrease in OEE for electricity, steam, and industrial gases due to more intensive maintenance activities undertaken. Despite this, the OEE levels recorded for all products were well above target.

OEE for electricity marginally dropped by 2.2% to 87.1% while steam and industrial gases registered at 88.8% and 92.1% respectively.

Reliability for electricity and steam production exceeded the world class benchmarks, at 96.4% and 95.9% respectively. Production for all products, however, fell as a result of lower customers offtake. Electricity production stood at 1,704 gigawatt hour (GWh); steam at 4,076 kilometric tonnes (KMt); and industrial gases at 594 mega normal cubic meters (MNm3).



• Plant improvement activities such as UT KRA:0 Improvement of ASU reliability

b y r e s o l v i n g M a i n A i r C o m p r e s s o r b a d a c t o r s , improving steam efficiency and equipment performance.

• Completion of plant turnaround activities for demin water plant at UG and gas turb ine major overhaul at UK and UG.

1,86

4

9%

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

4% 5%

1,70

4

4,24

6

4,07

6 626

594

’14 ’15 ’14 ’15 ’14 ’15

Utilities Volume

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INFORMATION

FINANCIAL REVIEW

U T R E G I S T E R E D R E V E N U E O F R M 9 7 3 . 6 M I L L I O N F O R

F Y 2 0 1 5 , R E F L E C T I N G A M A R G I N A L D E C R E A S E O F 4 %

F R O M L A S T Y E A R , M A I N L Y A T T R I B U T A B L E T O L O W E R

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

G A S E S B Y C U S T O M E R S .

UT’s contribution to PGB’s gross profit decreased by RM60.1 million (31%) in tandem with higher operations and maintenance costs during the year in line with the Company's effort to improve plant reliability and production


UT managed its risks via Enterprise Risk (ERR) and Plant & Facilities Risk Management (PFRM). Under ERR and PFRM, risks relevant to the Division were assessed, monitored and reported to the respective Division Plant Leadership Team (PLT) and PGB Risk Compliance Committee (RCC). Mitigations for each high and medium risk have been assigned to reduce and eliminate the risk associated with business, HSE and operations. The mitigations have been implemented

through HSE and Process Safety Management (PSM) enhancement programmes, initiatives such as Mechanical Integrity (MI) and Loss of P r i m a r y C o n t a i n m e n t ( L O P C ) Framework, improvement projects and transformation activities through our KRA taskforce.

With the established MI Framework, a notable 67% reduction in total minor LOPC incidents was recorded in 2015.

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SUSTAINABILITY

Environment

UT acknowledges our responsibility to ensure all processes and systems are efficient and safe at all times to minimise our impact on the environment. This is achieved through:

• discharging on-speci f icat ion industrial effluent in compliance wi th the Industr ia l E f f luent Regulation (IER) 2009.

• keeping abreast of potential r e g u l a t i o n s i n t r o d u c e d b y regulatory bodies, such as the Clean Air Regulation (CAR) 2014 and undertaking the necessary actions to ensure compliance.

Community

UT also established and sustains close relations with local communities t h r o u g h i t s C o r p o r a t e S o c i a l Investment (CSI) activities such as:

• The “Sayangi Sungai Paka” programme in collaboration with the Malaysian Nature Society (MNS), PETRONAS East Coast Regional Office (ECRO), and government agencies. The event focuses on environmental awareness and conservation. The fish released into Sungai Paka at the event emphasised on the well-being of the river and the habitats surrounding the area that UT operates.

• Led Occupational Safety and Health (OSH) Open Day in collaboration with other PETRONAS subsidiaries to foster closer relationships between local communities and the Terengganu Department of Occupational Safety and Health (DOSH).

Workplace

UT is committed to protect the health of people at our workplace and provides conducive workplace to staff and contractors through various programmes such as:

• The “No Polystyrene” campaign at our cafeteria, to reduce harmful impact of food packaging on the environments;

• Medical counselling carried out by our Occupational Health Doctor aimed to promote healthy lifestyles to employees;

• A ser ies o f “Har i Ber temu Pelanggan” to increase health awareness among staff including carrying out medical screenings at UK and UG; and

• Healthy lifestyle programme such as zumba exercise, Measurement of Body Mass Index (BMI), blood donations and others.

Marketplace

UT is focused on further strengthening relationships with our stakeholders through:

• Teambuilding with PETRONAS Chemical Group Berhad (PCG) and engagement with DOSH personnel;

• Contractors forums for two-way communication between UT and our contractors; and

• Recreational activities with local authorities.

OUTLOOK

• Utilities performance for FY2016 would be very much dependent on the demand by Petrochemical business.

• In 2016, UT’s aspiration is to incorporate best practices and further improve our performance which focuses on reducing interruptions to assets and deliver world-class performance and reliability.

• As part of the 3ZERO100 PGB Transformation programme, UT is expected to continue enhancing asset performance through the execution of our Overall Boiler Integrity Management (OBIMA) project, the Generator and Turbine Control System Upgrade (GETS-UP) and the ASU Power Supply Segregation (ASPIRE) and the Protection Relay Inspection and Assessment (PRIA) to maximise product delivery reliability to customers.

• Furthermore, UT will continue to enhance work processes and the O p e r a t i o n a l E x c e l l e n c e Management System (OeXMS)’s completion to improve productivity.

• In maintaining a highly engaged and capable workforce, UT will drive the remaining initiatives under the key strategic thrust for people and culture including Gas Academy, Root Cause Failure Analysis (RCFA) enhancement and HSE generative culture.

• UT is also committed to pursuing new business opportunities to maximise utilisation of its assets.

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INFORMATION


REGASIFICATIONA YEAR IN REVIEW

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


79.2

73.0 83

.186.3

’14Reliability Availability

’15 ’14 ’15

86.3%83.1%

Reliability

Availability

Reliability and Availability (%)

HUMAN CAPITAL


73.0

80

thousand safe manhours achieved

employeesdays of training and development.735

HEALTH, SAFETY & ENVIRONMENT (HSE)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.

4 LTIF

0 FATALITY

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PERFORMANCE REVIEW



REVENUE

RM637.1 3increase in revenue

MILLION

%

616.

2

637.

1

338.

2

’13 ’14 ’15

gross profit contributionto PGB Group

14 %

3 decrease in gross profit

%RM297.5 MILLION

307.

9

297.

5

163.

5

’13 ’14 ’15

14%

86%



Performance


• RGT achieved a regasification reliability of 86.3%, an improvement from 79.2% recorded last year. Availability was also elevated to 83.1%.

• During the year, our RGT complex received 24 cargoes from all over the world. The RGT Minimum Send Out Capability Improvement (RGTEC) initiative to optimise the overall supply chain of PETRONAS and enhance plant reliability and availability was progressing well at 38.6% and is expected to be completed by December 2016.

• RGT recorded revenue of RM637.1 million, an increase of RM20.9 million (3.4%) from FY2014. The higher revenue was attributed to storage fees as a result of the strengthening of USD against RM.

• RGT also registered gross profit of RM297.5 million, a decline of RM10.4 million (3.4%) from FY2014. The lower gross profit was mainly due to higher lease and depreciation expenses.

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INFORMATION

WHO WE ARE

RGT is operated by our Gas Transmission and Regasification (GTR) Division. We operate and maintain our offshore liquefied natural gas (LNG) Regasification Terminal Sungai Udang (RGTSU) in Melaka, 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.


REGASIFICATION TERMINAL

Liquefied Natural Gas (LNG)

Floating Storage Unit

• Tenaga 1 • Tenaga 4

Jetty RegasificationUnit

Storage of the LNG

Convert LNG to salesgas

Salesgas deliveredto PGU pipeline

network

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PERFORMANCE REVIEW


BUSINESS REVIEW

BUSINESS STRATEGY



RGT is committed to exhibiting leadership in the area of safety and ensuring our compliance with the various HSE governance and assurance frameworks as well as the PETRONAS Mandatory Control Framework at all times to safeguard lives, assets and our overall business continuity.


RGT 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.



RGT is striving to elevate its Overall Equipment Effectiveness (OEE) for equipment reliability, which would translate into higher p r o d u c t d e l i v e r y t o o u r customers.


RGT is committed to improve a n d s u s t a i n o u r f a c i l i t i e s operational performance in optimising the value delivered to our stakeholders.

Results

OEE improved to 99.1% from 94.1% in 2014.

Even more encouragingly , reliability and availability also increased to 86.3% and 83.1% respectively, from 79.2% and 73.0% respectively in 2014.

T h e s e r e s u l t e d i n a 5 0 % reduction in the number of facilities trips to ensure RGT delivers world class performance.


Optimum cost control and asset reliability

RGT is dedicated to minimising value leakages and improving overall asset reliability, which would translate into higher returns to its shareholders.


RGT is committed to utilising energy efficient technologies to reduce energy per unit cost of regasification, which translates into lower production cost and a reduction in overall energy intensity and carbon footprint.

S t r a t e g i c g r o w t h i n Regasification facilities

RGT is determined to pursue, explore and execute new business v e n t u r e s w i t h i n t h e c o r e competencies of the Company to establish new revenue streams and value for its shareholders.


RGT is focused on implementing a seamless project execution strategy across all of its projects, such as the RGT Minimum Send Out Capability Improvement (RGTEC) which translates into timely and within budget project delivery.

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INFORMATION


Our 3ZERO100 PGB Transformation journey moves us towards a high performance organisations with aspiration to achieve zero HSE incident, zero interruption, zero non-compliance and 100% product delivery reliability by the end of 2016.

Various strategic initiatives have been outlined to drive the organisation towards HSE and operational excellence through the key strategic thrusts of Assets, System & Process and People & Culture.

Improve asset reliability and availability

RGT is dedicated to improving its OEE which translates to higher overall asset reliability and availability through the implementation of Key Results Area (KRA) for RGT’s elimination of Bad Actors.

Revenue structure consists of regasification fee, throughput fee, and storage fee as governed by our RSA.

Cost structure comprises of depreciation and operational costs such as repair and maintenance as well as materials and supplies.

Assets consist of offshore LNG Regasification Terminal in Sungai Udang, Melaka (RGTSU), a 27km onshore and 3km offshore pipeline as well as two leased floating storage units.

Activities of this segment include receiving vessels carrying LNG imported by PETRONAS from around the world, storing it in two floating storage units and converting the LNG to gas before injecting it into the Peninsular Gas Utilisation (PGU) pipeline network for distribution to PETRONAS’ customers.

Key resources for this segment comprise of 80 employees from both technical and non-technical backgrounds with a male to female ratio of 26:1.

Output is regasified LNG which is subsequently injected into PGU.

Customer is solely PETRONAS which fully underwrites the capacity of our facilities.

BUSINESS MODEL

ASSETS

CUSTOMER

ACTIVITIES

REVENUESTRUCTURE

KEYRESOURCES

COSTSTRUCTURE

OUTPUT

KEY

ASSETS SYSTEM & PEOPLE & Elimination of all





PROCESS CULTURE

STRATEGICTHRUSTS

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STRATEGY & OUTLOOK

PERFORMANCE REVIEW


BUSINESS REVIEW

OPERATIONAL REVIEW

R G T H A S R E C O R D E D A N O T A B L E

I M P R O V E M E N T I N I T S O E E , R E L I A B I L I T Y

A N D A V A I L A B I L I T Y . T H E S E W E R E

A T T R I B U T E D T O C O N C E R T E D E F F O R T S

I N R E S O L V I N G I T S P O S T C O M M I S S I O N I N G

I S S U E S S I N C E I T C O M M E N C E D

O P E R A T I O N S I N F Y 2 0 1 3 .

During the year under review, RGT received 24 LNG cargoes, contributing to a total of 74 cargoes received since operations began in the second quarter of 2013.

RGT’s Overall Equipment Effectiveness (OEE) progressively stood at 99.1%. Despite facing several regasification issues, RGT has significantly improved its plant performance as compared to 2014.

Notwithstanding that, RGT strove to eliminate Bad Actors and the positive impact of this was reflected in the reduction of facilities trips. We also strengthened RGT’s HSE and operational compliance through various assurance programmes.

During the year, RGT successfully completed the LNG Regasification modules under Gas Academy encompassing operations, mechanical, electrical and instrumentation development for RGT. These modules are ready to be rolled out in our 2016 sessions. A total of 12 training sessions for Accelerated Capability Development and 26 training sessions for PETRONAS Competency Based Assessment System (PECAS) were conducted in 2015.

Overall, we recorded 735 training mandays in 2015, of which 727 mandays were for our technical personnel, whilst eight mandays were for non-technical staff.

Our new LNG Regasification Terminal project in Pengerang is on track and the development will continue in 2016. It will supplement the business growth of PETRONAS Downstream at Refinery and Petrochemical Integrated Development (RAPID). Our RGTEC project, was at 38.6% completion as at December 2015 and is expected to be fully completed by December 2016. This will optimise the overall supply chain of PETRONAS as well as increase plant reliability and availability.


Key Results Area activities such as:

• Resolution of Low Temperature and maximise capacity.

• Enhancement of Propane Pump Reliability.

• N i t r o g e n S u p p l y a n d A i r Compressor Enhancement.

Started LNG Regasification modules under Gas Academy to enhance staff capability.


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INFORMATION

FINANCIAL REVIEW

O U R R G T R E C O R D E D S T A B L E R E V E N U E O F R M 6 3 7 . 1

M I L L I O N , A N I N C R E A S E O F R M 2 0 . 9 M I L L I O N O R 3 . 4 %

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

R E V E N U E W A S A T T R I B U T E D T O T H E I N C R E A S E I N S T O R A G E

F E E S A S A R E S U L T O F T H E S T R E N G T H E N I N G O F T H E U S

D O L L A R A G A I N S T T H E M A L A Y S I A N R I N G G I T .

RGT’s gross profit was RM297.5 million, a decrease of RM10.4 million or 3.4% from the previous year. The lower gross profit was mainly due to higher lease and depreciation expenses.


RGT undertook various assessments to determine our level of compliance in terms of health, safety and environment. Such assessments have led RGT to perform a feasibility study on barge and vessel specifications and small craft jetty landing faci l i t ies at embarkation or disembarkation points of our Jetty Regasification Unit (JRU).

GTR Division continued its commitment to mitigate risks for RGT through the establ ishment of a prevent ive maintenance’s price agreement (PA) w i t h K O N G S B E R G a n d t h e engagement of a third party to conduct audits in relation to the elimination of off-spec product at the receiving point of RGT.

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STRATEGY & OUTLOOK

PERFORMANCE REVIEW


BUSINESS REVIEW

SUSTAINABILITY

RGT is committed to the preservation of the environment for future generations. Our RGTSU office building in Sungai Udang, Melaka qualified for Green Building certification by Green Building Index Sdn Bhd in 2015.

OUTLOOK

We anticipate the revenue for our regasification business to contribute positively to PGB’s income and remain sustainable on the back of capacity reservation by PETRONAS, for regasification and storage fees under the RSA.

In line with the PGB Transformation journey, RGT is expected to continue improving its assets’ performance and enhancing work processes and Operating Excellence Management System (OeXMS)’s completion to improve productivity.

The development of our LNG Regasification Terminal in Pengerang is on track and will continue in 2016. The new terminal will supplement the business growth of PETRONAS Downstream at the upcoming RAPID, with expected commissioning in 2017.

LNG Regasification modules under Gas Academy will be rolled in 2016 sessions.

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INFORMATION

P G B I S C O M M I T T E D T O U P H O L D I N G T H E H I G H E S T

S T A N D A R D S O F S A F E T Y I N O U R O P E R A T I O N S .

H E A L T H , S A F E T Y &E N V I R O N M E N T

HS

All Health, Safety and Environment (HSE) risks across the business are managed through our strict adherence to prevailing regulatory requirements, PETRONAS’ HSE Mandatory Control Framework (MCF), PETRONAS’ T e c h n i c a l S t a n d a r d s , a n d o u r H S E Management System (HSEMS).

To drive excellence in HSE, we embarked on a three-year HSE Roadmap in 2014 to engender a generative culture in the Company where safe behaviour is fully integrated into every aspect of our systems and processes. As part of the Roadmap, we have enhanced our behavioural safety and HSE assurance programmes for our staff and facilities, respectively.

TAKING HSE BEYOND MERE COMPLIANCE

HSE remains at the forefront of our priorities, guiding in no small way on how we conduct our business and operations. Our concerted efforts to maintain a high level of safety have yielded an improved HSE performance. We recorded 4.3 million safe manhours and we were grateful that there was no fatality. However, we were unfortunate that there were two Lost Time Injuries (LTI) accidents involving five injuries.

One of the LTI was an incident involving a Company driver while the remaining four were contractors who were injured during an unloading activity at the jetty offshore of the LNG Regasification Terminal, in Sg. Udang, Melaka. Besides, three gas releases took place, of which one is considered major but has been contained and resolved by our dedicated team. The other two were operational gas releases. We have studied in detail the causes and ramifications of these incidents and will take the necessary procedures to ensure no repeats of such untoward occurrences. Indeed, HSE will prominently be each and every staff’s Key Performance Indicators and non-compliance with HSE guidelines will strictly be forbidden. In addition, none of our staff was affected by major diseases.

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STRATEGY & OUTLOOKABOUT USMESSAGE TO

SHAREHOLDERSAT A GLANCE


PGB15_06_Sustainability.indd 142 4/4/16 5:49 PM

SE

PREVENTION IS BETTER THAN CURE

To help prevent occupational illnesses amongst our valued staff, specific industrial hygiene and health programmes were organised, the most prominent being our Gas Processing and Utilities Division’s Mercury Management Programme which emphasised mercury risk assessment and controls, such as the decontamination process, health surveillance practices, as well as proper usage of personal protective equipment (PPE). The programme was aimed at minimising the risk of mercury exposure at work, especially during plant turnarounds. The Company also embarked on benzene, toluene, ethylene, and xylene (BTEX) monitoring on staff to reduce their exposure at work to all BTEX elements.

Apart from the yearly exercises on HSEMS assurance and emergency response, PGB carried out a Tier-3 Emergency Response Exercise in FY2015, involving our gas transmission pipeline in the Northern Region of Peninsular Malaysia, local regulatory bodies, as well as security and emergency response units. This initiative served to assess the readiness of all parties involved and enhance their ef fect iveness in handling emergencies. The exercise also fulfilled our safety obligations, in line with current regulatory requirements and the need for constant emergency preparedness.

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INFORMATION

I N N O V A T I O N

A S A L E A D I N G G A S

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

U T I L I T I E S C O M P A N Y , P G B I S

C O N T I N U O U S L Y S E E K I N G F O R

O P P O R T U N I T I E S T O I M P R O V E

O U R P L A N T P E R F O R M A N C E T O

I N C R E A S E V A L U E T O O U R

S T A K E H O L D E R S . I N N O V A T I O N

I N T H E F O R M O F T E C H N O L O G Y

I S O N E W A Y T O I M P R O V E O U R

P E R F O R M A N C E .


STRATEGY & OUTLOOK

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144

Among our more recent and significant innovations were particle analysis in feedgas to determine appropriate filter size to eliminate high Differential Pressure (DP) cold box at Gas Processing Santong (GPS)’ Low Temperature Separation Unit (LTSU). This initiative has saved a potential loss of RM49.0 million from ethane production by achieving zero cold box down time, a 100% reliability and product delivery to customer and ensure robustness in the overall PETRONAS supply chain.

In the year under review, this innovation has received 3-Stars Gold award at Innovative and Creative Circle (ICC) Convention National level, Gold Award at Regional and ICC Muda Terbaik at Mini Convention. PGB has also qualified for participation in the 2016 International Convention on Quality Control Circles (ICQCC) in Bangkok, which will be held from 23 to 26 August 2016.

We have also improved our ethane product recovery through execution of GPP5 De-Methaniser Revamp (DMR) project which was implemented in May 2015. The re-tray design at De-Methaniser column was to handle changes in feedgas composition and design operating parameters. The innovation effort by the Company has contributed to improve ethane recovery rate by 8% and Overall Equipment Effectiveness (OEE) to 90.8%. I t has also contributed positively to Performance Based S t r u c t u r e ( P B S ) i n c o m e a n d accumulated value creat ion of RM106.0 million to PETRONAS.

Furthermore, we cont inued to eliminate our mechanical integrity issues for GPS Amine Pump by innovative modification approach. The idea was es tab l i shed by improving impeller design through combination of pump casing volute tongue modification with new impeller v a n e n u m b e r a l t e r a t i o n . T h i s innovation resulted in the elimination of more than 80.0% vibration issue and increased performance indicator for GPS Amine Pump by reducing tripping rate by 82.2% per month. It was successfully implemented since November 2015 and reduced the Price of Non-Conformance (PONC) to RM0.3 million per month.

The adoption at relevant technologies in our operations will ensure that PGB maintains our competitive edge and accelerating on the right track to achieve our 3ZERO100 targets under PGB Transformation programme.

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INFORMATION

P G B I S A F I R M B E L I E V E R I N T H E

A D A G E T H A T A C O M P A N Y ’ S M O S T

I M P O R T A N T A S S E T I S I T S P E O P L E . A S

S U C H , S T R E N G T H E N I N G O U R P E O P L E ’ S

C O M P E T E N C I E S C O N T I N U E S T O R A N K

H I G H O N O U R L I S T O F P R I O R I T I E S

F O R T H E Y E A R U N D E R R E V I E W .

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PERFORMANCE REVIEW


STRATEGY & OUTLOOK

C A P I T A L D E V E L O P M E N T

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INFORMATION

TOTAL NUMBER OF EMPLOYEES

MALE

FEMALE

2,187

83%

17%

Above 35 years old

Below 35 years old

46% 54%

Employees by Age Group

In managing our talents, PGB internalised the PETRONAS Employment Value Proposition (EVP) of Trust, Grow and Reward. PGB is also aligned with the PETRONAS Global Talent Strategy (GTS) in ensuring the availability of competent and multi-disciplinary pool of talents in meeting PGB’s business growth. The GTS guides the Company in pursuing the right talents, and ensuring that the right environment is provided for them and ultimately developing the right leaders.

To meet statutory requirements for a pool of certified manpower, we organised training programmes throughout the year for staff at all levels of the Company. Selected staff were also sent for competency development programmes run by PETRONAS learning centres or external training providers to enhance their functional and leadership skills.

Functional or technical assessments form an integral part of our capability development process, where staff are assessed against a set of defined Technology Inventory and Ruler. Their immediate superiors are responsible for ensuring that suitable measures to close performance gaps are identified and implemented in a timely fashion.

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HUMAN CAPITAL DEVELOPMENT

STRATEGY & OUTLOOK

GEN X

GEN Y

BABY BOOMERS

Two main capability development activities were undertaken in FY2015:

Technical Manager Competency Assessment for Technical Managers

In FY2015, PGB’s Technical Managers participated in the Technical Manager Competency Assessment, which served to evaluate the readiness of Technical Managers in managing the Company’s high-risk operating assets. This assessment thus functions as a gauge for management to determine Technical Managers’ competency levels.

Three e lements were used in assessing these competency levels: technology know-how, functional skills, and leadership skills. A total of 41 Technical Managers have been assessed in FY2015. The closure of g a p s i d e n t i f i e d d u r i n g t h e i r assessments was closely monitored via individual development plans over a period of two years. As of December 2015, 54% of the identified gaps have been closed.

Downstream Grounding Programme for New Talents

We embarked on the Downstream Grounding Programme (DGP) for all new technical executives and non-execut ives to accelerate thei r readiness to assume new roles and responsibilities.

DGP, one of several capabil ity development programmes under PETRONAS’ Downstream Capability, required participants to attend a series of structured training modules. This programme aims to develop new talents to support Downstream business growth in preparation for t h e u p c o m i n g R e f i n e r y a n d P e t r o c h e m i c a l I n t e g r a t e d Development (RAPID) project.

Incorporating classroom training, self-learn ing modules , as we l l as competency-level evaluation, DGP is a decidedly holistic, broad-based learning regimen that provides suitable exposure to the fundamentals of our plant operations.

The DGP equipped 82 new talents in three batches in FY2015. Sixty four of them were subsequently placed at our Gas Processing and Utilities Division, while 18 were assigned to o u r G a s T r a n s m i s s i o n a n d Regasification Division. We will c o n t i n u e t o e n s u r e s t r i n g e n t compliance with the DGP framework to sustain a steady stream of competent talents for PGB’s future growth needs.

TECHNICAL NON- TECHNICAL

80% 20%1%

46%

53%

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A T P G B , W E L O O K B E Y O N D M E R E

F I N A N C I A L P R O F I T A B I L I T Y

T O B A L A N C E E C O N O M I C ,

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

( E E S ) C O N S I D E R A T I O N S W H E N

M A K I N G S O U N D A N D S U S T A I N A B L E

B U S I N E S S D E C I S I O N S .

C O R P O R A T ER E S P O N S I B I L I T Y

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Our Corporate Responsibility initiatives are guided by PETRONAS’ Corporate Sustainability Framework, which focuses on seven Key Results Area encompassing the following:

SHAREHOLDERS’ VALUE

Sustaining the Company’s profitability through value creation, efficient extraction, a n d m a n u f a c t u r i n g processes.

HEALTH, SAFETY AND ENVIRONMENT (HSE)

Preventing and eliminating injuries, health hazards, as w e l l a s d a m a g e t o properties and communities, including conserving the environment.

NATURAL RESOURCE USE

Promoting efficient usage of hydrocarbons and water whilst supporting the use of renewable energy.

PRODUCT STEWARDSHIP

Ensuring that products conform to quality and HSE standards throughout the product lifecycle and meet the d iverse needs o f society.

CLIMATE CHANGE

L imi t ing emiss ions o f greenhouse gases into the atmosphere.

SOCIETAL NEEDS

Safeguarding human rights w i t h i n o u r s p h e r e o f influence, contributing to community needs, investing in training and education, promoting arts and sports, and conducting business in a transparent manner.

BIODIVERSITY

Ensuring projects and operations do not exert significant impact on the biodiversity of plants and animals.

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We continue to support the various c o m m u n i t y d e v e l o p m e n t a n d outreach programmes aimed at e m p o w e r i n g i n d i v i d u a l s a n d communit ies with the relevant knowledge, skills and resources to cope with today’s increasingly challenging world.

In addi t ion , we act ive ly form partnerships with local communities, governmental and non-governmental organisations to contribute to the improvement in wellbeing of our stakeholders in the EES spheres.

In essence, we are committed to making a positive difference in the lives of others in the following distinctive ways:

• At the Marketplace, we work hard to establish relationships and build platforms for meaningful interactions with our shareholders and other stakeholders, while maintaining the highest operating s t a n d a r d s f o r m a x i m u m effectiveness and efficiency.

• At the Workplace, we make every effort to empower and equip our personnel with the required knowledge, skills and capabilities. These initiatives enable them to grow their careers and deliver breakthrough performance in their respective roles while preserving their safety and wellbeing at work, wherever they may be stationed.

• In the Environment, we strive to minimise the adverse impact our o p e r a t i o n s h a v e o n o u r surroundings. We also champion efforts to instil greater awareness amongst our staff and other stakeholders on preserving the env i ronment for our future generations.

• In the Community, we devote our time, resources, and ideas to improve the lives of others by encouraging the young – our leaders of tomorrow – to aspire for greater heights in their academic life. We also proactively contribute assistance, monetary or in kind, to the needy and less-fortunate in the community.

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MARKETPLACE


Our corporate responsibility to the marketplace takes the following forms:

1. Uphold ing h igh s tandards of corporate governance

1 , 2 , 3 , 4 , 5 , 6

2. R e l i a b l e a n d e f f i c i e n t g a s infrastructure and utilities plants

1 , 2 , 3 , 4 , 6

3. Maximising shareholder value 4

4. Enhancing industry knowledge 1 , 2 , 3

5. Adhering to transparent procurement procedures 5

6. Interactive communication with stakeholders 1 , 2 , 3 , 4 , 5 , 6

SUPPLIERSREGULATORS

SHAREHOLDERS

NATION

INDUSTRY

CUSTOMERS

Marketplace

1

5

3

6

4

2

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We are committed to conducting our business responsibly to add value to the gas infrastructure and utilities industry as well as the nation as a whole. We are also steadfast in our resolution to contribute to the wellbeing of our shareholders and other stakeholders, while upholding high standards of corporate governance at all times to meet stakeholders’ expectations of PETRONAS Gas Berhad (PGB) as a reputable listed entity.

In addition, we are continuously expanding our business portfolio to support the national agenda as well as our own business goals of maximising shareholders value, enhancing stakeholders’ knowledge and understanding of the gas industry, adhering to transparent procurement procedures, and building professional relationships.G4-15

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Upholding High Standards of Corporate GovernanceG4-SO3

We believe that good corporate governance is not a mere statement of compliance, but a proactive commitment to achieving the highest standards of transparency, integrity, and professionalism across our operations, as promoted by the Malays ian Code on Corporate Governance 2012 (MCCG 2012).

As a measure of our commitment to comply ing wi th MCCG 2012’s guidelines, we have given due consideration to its recommendation on gender diversity and in 2013 we welcomed our first female Board member.

With regards to transparency, we provide comprehensive information on the Company and our performance through our quarterly and annual reports as well as result announcements, guaranteeing the accuracy and reliability of our financial statements by strictly adhering to the Financial Control Framework.

As a member of PETRONAS Group, PGB takes pride in our full adoption and support of the following:

1. Code of Conduct and Business Ethics

Provides guidelines on the standards of behaviour expected of Directors and employees of the Company, Counterparts, and also Business Partners.

2. Whistleblowing Policy

Provides an avenue for al l employees and members of the public to safely and discreetly disclose any improper conduct.

3. Anti-Bribery and Corruption Compliance Programme

F a c i l i t a t e s C o m p a n y - w i d e compliance with anti-corruption laws via a zero-tolerance policy against all forms of bribery and corruption.

4. Competition Law Compliance Programme

Prohibits all anti-competitive practices, in line with the relevant legislation on competition.

Supporting the National Agenda

O u r n a t i o n a l p o w e r g r i d i s considerably dependent on natural gas, which makes up about 60% of the power generation mix. Supply security is, therefore, of significant national interest, and PGB plays a major role in this area. We are committed to maintaining high operational performance standards at all our plants to ensure seamless delivery of gas and utilities to our customers. All of our operations are reliable, with some even having attained world-class standards.

In safeguarding the supply of high-quality gas, we have completed our Plant Rejuvenation and Revamp (PRR) project to extend the useful life of our Gas Processing Plants (GPPs) 2, 3, and 4 by another 20 years.

As a result of these upgrades, we increased the reliability of our ethane, propane, and butane production to 95.5%, 96.5%, and 96.5% respectively from 95.1%, 95.6%, and 95.6% in 2014. Reliability of our salesgas production moderated slightly to 99.2% from 99.4% in 2014, but remained at world-class standards.

Meanwhile, we continued to maintain an exceptionally high level of system reliability (99.92%) and availability (99.87%) in our gas transmission pipelines. Our liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka achieved 86.3% reliability and 83.1% availability, as wel l as Overal l Equipment Ef fect iveness (OEE) of 99.1%, compared with 79.2%, 73.0% and 94.1% respectively in 2014.

Our Utilities segment, which supplies electricity to the Kertih Integrated Petrochemical Complex (KIPC), the Gebeng Industrial Area, as well as Tenaga Nasional Berhad, achieved 96.4% reliability for electricity, whereas steam and industrial gases hit 95.9% and 94.4% reliability respectively.

In addition to supporting energy security through the reliable supply of gas in Peninsular Malaysia, PGB is now contr ibuting direct ly to power generation in Sabah via Kimanis Power Sdn Bhd (KPSB), our joint-venture company with NRG Consortium (Sabah) Sdn Bhd, a subsidiary of Yayasan Sabah. Our 300 MW Kimanis Power Plant, having commenced commercial operations in 2014, is expected to meet Sabah’s increasing electricity demand as a full-fledged independent power producer (IPP).

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Maximising Shareholder Value

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

PETRONAS Group has entrusted the Company with the development of two key ancillary facilities that support the Pengerang Integrated Complex (PIC) in Johor, namely Malaysia’s Second LNG Regasification Terminal Pengerang (RGTP) and Air Separation Unit Pengerang (ASU).

The RGTP is expected to provide primary gas supply to the Refinery and Pet rochemica l In tegra ted Development (RAPID), the Pengerang Cogeneration Plant (PCP), as well as the existing Peninsular Gas Utilisation (PGU) pipeline network to create additional injection points in the PGU network for increased security of gas supply in Peninsular Malaysia. The ASU will be the sole facility for the supply of industrial gases to PIC customers. This project is expected to contribute positively to PGB’s bottom line for an extended period.

Enhancing Industry Knowledge

As a socially responsible corporate citizen, we at PGB see distinctive value in having open communication channels with our many stakeholders who play diverse roles in society, including government agencies, academia, as well as members of the general public.

Through such communications, we not only elevate our stakeholders’ understanding of our business and the role of gas as a clean and efficient

energy source, but also take the o p p o r t u n i t y t o p r o m o t e o u r transparent practices, encourage the prioritisation of safety in the area of gas technology, as well as stimulate interest in the continued development of Malaysia’s gas industry.

In this connection, we regularly extend invitations to investors, analysts, shareholders, regulators, and other stakeholders to explore our plants and other operational premises to gain first-hand exposure and insights to our business.

In FY2015, PGB hosted over 20 groups who visited our facilities throughout the year. These visits are summarised as follows:

Engagements with international and domestic corporations through delegation visits to our Gas Processing Plants (GPP), Utilities Plants and Kimanis Power Plant (KPP)

3 March PETRONAS Technology Institute (INSTEP)’s trainers from Iraq

10 March Senoko Power Ltd3 April Akademi Laut Malaysia (ALAM) and MISC Berhad9 April PETRONAS Carigali Muriah Ltd, Indonesia (INSTEP

trainers)23 April Korea Gas Corporation (KOGAS)27 April Asian Institute of Technology, Thailand; and Gas

Transmission Co Ltd, Bangladesh20 May Indonesia’s Badak LNG; and PT Dimensi Barumas Perdana3 June Samsung C&T Corporation

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Engagements with local authorities through delegation visits to our GPPs and KPP

9 March The Department of Environment 17 March The Department of Occupational Safety and Health, led

by Director General Dato’ Ir Mohtar bin Musri 15 April The Ministry of Energy, Green Technology and Water, led

by Secretary General Datuk Loo Took Gee 21 April The Department of Environment4 June The Ministry of Energy, Green Technology and Water, the

Ministry of Finance, Unit Kerjasama Awam Swasta, TNB Fuel Services Sdn Bhd, Suruhanjaya Tenaga (Energy Commission), and TNB Single Buyer

10 June Jabatan Laut Malaysia, Agensi Penguatkuasaan Maritim Malaysia, MISC Berhad, and Sungai Udang Port

17 June Gurun Police Station 22 June The Sungai Petani Municipal Council of Kedah5 August The Royal Malaysian Customs Department 14 August TIM Naziran, the Royal Malaysia Police, the National

Security Council, and the Public Works Department 22 October The Public Works Department of Perak Tengah

Engagement sessions and public awareness programmes with residents

25 April Residents of Putra Avenue in Putra Heights of Subang Jaya28 April Residents of Kampung Merbau in Ayer Tawar of Perak

A d h e r i n g t o T r a n s p a r e n t Procurement ProceduresG4-12

PGB’s supply chain management (SCM) spans the whole cycle of PGB’s activities, from the conception of needs right up to the disposal of materials and discontinuation of services. It encompasses the process of planning, implementing and controlling supply chain operations with the purpose of sat isfy ing customer requirements as efficiently and effectively as possible.

At present, SCM focuses primarily on the procurement of services and materials that ensure the success of our projects and thus provide the impetus for the Company’s continued development.

All parties involved in the procurement process are expected to uphold a high level of integrity and adhere to s t r ic t governance and control procedures as establ ished. Al l suppliers are also encouraged to adopt responsible and sustainable business practices. As part of our commitment to achieve the highest standards of integrity, we introduced our Corporate Integrity System in FY2015, whereupon we encourage signing our Integrity Pledge by our suppliers.

PGB’s SCM activities are in compliance with PETRONAS’ directives and all relevant government circulars.

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Interactive Communication with StakeholdersG4-26

At PGB, we strongly believe in the merits of providing our shareholders with a convenient platform for frequent and easy communication with us.

In the period under review, we have elevated PGB’s investor relations function with our structured Investor Relations Programme to further boost the Company’s interactions and rapport with our valued shareholders.

This medium enables our shareholders to be in regular contact with the Company, with regular updates on our business and strategic directions disseminated to them in a timely fashion. Social media, which has been an undeniable force for increasing brand awareness and influencing investment decisions, is one of several tools we employ to communicate with customers and stakeholders.

We also actively update our website (www.petronasgas.com) with the latest information on the corporate and business aspects of the Group. Press statements, announcements to Bursa Malaysia, analyst briefings, as well as quarterly results are made available on the website, to promote accessibility of information to the shareholders and all other market participants.

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INFORMATION

WORKPLACE


A S W E W O R K T O W A R D S A C H I E V I N G O U R 3 Z E R O 1 0 0

T R A N S F O R M A T I O N T A R G E T S , I T B E C O M E S E V E R M O R E

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

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

R O L E S A N D R E S P O N S I B I L I T I E S .


PERFORMANCE REVIEW


STRATEGY & OUTLOOK

An optimal organisational structure was drawn up during the year to ensure clear demarcation of roles and facilitate employee empowerment. The success of the structure received focused efforts following various strategies and initiatives implemented in FY2015 to sustain employees’ motivation. This resulted in PGB receiving manning level of 98%.

Recruitment Strategies

We have always been aligned with PETRONAS’ guiding principles of recruiting individuals based on merit, where only the most suitably qualified and competent individuals are selected for hire. At the same time, we take into consideration diversity and inclusivity factors in our quest to uphold equi table employment practices.

• Middle East• Germany• Virtual Career Fair

• News @ PGB Portal• Presentation @ PGB MD/CEO Townhall

• Mega Career Fair @ Mid Valley• Cairex @ Universiti Teknologi MARA (UiTM)• TEC @ Universiti Teknologi PETRONAS (UTP)• Recruitment Drive for Chargeman @ Institut Kemahiran Belia Negara (IKBN)

• Local Newspapers• PETRONAS Recruitment Portal • External Recruitment Portals such as Jobstreet , Rigzone

• 49 Structured Interviews• 51 Technical Assessments• Institut Teknologi PETRONAS (INSTEP) Graduate Interviews

Regional Recruitment Drives

Local Recruitment Drives

Promotions and Campaigns

Job Advertisements

Interviews

In FY2015, we participated in local and international career fairs, rigorous in-person interviews, and online meetings whenever in-person sessions were not possible. We also worked closely with PETRONAS and its business divisions to ensure our employment decisions were in line with the Group’s direction.

Key recruitment activities included:

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Through these efforts, the Company successfully recruited 274 talents, the highest recruitment activity to date within a short span of time.

Apart from sourcing externally, we also conducted internal mobility of talents, promotions, and succession planning for plant critical positions (PCP) . In September 2015, a succession planning exercise was conducted for 137 PCPs at executive level. This is to ensure availability of competent talents pipeline to sustain the Company’s operations in the future.

Workforce Diversity and Inclusion

In line with PETRONAS’ Cultural Beliefs, we aspire for each employee to have a strong sense of belonging to the Company. Our “Tell Me” sessions enable staff to provide their honest feedback to further improve the Company. PGB also ensures that all employees are managed equally, irrespective of age, gender, and ethnicity, as governed by the overarching principle of rewarding employees based on competency, merit and performance. Indeed, we are always aware of the need to create a harmonious working env i ronment character i sed by inclusiveness and acceptance to motivate our employees to perform their best every day. In managing our human capital, PGB is guided by our human resources policies which uphold labour r ights and non-discrimination and adherence to local laws and regulations.

We also respect employees’ rights for freedom of association and choice of representative to engage in collective bargaining, consistent with applicable laws. Human Rights G4-SO4, OG12

I n O c t o b e r 2 0 1 5 , P E T R O N A S l a u n c h e d t h e H u m a n R i g h t s Commitment which PGB has adopted and commit ted to respect ing internationally-recognised human rights in the areas of its operations, complying with its Code of Conduct and Business Ethics (CoBE) and all relevant legal requirements. The Human Rights Commitment is to ensure that al l the Company’s activities are governed by human rights principles, laws, best industry practices and standards in managing our operations.

The Commitment is applicable to all employees of PGB, contractors, subcontractors and any third parties within PGB’s premises or performing work and/or business for or on behalf of PGB. It is to complement the Code of Conduct and Business Ethics (CoBE), Anti-Bribery and Corruption (ABC) Policy and Whistleblowing Policy. Human Rights is embedded across the five key areas of the PETRONAS Social Performance Framework that could potentially affect operational activit ies, namely, Environment, Health, Safety, Security and Socio-economic and Cultural.

Fresh – 209

Experience – 43

Technical Professional – 13

Internal (change of scheme) – 9

Recruitment FY2015

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The Commitment addresses:

• Labour and working conditions for contractors

• Third party security• Supply chain• Community well-being

Workforce Engagements

We believe that i t is v i tal for management to regularly engage with staff at all levels in order to properly disseminate information on our 3ZERO100 PGB Transformation progress and other important directions.

Such engagements include our PGB Townhall sessions with the Managing Director/Chief Executive Officer (MD/CEO) and Management, monthly meetings between staff and their respective heads of division, as well as more informal sessions with staff at the departmental level.

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.

Numbers Speak For ThemselvesG4-LA6

For the period under review, PGB achieved 4.3 million safe manhours. Our final Lost Time Injury Frequency (LTIF) score was 0.31 and we m a n a g e d t o k e e p o u r T o t a l Recordable Cases Frequency (TRCF) at 0.49. No compoundable cases were recorded in FY2015.

In FY2015, we initiated the Trust Programme where our Heads of Divisions and Departments would organise sessions in an informal setting to develop better rapport with their staff. This type of engagement is in line with the PETRONAS Cultural Belief of “Nurture Trust”, which encourages the building of mutual trust amongst employees.

W e a l s o c o n d u c t e d f r e q u e n t engagement sessions with shift staff during their off-peak periods to update them on the latest policies and procedures and respond to their inquiries and issues. In addition, we will have engagement session with staff union representatives (i .e. KAPENAS) on a quarterly basis. We recorded all feedback and took the necessary steps to address the issues raised.

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ENVIRONMENT


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

P R O T E C T I N G O U R F I N I T E N A T U R A L R E S O U R C E S A N D T H E

E N V I R O N M E N T A S W E F O R G E A H E A D W I T H

O U R 3 Z E R O 1 0 0 P G B T R A N S F O R M A T I O N P R O G R A M M E A N D

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

GREENHOUSE GAS EMISSIONSG4-EN15

The Company’s greenhouse gas (GHG) emissions are actively monitored using the International Petroleum Industry Environmental Conservation Association (IPIECA) GHG Accounting and Reporting Guidelines in combination with the renowned SANGEA emissions calculations tool for accuracy and reliability in reporting.

Considerable reduction in flaring activity in FY2015 lowered our GHG emissions by nearly half to 2.25 million tonnes from 4.08 million tonnes in FY2014. Various short and long-term initiatives are being undertaken to reduce this level further.

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Optimising Energy ConsumptionG4-EN3, G4-EN6

We recognise the benefits of energy efficiency and has undertaken steps to optimise our energy consumption. However, due to longer operation availability and plant reliability, 57.0 million giga Joules (GJ) of energy was consumed in FY2015 as compared with 28.8 million GJ in FY2014. We are taking remedial action to mitigate this situation.

Managing Water Consumption and WithdrawalG4-EN10

We constantly monitor our water usage and identify further opportunities for the conservation and recycling of this precious resource to avoid depletion of our freshwater reserves.

In the year under review, a total of 7.4 million cubic metres (m3) of freshwater was withdrawn, compared with 7.8 million m³ in FY2014 a reduction of 5%. In addition, the Company’s water recycling rate was reduced to 25.0% from 37.8% in FY2014.

Waste ManagementG4-23

Our waste monitoring programme has seen considerable reduction in waste disposal and its associated costs through active recycling and recovery.

In FY2015, total waste treated via recovery methods doubled to 10.0% from 5.0% in FY2014, despite a 33.0% increase in the amount of waste generated and disposed to 1,360 metric tonnes from 901 metric tonnes in FY2014.

Biodiversity ConservationG4-EN12, G4-EN13, OG4

Biodiversity conservation is also high on our pro-environment agenda.

In FY2015, we collaborated with an Non-governmental Organisation (NGO), the Malaysian Nature Society (MNS), to launch a programme called “Sayangi Sungai Paka” to heighten awareness of the need to sustain the biodiversity of the Paka river. The river is located downstream from the area of our Gas Processing Plant Santong.

Launched in June 2015 with the release of 1,000 fishes into the river, the three-year programme involves water sampling and monitoring, MNS’ collection of data on fauna and flora distribution along the river, and a river ecology and habitat briefing to the community.

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For FY2016, the reach of this campaign will be expanded to cover the secondary and primary schools within the area.

While the Company takes care to adhere strictly to our international-standard safety measures, we are also on constant alert to ensure that our internal systems effectively control our effluent quality. PGB’s internal and external water quality monitoring is highly meticulous to ensure our effluents do not exceed the limits set by the authorities and hence not posing a threats to the fragile riverine system.

Our Gas Transmission team in Segamat helped promote a green and healthy lifestyle by revitalising the existing herb garden at our office compound. A total of 53 types of herbs were planted, including akar dani, hempedu bumi, jerangau, gandarusa and patawali. The garden increases staff awareness on the wide variety of herbs and allows them to experience the herbs’ medicinal properties.

Meanwhile, PGB’s team based at Kimanis Regional Office in Sabah continued to engage with the Klias Wetland and the Mondikot Deer Habitat Centre to heighten awareness of the importance of safeguarding the delicate natural ecosystem. PGB’s transmission pipeline in certain parts o f S a b a h t r a v e r s e s s e v e r a l environmentally sensitive receptors and habitats, such as the wetlands under the supervision of Kl ias Wetland, and the wildlife sanctuaries under the jurisdiction of the Mondikot Deer Habitat Centre.

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COMMUNITY


We also remain committed to ensuring that our business grows steadily over the long term in a safe and environmentally responsible manner. This enduring commitment has shaped our business conduct in a way that creates value, not just for now, but also for our future generations.

We currently channel our resources towards the three focus areas of education, community wellbeing and development, as well as the environment.

Focus Areas

Value Proposition

Themes

Education EnvironmentCommunity Wellbeing& Development

Develop knowledge and

capabilities to support nation

building

Improve wellbeing and

contribute to community

development

Conserve natural resources

for current and future

generations

• Access to education

• Capacity building

• Community health and safety

• Community uplift

• Biodiversity

• Climate change

G4-SO1, OG12

O U R C O R P O R A T E S O C I A L I N V E S T M E N T S ( C S I ) E F F O R T S

A R E A L I G N E D W I T H P E T R O N A S ’ C O R P O R A T E

R E S P O N S I B I L I T Y ( C R ) I N I T I A T I V E S W H I C H A R E A I M E D A T

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

F O R P E O P L E R E S I D I N G I N T H E A R E A S W H E R E W E O P E R A T E .

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In FY2015, we expanded our CSI approach by teaming up with Non-Governmental Organisations (NGO) to spearhead fresh programmes for the communities located near our plants and pipelines.

Care was taken to ensure our CSI p r o g r a m m e s a r e e f f e c t i v e i n addressing the diverse needs of these communities. In addition, we strove to create opportunities for the social advancement of lesser-privileged groups.

The PGB Livelihood Programme

PGB’s Livelihood Programme, as its name suggests, is aimed at enhancing the livelihood of the communities we operate in. We started this programme by forming a partnership with NGO Yayasan Salam to conduct programmes on soft-skill development.

Kampung Bukit Raya in Hulu Langat, Selangor, and Kampung Paya Pulai in Segamat, Johor were selected for this programme that caters to single mothers and neglected wives aged f rom 20 to 60 years , run by the Jawatankuasa Kemajuan dan Keselamatan Kampung (JKKK) in collaboration with Yayasan Salam.

The women were equipped with a variety of skills and valuable knowledge required for entrepreneurship, such as basic marketing and accounting. In addition, they were given lessons on ef fect ive leadership and t ime management.

PGB also helped to renovate and refurbish a community centre in Kampung Bukit Raya, which was used as the training centre to host the weekly activities. The centre was also e q u i p p e d w i t h b a s i c k i t c h e n equipment like an oven, a freezer, a mixer, as well as other cooking utensils.

CORPORATE SOCIAL RESPONSIBILITIES (CSR)

PGB believes that giving back to society is not an obligation, but a privilege. We are cognisant of our respons ib i l i ty to care for the communities within our reach, and are actively touching base with the n e e d y a n d l e s s - f o r t u n a t e a t orphanages, old folks’ homes and o t h e r s u c h f a c i l i t i e s t h r o u g h contributions in cash and kind.

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Flood Relief

Heavy monsoon rains during the year brought about the most devastating floods in decades, with thousands of people forcefully evacuated from their abodes.

PGB’s aid team zeroed in on Dabong, one of the worst affected areas in the hardest-hit state of Kelantan. Relief efforts encompassed the distribution of food and essential supplies, as well as the cleaning up of homes and schools which were submerged in muddy floodwater.

Our staff volunteers were also mobilised to spruce up the premises of Sekolah Menengah Dabong. In addition, they distributed basic school necessities to the school authorities, including white boards and markers, reference material for its library, as well as a cash donation.

The PGB Free Market

Taking cues from the conventional flea market, PGB organised our inaugural PGB Free Market in aid of 24 underprivileged families living in Lembah Subang, Selangor.

Setting our Free Market apart from traditional notions of a flea market was the fact that the pre-loved items being hawked by our staff were offered at no cost to the families who came as early as 8.00 a.m. to select from a wide array of items like men’s and women’s apparel , fashion accessories and toys.

Held during the sacred month of Ramadan in collaboration with Nadi Annissa, a Kuala Lumpur-based charitable organisation, the PGB Free Market aimed to ease the financial burden of these families in making preparations for Hari Raya Aidilfitri. In addition, PGB supplied rice, cooking oil, as well as assorted condiments and cookies to these families.

To further liven up the affair, 100 children – 55 boys and 45 girls – were presented with new pairs of baju melayu and baju kurung respectively to enable them to dress to the nines for the festive occasion.

Program Sentuhan Kasih PETRONAS (PSKP)

Also in the month of Ramadan, the Company donated rice – undeniably a staple of Malaysian families – in the form of 10 kg bags to 60 low-income families residing in low-cost flats in Kota Damansara, Selangor.

This rice donation was made under PSKP, a community outreach initiative undertaken in conjunction with Malaysia’s main festivit ies. The programme was also co-organised with Nadi Annissa, which helped in no small measure to identify the families eligible for this aid.

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Program Sentuhan Ilmu PETRONAS (PSIP)

This education-centric outreach p r o g r a m m e u n d e r s c o r e s o u r unwavering dedication to nation-building through educating the next generation of leaders.

The PSIP, introduced in 2002 by PETRONAS, aims to offer academic and non-academic assistance to underperforming students from low-income families of selected primary schools who demonstrate potential to do well in their studies. Each subsidiary of PETRONAS is tasked with adopting such students at primary schools in the vicinity of their operations, where the adoptees will receive financial and education support for six years, i.e. from their first year of primary studies until they sit for the Ujian Penilaian Sekolah Rendah (UPSR) six years later.

In FY2015, we facilitated various engaging act iv i t ies under th is programme for the students of Sekolah Kebangsaan (SK) Cherana Puteh in Simpang Ampat, Melaka (adopted in 2013), as well as SK Sungai Baging in Kuantan, Pahang (adopted in 2012) . The most prominent activity was unquestionably the UPSR Camp, which dri l led students on the subjects of English, Science and Mathematics. In addition, m o t i v a t i o n a l w o r k s h o p s w e r e organised to help students prepare mentally for their exams.

During the year, we also bade farewell to two of our adopted schools, SK Santong in Paka, Terengganu, and SK Batu Anam in Segamat, Johor upon their completion of the PSIP tenure . To commemorate the occasion, students and teachers of SK Santong were taken on a school trip to Aquaria KLCC in Kuala Lumpur, while students and teachers of SK Batu Anam were feted at a ceremony held at the school.

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T H E B O A R D O F D I R E C T O R S ( T H E B O A R D ) O F P E T R O N A S

G A S B E R H A D ( P G B O R T H E C O M P A N Y ) B E L I E V E S T H A T

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

T H E C O M M I T M E N T B Y T H E B O A R D T O A C H I E V E T H E

H I G H E S T S T A N D A R D S O F P R O F E S S I O N A L I S M A N D

B U S I N E S S E T H I C S A C R O S S T H E C O M P A N Y ’ S A C T I V I T I E S .

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

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

B U S I N E S S P R O P O S I T I O N S A N D M A X I M I S I N G

S H A R E H O L D E R S ’ V A L U E .

The Board is committed to achieve and apply the best practices in Corporate Governance as prescribed by the Main Market Listing Requirements (MMLR) of Bursa Malaysia Securities Berhad (Bursa Malaysia) and promoted by the Malaysian Code on Corporate Governance 2012 (MCCG 2012) in carrying out i ts duties and responsibilities.

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:

(a) Review and approval of the annual corporate plan, which inc ludes overa l l corporate strategy, operat ional plan, marketing plan, human resources plan, financial plan and budget, r isk management plan and information technology plan;

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CORPORATE GOVERNANCESTATEMENT

(b) Overseeing the conduct of business and evaluation of whether the business is being properly managed;

(c) Identification of principal risks and ensuring the implementation of appropr iate systems to control, monitor and manage these risks;

(d) Overseeing the succession planning and appointment of senior management, including ensuring senior management personnel are of suff ic ient calibre;

(e) Rev iew the adequacy and integrity of internal control s y s t e m s a n d m a n a g e m e n t information systems, ensuring the establishment of sound framework of report ing on internal controls, including regulatory compliance; and

(f) Review and approval of quarterly results and year end financial statements.

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.

The Board Charter is accessible to the public for reference on the Company’s official website at www.petronasgas.com.

Composition of the BoardG4-34

The Board currently comprises eight 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 four other non-independent and non-executive members, including the Chairman. As at 24 February 2016, the Board composition is as follows:

Executive Director1 out of 8 (12.5%)(also the Managing Director/Chief Executive Officer)

Independent Non-Executive Directors3 out of 8 (37.5%)

Non-Independent Non-Executive Directors4 out of 8 (50.0%)(including Chairman)

The composition of the Board is in compliance with Paragraph 15.02 of the MMLR as more than one-third of i t s members are independent directors. This composition enables an effective and objective check and balance on the Board’s deliberation and decision making. The presence of the Independent Directors are also crucial in the mitigation of any possible conflicts of interests in relation to related party transactions.

During the year under review, Datuk Manharlal Ratilal vacated his position as Chairman and Board member of the Company effective 1 September 2015. Datuk Manharlal Ratilal is succeeded by Tan Sri Dato’ Seri Shamsul bin Abbas, whose profile is available on page 40 of this Annual Report.

Directors are selected based on the individual merits and experience. The c u r r e n t B o a r d ’ s c o m p o s i t i o n comprises of individuals of diverse backgrounds with expertise and skills in oil and gas industry, engineering, finance, business and accounting. The current overall Board 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 meeting. The profile of each Director is presented on page 40 to page 47 of this Annual Report.

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INFORMATION

T h e N o n - E x e c u t i v e D i r e c t o r s possesses the necessary expertise and experience to ensure that the s t r a t e g i e s p r o p o s e d b y t h e Management are fully deliberated and examined, taking into account the long- term in terest o f 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 judgement taking into account the interest of relevant stakeholders including minority shareholders of the Group. For the financial year under review, the Independent Non-Executive Directors have reaffirmed their independence based on the criteria of Independent Directors adopted by the Company.

In accordance with the MMLR, none of the member of the Board holds more than five directorships in listed companies. Prior to acceptance of a n y o t h e r a p p o i n t m e n t f o r

d i r e c t o r s h i p s i n o t h e r l i s t e d 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 Managing Director/Chief Executive Officer

There is clear demarcation of duties and responsibilities between the Chairman, Managing Director (MD)/ Chief Executive Officer (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 o p e r a t i o n s o f t h e b u s i n e s s , 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 Management Committee.

Senior Independent Director

The Board had, on 24 February 2016, re-designated Dato’ N. Sadasivan N.N. Pillay as a Non-Independent Non-Executive Director. The Board at the same meeting appointed Habibah binti Abdul as the Senior Independent Director of the Company (SID) and Chairman of the Board Audit Commit tee in p lace o f Dato ’ Sadasivan. Any concerns pertaining to the Group may be conveyed by shareholders and other stakeholders to the attention of the SID. All queries relating to the Group can be directed to the following address:

Senior Independent Director PETRONAS Gas BerhadLevel 51, Tower 1 PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur

Board Meetings

The Board meets at least quarterly with additional meetings convened as and when necessary. The Board meetings for year 2015 are scheduled in November 2014 to facilitate the D i r e c t o r s t o p l a n a h e a d a n d incorporate the Board meetings into their respective schedules. This also serves to provide the members with ample notice of the meetings.

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CORPORATE GOVERNANCE STATEMENT

The Board has a formal schedule of matters reserved at Board meetings which includes corporate plans, annual budget, 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 discussed 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 had convened on six occasions. The attendance of the Board members are as follows:

Table 1 : Attendance Record

Name of Directors Attendance Percentage

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas* 2/2 100%

Yusa’ bin Hassan 6/6 100%

Dato’ N. Sadasivan N.N. Pillay 5/6 83%

Datuk Rosli bin Boni 6/6 100%

Ir. Pramod Kumar Karunakaran 6/6 100%

Dato’ Ab. Halim bin Mohyiddin 6/6 100%

Lim Beng Choon 6/6 100%

Habibah binti Abdul 6/6 100%

Datuk Manharlal Ratilal** 4/4 100%

* Appointed on 1 September 2015** Vacated office on 1 September 2015

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INFORMATION

Supply of and Access to Information

Prior to each Board meeting, the agenda and a set of Board papers encompass ing qual i ta t ive and quantitative information relevant to the business of the meeting are circulated to all Directors in advance of the meeting dates. This enables the Directors to have sufficient time to peruse the Board papers and seek clarifications 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 meetings under supplemental agenda. Board papers prepared are c o m p r e h e n s i v e a n d i n c l u d e s 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 and furnish relevant information and clarification for the Board to arrive at a considered decision.

Access to Board papers and other relevant information are carried out online through a collaborative online software which allows the Directors to securely access Board documents. The online accessibility facilitates the

Di rectors to read and rev iew documents or communicate with other members during the Board meetings or at any other time.

The Directors have direct access to t h e M a n a g e m e n t a n d h a v e unrestricted access to any information relating to the Group to enable them to discharge their dut ies. The Directors also have direct access to the advice and services of the Company Secretar ies 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 B o a r d C o m m i t t e e s w h o s e compositions are in accordance with the best practices as prescribed by the MMLR of Bursa Malaysia and the MCCG 2012. The functions and Terms of Reference of the Board Committees, as well as authority delegated by the Board to these Board Committees, are reviewed and updated from time to time.

(a) Board Audit Committee

The Board Audit Committee is made up of three Independent Non-Executive Directors and two Non-Independent Non-Executive Directors. In line with good corporate governance, the

Executive Director is not a member of the Board Audit Committee.

The Board Audit Committee reviews quarterly and annual f i n a n c i a l s t a t e m e n t s , announcements on quarterly results, internal audit reports and ensures that the internal control s y s t e m a n d m a n a g e m e n t in format ion system are in compliance with the Company’s p o l i c i e s a n d p r o c e d u r e s , applicable laws and regulations. The Board Audit Committee also monitors the effective implementation of programmes to ensure compliance to the Company’s Risk Management Policy and ensures that principal risks are identified and monitored and appropriate measures are undertaken to manage these risks. The Board Audit Committee also plays a significant role in the review and endorsement of related party t ransact ions/recurrent related party transactions entered into by the Company and its subsidiaries, in line with the policy and procedures as set out under the PGB Related Party Transactions (RPT)/Recurrent Related Party Transactions (RRPT) Policy & Procedures.

The report on the Board Audit Committee and its activities are presented on page 216 to page 221 of this Annual Report. The Terms of Reference of the Board Audit Committee are included therein.

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(b) Nomination and Remuneration Committee

T h e N o m i n a t i o n a n d R e m u n e r a t i o n C o m m i t t e e comprises entirely Non-Executive Directors as per the requirement of Paragraph 15.08A (1) of the MMLR of Bursa Malaysia as well as recommendation 2.1 of M C C G 2 0 1 2 w h e r e t h e commit tee must compr i se e x c l u s i v e l y N o n - E x e c u t i v e Directors with majority being Independent Directors.

T h e N o m i n a t i o n a n d Remuneration Committee ensures that the Board compr ises members with relevant expertise and experiences drawn from business, financial and technical backgrounds. The wide spectrum of skills, experiences and diversity offered by the Board has added strength in terms of the Board’s capabi l i ty and judgement . Accordingly, the Nomination and Remuneration Committee also carries out a review of the Skills and Experience Matrix of the Board members. T h e k e y a c t i v i t i e s o f t h e Nomination and Remuneration Committee are detailed out on page 209 to page 212 of this Annual Report. The Terms of Reference of the Nomination and Remuneration Committee are included therein.

Continuing Development Programme for Directors

All the Directors have attended the Mandatory Accreditation Programme as required under the MMLR of Bursa Malaysia.

The Directors are regularly updated on the Group’s businesses and the c o m p e t i t i v e a n d r e g u l a t o r y 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 Principle 4 of MCCG 2012, the Directors recognise the importance and value of attending conferences, training programmes and seminars in order to keep t h e m s e l v e s a b r e a s t w i t h t h e development and changes in the industr ies in which the Group operates, as well as to update themselves on new statutory and regulatory requirements. During the year under review, the Directors have a t t e n d e d a n d p a r t i c i p a t e d i n programmes, conferences and forums that covered the areas of corporate governance, f inancial , 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 had also

participated in a familiarisation visit to PGB’s project s i te s i tuated at Pengerang, Johor.

Particulars of training programmes attended by the Directors as at 31 December 2015 are as appended to the Corporate Governance Statement on page 187 to page 188 of this Annual Report. Re-Appointment and Re-Election

In accordance with Article 93 of the Art ic les of Associat ion 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 Articles of Association 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.

Pursuant to Section 129 of the Companies Act, 1965, Malaysia, a Director who is over 70 years of age must retire at the AGM of the Company, and may be re-appointed by shareholders with not less than three-fourths majority.

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INFORMATION

As per recommendation 3.2 and 3.3 of MCCG 2012, 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 directors’ re-designation as a Non-Independent Director or the B o a r d m u s t j u s t i f y a n d s e e k shareholders’ approval in the event it retains the Director as an Independent Director.

The Board had, on 24 February 2016, approved the re-designation of Dato’ Sadasivan as a Non-Independent Non-Executive Director. Hence, none of the Independent Non-Executive Directors of the Company have served the Board for more than nine years.

Board Effectiveness Evaluation

The Company conducts an annual evaluation of the effectiveness of its Board and Committees. It comprises a Board Evaluation, a Committee E v a l u a t i o n , B o a r d S k i l l s a n d Competency Mapping and Individual Director Self and Peer Evaluation. The purpose of the evaluation is to measure the effectiveness of the performance of the Board and Committees as well as to address the Board’s and Committees’ attention on areas for improvement as part of discharging his/her role as Director of the Company.

The questionnaires on the Board Effectiveness and Directors Evaluation are prepared internally incorporating appl icable best pract ices. The indicators for the performance of the Board includes factors such as the B o a r d c o m p o s i t i o n , c o n d u c t , 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 the Directors’ roles, leadership and contribution to the Company.

Upon completion of the evaluation by the Directors, the external Company Secretary collates and analyses the feedback received. The analysis conducted is presented to the Nominat ion and Remunerat ion Committee for del iberat ion. A summary of the Board Evaluation is presented to the Board by the Chairman of the Nomination and Remuneration Committee. In addition, the Chairman may conduct individual feedback sessions with the Board members with a view to enhance strengths and discuss on areas for improvement.

Directors’ Remuneration

The remuneration 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; and

• Meeting allowances for each meeting attended.

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 are under the purview of the Nomination and Remuneration Committee before any recommendation is tabled to the Board.

The Director’s fees and meeting a l l o w a n c e s f o r c e r t a i n N o n -Independent Non-Executive Directors who are also employees of PETRONAS and holding posit ions 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 provides the Board a deeper insight into PETRONAS operations.

Pursuant to Art ic le 84 of the Company’s Articles of Association, PGB also reimburses reasonable expenses incurred by Directors, where relevant, in the course of carrying out their duties as Directors.

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For the year under review, the breakdown of the Directors’ remuneration is as follows:

Name of Directors

Directors Fees(RM)

Board Meeting

Attendance Fees^

(RM)

Audit Committee

Meeting Attendance

Fees^

(RM)

Nomination and

Remune-ration

Committee Meeting

Attendance Fees^

(RM)AGM(RM)

Others**(RM)

Total(RM)

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas (Appointed on 1 September 2015) 36,000 8,000 Nil Nil Nil 2,000 46,000

Yusa’ bin Hassan Nil Nil Nil Nil Nil Nil Nil

Dato’ N. Sadasivan N.N. Pillay 72,000 15,000 18,000 4,000 Nil 6,000 115,000

Datuk Rosli bin Boni 72,000 18,000 12,000 Nil Nil 6,000 108,000

Ir. Pramod Kumar Karunakaran Nil Nil Nil Nil Nil Nil Nil

Dato’ Ab. Halim bin Mohyiddin 72,000 18,000 12,000 Nil Nil 6,000 108,000

Lim Beng Choon 72,000 18,000 Nil 6,000 Nil 3,000 99,000

Habibah binti Abdul 72,000 18,000 Nil 4,000 Nil 6,000 100,000

Datuk Manharlal Ratilal(Resigned on 1 September 2015) Nil Nil Nil Nil Nil Nil Nil

Total 396,000 95,000 42,000 14,000 Nil 29,000 576,000

** Others includes petrol/fleet card.^ Meeting attendance fees are based on the number of meetings attended by the Directors.

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INFORMATION

The remuneration package for the Executive Director of the Company is b a l a n c e d b e t w e e n f i x e d a n d performance-linked elements. A portion of the Executive Director’s compensation package is variable in nature and is Key Performance Indicator (KPI) based, which includes the Group’s performance. As an Executive Director, he is not entitled to receive Directors’ fees as well as meeting allowances.

Yusa’ bin Hassan, 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 a management fee to cover all payroll-related costs and benefits ordinarily incurred by him in the course of his employment. During the year, the Company paid RM736,800 as management fee.

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. T h e B o a r d e n s u r e s t h a t o n l y appropriate personnel with the relevant skills and experiences are appointed to Management positions of PGB.

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 Annual Report and where required, press conferences. Immediately after the conclusion of the Annual General Meeting, the Company will hold a press conference with the media and any materials distributed during the press conference are published in the Company’s website.

The MD/CEO together with the Head of Finance Division and the Company’s Investor Relations Unit conducts regular dialogues with its institutional shareholders and analysts, and holds 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 faci l i t ies 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 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 di rected to emai l address [email protected] or alternatively, it can be addressed to:

Harris bin Harun Head Investor RelationsLevel 51, Tower 1PETRONAS Twin Towers50088 Kuala LumpurMalaysia

Annual General Meeting (AGM)

The AGM is the principal forum of open dialogue with shareholders. The notice and agenda of AGM together with Forms of Proxy are given to shareholders at least 21 days before AGM, which gives shareholders sufficient time to prepare themselves to attend the AGM or to appoint proxy to attend and vote on their behalf. Each item of special business included in the notice of the AGM w i l l b e a c c o m p a n i e d b y a n explanatory statement on the effects of the proposed resolution.

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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 by show of hands from members and prox ies on the resolutions. The Board, Management, external auditors and other advisors, as applicable are present at AGM to provide answers and clarifications to shareholders. The Chairman informs on the availability of poll voting by shareholders on matters raised during the AGM.

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 246 of this Annual Report.

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 Board Audit Committee. The list of transactions entered into with related parties are incorporated at page 308 of this Annual 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 t ransact ions and recurrent related party transactions. This is set out on page 192 to page 206 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 r isk management and internal control to safeguard shareholders’ investments and the assets of the Company and the Group.

The Statement on Risk Management and Internal Control provides an overview of the risk management and internal controls within the Group as set out on page 192 to page 206 of this Annual Report.

INTEGRITY AND ETHICSG4-SO3

The Board further acknowledges its role in establishing a corporate culture comprising ethical conduct within the Group. In line with this principle, the Board has adopted the PETRONAS Code of Conduct and Business Ethics, the Whistleblowing Policy, the Corporate Disclosure Guide and the Anti-Bribery and Corruption Manual. The adoption of such policies are so as to ensure that the conduct of business and the Company’s employees are consistently carried out ethically and with integrity.

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Code of Conduct and Business Ethics

The Group adopts and practices the PETRONAS Code of Conduct and Bus iness E th ics (CoBE) which emphasises and advances the principle o f d i s c i p l i n e , g o o d c o n d u c t , professionalism, loyalty, integrity and cohesiveness that are critical to the success and well-being of the Group. The CoBE contains detailed policy statements on the standards of behaviour and ethical conduct expected of each individual of the Group. The Group also expects that c o n t r a c t o r s , s u b - c o n t r a c t o r s , 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.

Included as part of the CoBE is the Anti-Bribery and Corruption Policy which explicitly prohibits the giving and acceptance of bribes, in whatever form, by employees including giving and receiving of facilitation payments in all business dealings. The Company has also adopted and implemented the ‘No Gift Policy’ as a means to avoid any conflict of interest situations for either party or potential business dealings between the Company and third parties.

The CoBE is accessible to the public for reference on the Company’s official website at www.petronasgas.com.

Whistleblowing Policy

T h e G r o u p h a s a d o p t e d t h e PETRONAS Whistleblowing Policy which provides an avenue for the Group employees and member of the public to disclose any improper conduct in accordance with the procedures as provided under the policy.

Under the Whistleblowing Policy, a whistleblower will be accorded with protection of confidential i ty of identity, to the extent reasonably pract icable. An employee who whistleblows 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 pract icable, provided that the disclosure is made in good faith. Such protection is accorded even if the investigation later reveals that the whistleblower is mistaken as to the facts and the rules and procedures involved. The whistleblowing policy is 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 facil itate 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 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.

During the year, there were no cases reported relating to any breach of the prohibition.

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COMPANY SECRETARIES

The Company Secretaries of the Company are qualified to act as Company Secretaries per Section 139A of the Companies Act, 1965. The Company Secretaries play an advisory role to the Board, particularly with regards to the Company’s constitution, Board policies and procedures and the Company’s c o m p l i a n c e w i t h r e g u l a t o r y requirements, codes, guidance and legislation.

The Company Secretaries ensure that the discussions and deliberations at B o a r d a n d B o a r d C o m m i t t e e meetings are well documented, and subsequently communicated to the relevant Management for appropriate actions. 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 Board Audit Committee, the Company maintains a professional and transparent relationship with its external auditors, Messrs KPMG. The Board Audit Committee met the external auditors twice during the financial year without the presence of the Management to review the scope and adequacy of the Group’s audit p r o c e s s , t h e a n n u a l f i n a n c i a l statements and their audit findings. At the meeting, the external auditors highlighted to the Board Audit Committee on matters that warrant their attention.

The ro le o f the Board Audi t Committee in relation to the external auditors is described in the Board Audit Committee Report on page 216 to page 221 of this Annual Report.

T h e B o a r d A u d i t C o m m i t t e e continuously reviews and monitors the suitability and independence of external auditors. As part of the annual audit exercise, the Group also obtains assurance from the external a u d i t o r s c o n f i r m i n g t h e i r independence throughout the year under review.

Internal Auditors

The Company’s Internal Auditors, of which the function is undertaken by the Group Internal Audit Department (GIAD) of PETRONAS reports directly to the Board Audit Committee and has unrestricted access to the Board Audit Committee.

The GIAD function is independent of the activities or operations of other operating units. The GIAD conducts regular audits on the effectiveness of internal controls, compliance with internal and regulatory requirements. The audit report which highlights any f i n d i n g s , a l o n g w i t h t h e recommendations are tabled to the Board Audit Committee.

THE MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012 (MCCG 2012)

The Board is committed and strives to observe the pr inciples and recommendations of the MCCG 2012, of which observance is on voluntary basis.

The Group has fully adopted all recommendations of the MCCG 2012 except for the following:

1. Recommendation 2.2 – The gender diversity policies and targets and the measures taken to meet the targets.

Directors are selected based on the ind iv idua l mer i t s and experience. The Company does not have a specific gender policy. Nonetheless, there is a female representative on the Board, making up 12.5% of the Board composition.

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INFORMATION

2. Recommendation 2.3 – The Board should establish formal and transparent remuneration policies and procedures to attract and retain directors.

The remuneration of the directors is competitive and attractive as it has been benchmarked against the industry. A formal written pol icy and procedures for directors’ remuneration will be developed.

3. Recommendation 3.5 – The Board must comprise a majority of Independent Directors where the Chairman of the Board is not an Independent Board member.

Given the Company’s synergetic business operational integration with PETRONAS, the Chairmanship of the Company remains with a Non-Independent Non-Executive Director.

4. Recommendation 5.2 – The Audit Committee should have policies and procedures to assess the suitability and independence of external auditors.

The Board Audit Committee c o n t i n u o u s l y r e v i e w s a n d monitors the suitability and independence o f ex terna l auditors. As part of the annual audit exercise, the Group also obtains assurance from the external auditors confirming their independence throughout the year under review.

STATEMENT BY THE BOARD ON COMPLIANCE

T h e D i r e c t o r s h a v e p r o v i d e d a s s u r a n c e s t h a t t h e f i n a n c i a l statements prepared for the financial year gives a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the results and cash flow of the Group for the financial year as required by the Companies Act, 1965.

T h e S t a t e m e n t o f D i r e c t o r s ’ Responsibilities for the Audited Financial Statements of the Company and Group are outlined on page 246 of this Annual Report. Details of the Company and the Group financial statements for the financial year ended 31 December 2015 are set out on page 253 to 331 of this Annual Report.

The Board has deliberated, reviewed and approved this Statement. After due consideration, the Board is satisfied that the Group has fulfilled its obligations under the relevant chapters of the MMLR of Bursa Malaysia on corporate governance and applicable laws and regulations throughout the year ended 31 December 2015.

This statement is made in accordance with the resolution of the Board of Directors dated 24 February 2016.

Tan Sri Dato’ Seri Shamsul Azhar bin AbbasChairman

Yusa’ bin HassanManaging Director/Chief Executive Officer

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TAN SRI DATO’ SERI SHAMSUL AZHAR BIN ABBAS

No. Training Attended Date

1. Petroliam Nasional Berhad (PETRONAS) – In-house Training Programme (1) New Companies Bill 2015 (2) Boardroom War

29 October 2015

YUSA’ BIN HASSAN


1. Petroliam Nasional Berhad (PETRONAS) – In-house Training Programme(1) New Companies Bill 2015 (2) Boardroom War

29 October 2015

2. PETRONAS Gas Berhad: Directors Training and Site Visit – Construction of Regasification Plant 29 November 2015

DATO’ N. SADASIVAN N.N. PILLAY


1. Enterprise Risk Management Workshop by KPMG 6 – 7 March 2015

2. Remuneration Reward Practices Seminar – Time to raise the Bar by Malaysian Institute of Corporate Governance

8 April 2015

3. ASEAN Sustainability Series – Sustainability Symposium by Bursa Malaysia Berhad 8 October 2015

4. Sustainability Reporting and New and Revised Auditor Reporting Training Session by KPMG 10 October 2015

5. Future of Auditor Reporting – The Game Changer for Boardroom by Bursa Malaysia Berhad, Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants

2 November 2015

DATO’ AB. HALIM BIN MOHYIDDIN


1. Board Chairman Series Part 2: Leadership Excellence by ICLIF and Bursa Malaysia Berhad 27 July 2015

2. Annual External Environment Analysis and Sectorial Outlook by MISC Berhad 5 August 2015


29 October 2015


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INFORMATION

TRAINING PROGRAMMES ATTENDED BY DIRECTORS

F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

IR. PRAMOD KUMAR KARUNAKARAN



29 October 2015


DATUK ROSLI BIN BONI



29 October 2015


LIM BENG CHOON


1. Special Discussion on Trans-Pacific Partnership Agreement by IDEAS 7 May 2015

2. Creating an Entrepreneurial Culture by Genovasi/Harvard Business Club 7 May 2015

3. Myths of Innovation by Genovasi/Stanford Design School 13 August 2015


29 October 2015


HABIBAH BINTI ABDUL


1. Board’s Strategic Leadership – Innovation & Growth in Uncertain Times by Ram Charan (Fide Forum) 21 May 2015

2. Impact of New Accounting Standard on Banks – What Directors Should Be Aware Of – A Dialogue With Darrel Scott, International Accounting Standards Board (IASB) Board Member (Fide Forum)

5 June 2015


29 October 2015


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PERFORMANCE REVIEW


TRAINING PROGRAMMES ATTENDED BY DIRECTORSF O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

T H E C O M P A N Y C O N T I N U E S T O S T R E N G T H E N I T S

C O M M I T M E N T I N E N S U R I N G C O M P L I A N C E T O S T A T U T O R Y

A N D R E G U L A T O R Y R E Q U I R E M E N T S A S W E L L A S I N T E R N A L

P O L I C I E S A N D P R O C E D U R E S . T H E C O M P A N Y H A S P U T I N

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

E X E R C I S E , G U I D E D B Y T H E S E S T A T U T O R Y A N D

R E G U L A T O R Y R E Q U I R E M E N T S , G U I D E L I N E S A N D B E S T

P R A C T I C E S B O T H F R O M W I T H I N P E T R O N A S G R O U P A S

W E L L A S E X T E R N A L .

The Company’s commitment is also evident under its transformation journey of 3ZERO100 where various measures are being undertaken to achieve its transformation aspirations, one of which being zero non-compliance.

KEY COMPLIANCE REQUIREMENTS AND ASSESSMENTS G4-SO8

The Company observes various compliance requirements as part of i ts overal l governance ef forts , covering the areas of Finance, Health Safety Environment (HSE), Operational Excellence, Project Management and Human Resource, to cite a few.

Internally, the Company’s compliance assessments or audits are based on a 3-tier hierarchy in line with the PETRONAS Technical Standards, with frequency of assessments determined based on the standards and approved by Management.

At Tier 1, self-audits are undertaken by the respective process owners to assess any gaps on compliance. There are also selected departments or units within the Company which u n d e r t a k e a u d i t s o n o t h e r departments or unit to assess compliance on specific areas e.g. HSE M a n a g e m e n t S y s t e m , S I R I M requirements as well as internal procedure requirements. Tier 1 audits are the most frequently conducted compliance assessments in the Company, some are even as frequent as monthly basis.

At Tier 2, representatives from PETRONAS Downstream undertakes audits on the Company based on selected areas of compliance which are carried out at a less frequent interval compared to Tier 1 i.e. annually or once every two years.

At Tier 3, the Company may be subject to audits conducted by selected divisions within PETRONAS Holding Company e.g. Group HSE, Group Technical Solutions and Group Internal Audit. The exercise may be conducted periodically or on need b a s i s b a s e d o n r e q u e s t b y Management.

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INFORMATION

ADDITIONAL COMPLIANCEINFORMATION

The Company is also subject to periodical audits by external bodies or authorities as part of compliance assessments against statutory and regulatory requirements. During the year under review, amongst the authorities or external bodies which conducted audits on the Company were KPMG, Inland Revenue Board, SIRIM, Jabatan Bomba & Penyelamat Malaysia (JBPM), Department of Standards Malaysia (DSM), Majlis Keselamatan Negara (MKN) and Institut Kimia Malaysia (IKM).

COMPLIANCE MONITORING AND REPORTING

Audit findings are deliberated and tracked until closure. At the Divisions, the Plant Leadership Team (PLT) reviews audit plans and findings related to the respective Divisions. Since the establishment of Risk and Compl iance Commit tee (RCC) beginning January 2015, key audit

findings mainly from Tier 2, 3 and external audits are reported to the RCC which is chaired by Managing Director/Chief Executive Officer and sits on quarterly basis. All findings and progress of actions items derived from Tier 3 audits conducted by PETRONAS Group Internal Audit are also escalated to the Board Audit Committee (BAC).

Additional Compliance Information in accordance with Appendix 9C of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR) is as follows:

1.0 UTILISATION OF PROCEEDS FROM CORPORATE PROPOSALS

T h e r e w a s n o C o r p o r a t e Proposals undertaken for the year under review.[Disclosed in accordance with Appendix 9C, Part A, Item 13 of the MMLR]

2.0 SHARE BUY-BACK

The Company did not propose any share buy-back during the financial year.[Disclosed in accordance with Appendix 9C, Part A, Item 14 and Appendix 12D of Paragraph 12.23 of the MMLR]

3.0 OPTIONS OR CONVERTIBLE SECURITIES

The Company did not issue any options or convertible securities during the financial year.[Disclosed in accordance with Appendix

9C, Part A, Item 15 of the MMLR]

4.0 DEPOSITORY RECEIPT PROGRAMME

The Company did not sponsor a n y d e p o s i t o r y r e c e i p t programme during the financial year.[Disclosed in accordance with Appendix 9C, Part A, Item 16 of the MMLR]

5.0 IMPOSITION OF SANCTIONS/PENALTIES

There were no public sanctions and/or material penalties imposed on the Company or its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year.[Disclosed in accordance with Appendix 9C, Part A, Item 17 of the MMLR]

6.0 NON-AUDIT FEES

The amount of non-audit fees incurred for services rendered to the Group by the external auditors, Messrs KPMG or its affiliated companies during the financial year is RM15,000.[Disclosed in accordance with Appendix


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ADDITIONAL COMPLIANCE INFORMATION

7.0 VARIATION IN RESULTS

There were no profit estimates, forecasts or projections made or released by the Company during the financial year.[Disclosed in accordance with Appendix 9C, Part A, Item 19 of the MMLR]

8.0 PROFIT GUARANTEE

The Company did not give any profit guarantee during the financial year.[Disclosed in accordance with Appendix 9C, Part A, Item 20 of the MMLR]

9.0 MATERIAL CONTRACTS INVOLVING INTERESTS OF DIRECTORS AND MAJOR SHAREHOLDERS

There were no material contracts or loans entered into by the Company or its subsidiaries involving Directors’ or major shareholders’ interests, either still subsisting at the end of the year ended 31 December 2015 or entered into since the end of the previous period, except as disclosed in the audited financial statements.[Disclosed in accordance with Appendix 9C, Part A, Item 21 of the MMLR]

10.0 ANALYSIS OF SHAREHOLDINGS

The analysis of shareholdings is disclosed on page 334 to page 337 of this Annual Report.[Disclosed in accordance with Appendix 9C, Part A, Item 23 of the MMLR]

11.0 LISTING OF PROPERTIES

The summary o f Landed Property, Plant and Equipment for the financial year ended 31 December 2015 is disclosed on pages 339 to page 349 of this Annual Report.[Disclosed in accordance with Appendix


12.0 SHARE OPTION SCHEMES FOR EMPLOYEES

The Company do not have Share Option Schemes for its Employees.[Disclosed in accordance with Appendix 9C, Part A, Item 26 of the MMLR]

13.0 TRAINING ATTENDED BY DIRECTORS

The list of trainings attended by Directors is disclosed on page 187 to page 188 of this Annual Report.[Disclosed in accordance with Appendix 9C, Part A, Item 28 of the MMLR]

14.0 CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES

T h e c o r p o r a t e s o c i a l r e s p o n s i b i l i t y a c t i v i t i e s undertaken by the Company is disclosed on page 150 to page 171 of this Annual Report.[Disclosed in accordance with Appendix

9C, Part A, Item 29 of the MMLR]1

15.0 RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING IN NATURE (RRPT)

Details of the RRPT entered into during the financial year ended 31 December 2015 pursuant to the said RRPT Mandate is disclosed on page 308 of this Annual Report.

[Pursuant to Paragraph 10.09(2)(b) and Paragraph 3.1.5 of Practice Note 12 of

the MMLR]

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INFORMATION

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 object ives , the Group adopts PETRONAS’ shared values of loyalty, in tegr i ty , profess iona l i sm and cohesiveness which set the tone for a sound system of risk management and internal control.

T H E S T A T E M E N T I S M A D E P U R S U A N T T O P A R A G R A P H

1 5 . 2 6 ( B ) O F T H E M A I N M A R K E T L I S T I N G R E Q U I R E M E N T S

( “ M M L R ” ) O F B U R S A M A L A Y S I A S E C U R I T I E S B E R H A D

( “ B U R S A M A L A Y S I A ” ) W H E R E T H E B O A R D O F D I R E C T O R S

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

S T A T E M E N T A B O U T T H E S T A T E O F T H E I N T E R N A L

C O N T R O L O F T H E L I S T E D I S S U E R A S A G R O U P .

BOARD’S ACCOUNTABILITY

The Board acknowledges the i m p o r t a n c e o f a s o u n d r i s k management system and internal control practices for good corporate governance with the objective of s a f e g u a r d i n g s h a r e h o l d e r s ’ investments and the Group’s assets. The Board a f f i rms i t s overa l l 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.

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STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROLS

STRATEGY & OUTLOOK

Board

BAC

Risk &ComplianceCommittee

Head, Planning & Risk Management Department

Risk & Compliance Unit

MD/CEO

The Group has in place an ongoing process for identifying, evaluating, moni tor ing and managing a l l 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 i s to adopt an e f fec t i ve and p r o g r e s s i v e E n t e r p r i s e R i s k Management (ERM) system to identify, evaluate and monitor the risks faced by the Group and to take specific measures to mitigate these risks.

Risk Oversight Structure

The Group risk oversight structure allows clear and timely risk information flow for effective oversight on risk management implementation at all levels. Risks are reviewed at various levels e.g. Plant Leadership Teams (PLTs), Project Steering Committees (PSCs) etc. within the Group before it i s del iberated at Board Audit Committee (BAC).

At Group level , the R isk and Compliance Committee (RCC), which commenced its first sitting in January 2015 and chaired by the Managing Director/Chief Executive Officer (MD/CEO), is obliged to ensure that an appropr iate and ef fect ive r isk 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.

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 on the Group, on a quarter ly 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.

At the beginning of the year under review, BAC has endorsed the adoption of the Group’s revised Risk Policy as a clear communication on Management’s expectations on risk management implementation and business continuity practices.

As an effort to further enhance clarity on the risks that the Group is willing to pursue or retain, the Group has also subsequently established a Risk Appetite statement:

High Level Group Risk Oversight Structure

“ PETRONAS Gas Berhad (PGB) 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.”

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Risk Management Framework Implementation

(a) Enterprise Risk

The Group’s Enterprise Risk Management (ERM) adheres to 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:

ContinualImprovement

RiskMonitoring & Review

RiskTreatment

RiskAssessment

Governance

Context Setting

• System Monitoring & Review• Risk Assurance• ERM Capability

• Risk Policy• Organisation & Structure• Roles & Responsibilities

• Risk Reporting & Monitoring• Risk Information System

• Risk Treatment Strategy• Risk Treatment Plan

• Risk Identification• Risk Analysis• Risk Evaluation

• External Context• Internal Context• Risk Appetite• Risk Criteria

ERMFRAMEWORK

Enterprise Risk Profiling and Assessment follows a structured process which ensures a comprehensive and consistent approach in assessing and analysing risks faced by the Group. Risks are reviewed annually with involvement from Management and Subject Matter Experts (SMEs) from divisions and departments across the Group. Prior to risk profiling and assessment activities, various inputs are analysed in setting the context of the assessment, which include both internal and external factors that may impact the Group’s business and operations.

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STRATEGY & OUTLOOK

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

From external context, any recent changes in regulatory/statutory requirements as well as shifts in industry outlook and landscape are also analysed as they may have direct or indirect impact to the Group operations.

PGB 2015/16 ERP

Operating Divisions

Operational and project issues, plant performance, HSE incidents, audit findings, new development

Plant and Facilities Risk

Projects

Project Risk

Growth/New Business Transactions

Business Ventures Risk

Residual Risksfrom 2014/15

ERP

PGB Risk Policy& Appetite

PGB 3ZERO100Targets

Management Expectation

PGB CorporateHouse; Visionand Mission

Tier 2 & 3Audit

Findings

Latest Development/

New regulatory/Legal

Requirements

Context of PGB 2015/16 ERP is based on various inputs to reflect the latest environment and expectations.

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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.

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.

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

Establish Internal &External Context

Identify Risks &Existing Controls

Identify Likelihood& Impact

Identify Risk Mitigations& Key Risk Indicators

DetermineRisk Owners

and MitigationsOwners

Obtain Approval of Risk Profile

from Management & BAC

Periodically Monitor & Report Mitigation

Action Status to Management & BAC

T h e P l a n n i n g a n d R i s k M a n a g e m e n t D e p a r t m e n t (PRMD) is entrusted with the respons ib i l i t y o f ensur ing effective risk governance and implementation in the Group. In 2014, the Group established RCC to enhance oversight on risk management and compliance in the Group. The RCC, chaired by Managing Director/Chief Executive Office (MD/CEO), commenced its first quarterly sitting in January 2015 with Risk Management Unit under PRMD undertaking the Secretariat roles.

PRMD provides regular updates o n t h e G r o u p ’ s E R M 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 High and Medium risks of the Group. The rationale of the likelihood and impact rating assigned to the

key risks were also discussed against Management ’s r isk tolerance and appetite. Further mitigations were identified for the key risks, mainly in the areas of operational and HSE areas. These mitigations are in line with the Group’s focus in driving its business plans and strategies to achieve its aspirations as set out in pages 62.

The Company had also provided guidance to one of its joint venture (JV) companies, on the es tab l i shment o f R i sk Management Framework.

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STRATEGY & OUTLOOK

Risk assessments are a lso conducted on new business ventures. The Business Venture Risk Assessment (BVRA) Reports are included as part of business development proposal presented to the Commercial Steering Committee (CSC) or relevant Project Steering Committees (PSC). The reports are also included in the Final Investment Decision (FID) proposals for Board’s approval.

(b) Plant and Facilities Risk

T h e G r o u p m a n a g e d i t s operational risks via Plant and Faci l i t ies Risk Management (PFRM). Under PFRM, r isks relevant to operations at the d i v i s i o n s w e r e a s s e s s e d , monitored and reported to the respective Divisions’ PLT.

As per Enterprise Risk, the risks w e r e r a t e d b a s e d o n i t s probability and impact to the divisions’ operations. Appropriate mitigation plans are put in place for every critical 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 Plant and Facilities Risk Profile Matrix has been further aligned with the Company’s Enterprise Risk Profile Matrix to ensure consistency in risk ratings. Subsequently, the risks were monitored with mitigation actions

tracked and periodically reported to the respective PLT at the divisions.

The PLT is responsible in ensuring adequate and effective PFRM at the divisions.

(c) Project Risk

T h e G r o u p c o n t i n u e s t o i m p l e m e n t P r o j e c t R i s k Management processes in line with the PETRONAS Project Management System (PPMS) requirements. The Group carries out Project Risk Assessments, I n d e p e n d e n t R e v i e w s a n d Lessons Learnt for all its major and critical projects.

During the year under review, the Group has further improved its Project Risk Management procedure to ensure a more stringent implementation of P r o j e c t R i s k M a n a g e m e n t processes and in t roduced monthly project risk updates in monthly project progress report for proper monitoring. The reports were presented at the r e l e v a n t c o m m i t t e e s e . g . respective divisions’ PLT, the relevant PSCs and RCC.

The PSCs, chaired by PGB MD/CEO, meets on regular basis to deliberate on project progress, risk areas and their mitigations. Updates on project progress are also incorporated as an agenda del iberated in the monthly Management Committee (MC) 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.

(d) Contractor Risk

Contractor risk is managed through tendering evaluation exercises facil itated by the Company’s Project Supply Chain Management (PSCM) Department, P E T R O N A S T e c h n o l o g y & Engineering (T&E) Division and PETRONAS Group Shared Material and Services Organisation (SMSO) 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 and monitored by the relevant teams involved in the project.

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(e) Finance Risk

T h e G r o u p h a s a d o p t e d PETRONAS Corporate Financial Policy (CFP) which sets forth the governing policy in effecting the prac t ice o f F inanc ia l R i sk Management across the Group. The policy stipulates a consistent framework in which financial risk exposures are identified and strategies developed to mitigate such r isks. 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.

(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 credi t 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. In addition, annual reviews are conducted on the assigned credit risk ratings of these customers while the trend of the customers’ financials are also analysed to detect early signs of financial

distress and to provide early warning to the Management. The Company used Credit Risk Tolerance Limit (CTRL) to minimise potential loss from credit exposure for utilities customers.

In August 2015, BAC has endorsed that the reporting of Credit Risk to be managed only up to the RCC level due to very minimal credit risk exposure evident from its trending since May 2014, of which its Credit Value-at-Risk (CVAR) for the Company’s utility customers remained well within CRTL. Reporting to the BAC is made when the need arises.

T h e t r a d e a n d n o n - t r a d e receivables ageing are also deliberated by the MC as well as Commercial Steering Committee on monthly and quarterly basis respectively.

(g) Contingency Planning and Business Continuity Management

T h e G r o u p h a s i n p l a c e Contingency Planning that defines the structure and processes for managing emergenc ies a t operational and company level. There is a three-tier response system in place which provides a clear demarcation of roles and r e s p o n s i b i l i t i e s b e t w e e n emergency site management, PLT and MC. Business Continuity Plan (BCP) is also in place to ensure business continuity in the

event of crises, or business d i s r u p t i o n s . T h e B C P implementation is part of the Group’s Business Continuity Management set out in page 207.

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 t h u s p r o t e c t i n g b u s i n e s s , stakeholders and customers during crisis or disaster.

During the year under review, two emergency exercises were successfully conducted to test the Company’s readiness in managing c r i s i s . A T ie r -3 emergency exercise was carried out at GTR involving local authorities which simulated a pipeline rupture affecting part of its Peninsular Gas Utilisation System located in Jawi, Seberang Prai, Pulau Pinang.

T h e C o m p a n y h a s a l s o participated in the PETRONAS T w i n T o w e r s I n t e g r a t e d Simulation exercise involving building evacuation and work resumption at the Company’s alternate worksite to test the continuity of its critical functions in the event of the inaccessibility of PETRONAS Twin Towers.

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STRATEGY & OUTLOOK

(h) Health, Safety and Environment (HSE) Risk

The Group leverages on the PETRONAS HSE Management System (HSEMS) to manage HSE risks and ensure that operations are in compliance with the HSE regulatory requirements. The HSEMS process ensures that HSE risks within the business are managed effectively. In addition, t h e G r o u p s u b s c r i b e s t o PETRONAS HSE Mandatory Control Framework to strengthen HSE governance within the Group through clear HSE requirements.

The Group has established a governance structure in managing the HSE risks, in tandem with the PETRONAS HSEMS and HSE Mandatory Control Framework. The governance structure includes the identification of HSE risks, develop HSE strategic initiative, establish annual plan and targets, internal compliance review and appointment of Result Managers for monitoring the implementation.

The Group has established multiple platforms to conduct periodic management review on HSE related risks and events in addressing changes that are triggered from past incidents and plant modifications activities. PGB MD/CEO chairs the HSE Steer ing Committee which comprises members from the Management to discuss HSE matters concerning the Group on monthly basis. Similar HSE M a n a g e m e n t C o m m i t t e e meetings are held at the facilities,

projects as well as at Division level which are chaired by r e s p e c t i v e m a n a g e m e n t personnel. In addit ion, the Group’s HSE risks are registered under the Group’s ERP where closure of mitigation actions are reported as part of quarterly Enterprise Risk Reporting to the Management and BAC.

The Group has also put in place a series of assurance programmes t o r e v i e w a n d v e r i f y t h e effectiveness of the HSEMS and HSE risk mitigations. The HSE 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.

During the year under review, internal audits which involved P E T R O N A S D o w n s t r e a m Business as well as PETRONAS Group Hea l th , Sa fe ty and Envi ronment (GHSE) , were conducted at Head Office, GTR, Utilities Kertih (UK) and Utilities Gebeng (UG). The Group also performed various HSE-related assurance programmes and audits on its facilities, which include Pre-Activity Safety Review and Project Independent Review. The Group is committed to continue with its rigorous HSE a s s u r a n c e p r o g r a m m e s i n ensuring the effectiveness of its HSEMS implementation.

Risk Initiatives

The Group continues to enhance risk m a n a g e m e n t a w a r e n e s s a n d 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 shar ing p la t forms es tab l i shed at PETRONAS level through the C o m m u n i t y o f P r a c t i c e ( C o P ) 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.

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INFORMATION

INTERNAL AUDIT FUNCTION

The Board recognises that the internal audit function is an integral part of the governance process. PETRONAS Group Internal Audit Division (GIAD) undertakes the internal audit function o f t h e G r o u p a n d p r o v i d e s independent assurance on the adequacy and effectiveness of the internal control systems implemented by the Group, and reports its findings directly to the BAC.

The internal audit function includes undertaking reviews of the Group’s system of internal controls, i ts operations and selected key activities based on risk assessment and in accordance with the annual internal audit plan which is presented and approved by the BAC.

BAC receives and reviews all GIAD audit reports including the agreed corrective actions to be undertaken by the auditees. GIAD monitors status of the agreed corrective actions through Quarterly Audit Report submitted by auditees which are assessed and verified by GIAD. The consolidated status of the audit issues is submitted and presented to the BAC for deliberations on a quarterly basis.

GIAD adopts the standards and principles outlined in the International Professional Practices Framework of the Institute of Internal Auditor.

The key activities of the internal audit function are set out in the BAC Report on page 216.

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 Head of Finance Division provides the Board with quarterly performance report.

Where areas for improvement in the system are identified, the Board will consider the views and recommendations made by the BAC and Management.

(b) Organisation Structure

An organisational structure which defines the formal l ines of responsibility and delegation of authority is in place to assist in implement ing the Group’s s t r a t e g i e s a n d d a y - t o - d a y business activities. A process of hierarchical reporting has been established which provides a documented and auditable trail of accountability. The Company’s organisational structure is set out on page 34 of the Annual Report.

The Company has an MC 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 d i r e c t i o n s a n d m a n a g e o p e r a t i o n a l i s s u e s a t t h e respective divisions.

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 o r g a n i s a t i o n ’ s g o a l s a n d objectives.

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(c) Budget Approval

Budgets are an important control mechanism used by the Group to ensure an optimum allocation of Group resources and the opera t iona l managers a re 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 operat ing units and subsidiaries are evaluated. The Group’s plans and budget shall be approved by the Board.

Variances against the approved b u d g e t a r e a n a l y s e d a n d reported to the MC and BAC/Board on a monthly and quarterly basis respectively and corrective actions will be taken where necessary.

A n y a d d i t i o n a l b u d g e t requirement is to be managed b y b u d g e t t r a n s f e r o r supplementary budget and is approved by the re levant a p p r o v i n g a u t h o r i t y i n accordance to the Limits of Authority.

(d) Limits of Authority

A documented Limits of Authority ( L O A ) w i t h c l e a r l i n e s o f accountability and responsibility serves as a tool of reference to i d e n t i f y t h e a p p r o p r i a t e approving authority at various levels of management including matters that require the Board’s approval.

Full review of LOA is undertaken every five years and realignment of LOA is performed every time there i s a change in the organisation structure.

(e) System and Control

System and Control Unit of F inance Div is ion conducts scheduled governance and compliance audits in addition to the internal audits conducted by GIAD. The audits are meant to p r o v i d e a s s u r a n c e t o t h e Management on the Group’s internal control effectiveness and compliance to the Company Enterprise Resource Planning (ERP) system’s established roles and segregation of duties, LOA, policies and work procedures. At the end of each audit, a report is p r e s e n t e d t o t h e R C C highlighting findings and the agreed corrective actions. The status of the audit issues are monitored and reported to the RCC on a quarterly basis.

During the year under review, two audits on project governance and compliance (pre award and post award) were undertaken, with an overall assessment of FAIR.

(f) Tendering and Procurement

The Group has clearly defined authorisation procedures and authority limits set for awarding tenders and all procurement transact ions covering both capital and revenue expenditure items.

Tender Committee structure with defined level of responsibilities i s in p lace to govern the tendering activities. Subsequent to the review by the relevant T e n d e r C o m m i t t e e s , t h e contracts will be subject to a p p r o v a l b y t h e r e l e v a n t approving authority who is independent from the Tender Committee. Tenders are called for and are awarded based on factors such as capability, quality, HSE, performance track record, schedule and cost.

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(g) Operating Procedures and Guidelines

Internal control processes are d o c u m e n t e d i n s t a n d a r d manuals, work procedures and work instructions which establish the guidelines on business planning, capital expenditure, financial operations, performance reporting, plant and transmission o p e r a t i o n s , s u p p l y c h a i n management, human resource, change management, operational & organisat ion excel lence, i n f o r m a t i o n t e c h n o l o g y , corporate affairs and HSE. These processes are being reviewed on r e g u l a r b a s i s t o e n s u r e c o m p l i a n c e t o r e g u l a t o r y requirements and best practices.

(h) Financial Control Framework

T h e G r o u p h a s a d o p t e d PETRONAS Financial Control Framework (FCF) wi th 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 d o c u m e n t a t i o n , t e s t i n g , monitoring and certification. The system funct ion 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 a t var ious management levels is required to complete and submit a Letter of Assurance which prov ides confirmation of compliance to key controls for the areas of the business for which they are accountable. Subsequently, PGB MD/CEO and the Finance Division provide overall assurance to the Board on the adequacy and effectiveness of key internal controls of the Group.

(i) Information and Communication Technology

T h e G r o u p l e v e r a g e s o n 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 a n d s y s t e m r e v i e w s a r e conducted periodically to ensure compliance against PETRONAS Group policies and procedures.

(j) Related Party Transaction

The Group has established policies and procedures with r e g a r d s t o R e l a t e d P a r t y Transaction (RPT) and Conflict of Interest (COI) to ensure full compliance to the MMLR of Bursa Malaysia. This includes the PGB RPT/Recurring RPTs (RRPT) Policies and Procedures.

The pol ic ies and standard operating procedures require the use of various methods to ensure that RPTs are conducted on normal commercial terms, which are consistent with the G r o u p ’ s n o r m a l b u s i n e s s practices and policies, and 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;

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• Where possible, sourcing and sales of PGB’s products or services to be based on market/industry negotiated pricing terms and conditions and/or pricing formulas;

• Whenever similar pricing of the same services or product i s a v a i l a b l e a n d / o r benchmarking of the same is practicable and/or possible, other than that which are proprietary in nature or unique to the PETRONAS Group, an assessment is undertaken to determine whether the price and terms offered to/by the related parties are fair and reasonable and comparable to those offered to/by third parties, bearing in mind, market forces for the demand and supply of the products/services and its impact on pricing, quality, delivery schedules, preferential terms and conditions, and on the urgency that the products/ s e r v i c e s a r e r e q u i r e d . Nonetheless, in the event that such quotation or comparative pricing from third parties cannot be obtained, the transactions’ prices will be reviewed to ensure that the RPTs/ RRPT are within normal commercial terms and not detrimental to the Group’s minority shareholders;

• RPTs/RRPTs will be reviewed by the BAC prior to the approval by either the Board or the shareholders. In the case of transaction/contract entered into by the subsidiary companies, the RPTs/RRPTs will be endorsed by the BAC and subsequently approved by the subsidiary company’s Board. If a Director or a related party has an interest in a transaction, he or she will abstain from any deliberation and decision-making at the Board or subsidiary company’s Board (as the case may be) in respect of the said transaction; Beginning FY2014, GIAD has conducted quarterly reviews of the Group Related Party Transactions and as well as an annual review of the PGB RPT/RRPT Policy and Procedures to provide assurance to the BAC on the Group’s compliance to the Related Party Transaction Guidelines.

• The BAC is responsible to ensure that the policies and procedures relating to RPTs/RRPTs and COI situations are sufficient to ensure that RPTs/RRPTs are carried out on normal commercial terms and not to the detriment of t h e G r o u p ’ s m i n o r i t y shareholders. The Board has the overall responsibility to ensure compliance to the established guidelines and procedures to approve and

monitor RPTs/RRPTs and COI situations. The Board and/or B A C m a y a l s o a p p o i n t individuals and Committees to examine the RPTs/RRPTs, as deemed appropriate;

• Effective financial year under review, all Directors and Senior Key Management Personnel of the Group will declare in writing an annual declaration form, designed to e l ic i t in format ion about current/potential relationships a n d / o r C O I s i t u a t i o n s , involving their interest, either directly or indirectly. All Directors and Senior Key Management Personnel of the Group shall also notify in writing of any interest in RPT or COI situation when it becomes known to them;

• The Company’s Legal and C o r p o r a t e S e c r e t a r i a t Departments reviews on all commercial contracts. System based records are maintained to capture the RPTs/RRPTs which have been entered into. P r o c e s s e s c o n c e r n i n g negotiations, tendering and/or analysis carried out for transactions between related parties are appropriately documented and retained to support and evidence that such transactions have been c a r r i e d o u t o n n o r m a l commercial terms and are not detrimental to the Group’s minority shareholders.

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The Company has been granted various waivers by Bursa Malaysia f r o m c o m p l y i n g w i t h t h e 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 e s s e n t i a l l y s t a t e t h a t t h e e x e m p t e d R R P T m u s t b e transacted on an arm’s length basis.

(k) E m p l o y e e P e r f o r m a n c e Management

In order to maintain the Group as a high performing organisation, the Group continues to strengthen and enhance i ts Employee Performance Management. The G r o u p h a s e s t a b l i s h e d a systematic and wholesome assessment of staff’s performance against the set performance indicators which is reviewed on a half yearly basis.

(l) Capability Development

The Group invests a lot of efforts in accelerating the capability of its staff. The Group aligns its capability development efforts to the PETRONAS Accelerated C a p a b i l i t y D e v e l o p m e n t

Framework for its technical staff, where their capabilities are continuously developed and periodically assessed. Non-technical staff are appraised through an annual Functional Assessment.

The Group has also established a platform to deliberate staff capabi l i ty matters through t h e C o m p a n y C a p a b i l i t y D e v e l o p m e n t W o r k i n g C o m m i t t e e ( C D W C ) . T h i s 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).

(m) 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 Company’s official website at www.petronasgas.com which emphasises and advances 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 contains detailed policy statements on the standards of behaviour and ethical conduct expected of each individual of

the Group. 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.

Included as part of the CoBE is the Anti-Bribery and Corruption Policy which explicitly prohibits the giving and acceptance of bribes, in whatever form, by employees including giving and receiving of facilitation payments in all business dealings.

(n) Whistleblowing Policy

The Group has adopted the PETRONAS Whist leblowing Policy (WBP) which provides an avenue for the Group employees and member of the public to disclose any improper conduct i n a c c o r d a n c e w i t h t h e procedures as provided under the policy. The WBP is accessible to the public for reference on the Company’s official website at www.petronasgas.com.

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STRATEGY & OUTLOOK

Under the WBP, a whistleblower will be accorded with protection of confidentiality of identity, to the extent reasonably practicable. An employee who whistleblows internally will also be protected a g a i n s t a n y a d v e r s e a n d detrimental actions for disclosing any improper conduct committed or about to be committed within the Group, to the ex tent reasonably practicable, provided that the disclosure is made in good faith. Such protection is accorded even if the investigation later reveals that the whistleblower is mistaken as to the facts and the rules and procedures involved.

(o) PETRONAS Raid Protocol

The Company’s policies are aligned to the PETRONAS Raid Protocol in ensuring appropriate manner in handling interaction w i t h , a n d s u b m i s s i o n o f information and data to the authorities in the event that raids are carried out in PETRONAS’s offices worldwide. It is an internal procedure in response to the powers of the authorities under re levant laws and var ious jurisdictions.

(p) Succession Planning

The Succession Planning process is aimed to enable the matching of the right talents to the right posit ions for breakthrough performance. The process starts

with identification of Critical Pos i t ions a t Bus iness and Corporate level. The Company invests heavily in developing the Succession Planning for the focused group of staff i .e. Technical and Non-Technical Managers as well as for Technical Professional Posit ions. This exercise is crucial in managing talents within PGB and from other Operating Units or Business Units. The Succession Planning information will then facilitate the Management in deliberating and charting staff’s career progression including mobility internally within the Company or across businesses within PETRONAS Group for wider exposure as well as capability gap closure through an identified development plan.

(q) P E T R O N A S L e a d e r s h i p Development

The Management recognises the impor tance o f Leadersh ip Development in ensuring the organisat ion has suf f ic ient leaders in the future. The PETRONAS Leadership Diamond guides staff to better understand the PETRONAS Leadership Philosophy, emphasising on Leadership Competencies and its identif ied behaviours to promote better internalisation.

(r) Human Resource Policies and Procedures

The Group’s Human Resource (HR) policies are aligned to the P E T R O N A S p o l i c i e s a n d procedures on all areas of human resources. This is to ensure that the Group practices best in class HR policies and procedures especial ly with regards to Human Capi ta l Development. Other HR areas which are well established in the Group include Job Management, S u c c e s s i o n P l a n n i n g a n d 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 Managing Director/Chief Executive Officer (MD/CEO) and the Chief Financial Officer (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 MC members conf i rming the adequacy and effectiveness of risk management practice and internal control system within their respective areas.

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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 management and internal control systems at the Group’s subsidiary, Pengerang LNG (Two) Sdn Bhd, will be in place progressively upon complet ion of i ts project and commencement of its operations.

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), G u i d a n c e f o r A u d i t o r s o n 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 2015, 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 M a n a g e m e n t a n d I n t e r n a l 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 management and internal control system including the assessment and opinion by the Board of Directors and management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems.

This Statement on Risk Management and Internal Control is made in accordance with the resolution of the Board dated 24 February 2016.

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas Chairman

Yusa’ bin HassanManaging Director/Chief Executive Officer

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STRATEGY & OUTLOOK

The Group’s BCM provides a systematic approach from managing its operational risks to building capability towards effective response during disruptions or crises.

BCM GOVERNANCE

The Planning and Risk Management Department (PRMD) 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 Plant Operational Excellence (POE) Department to drive implementation of the framework and processes rolled out by PRMD and ensure effective execution of BCM at the respective divisions. On regular basis, PRMD conduct assessments to ensure divisions’ compliance to the Group’s BCM requirements.

T H E G R O U P

P R A C T I C E S A

S T R U C T U R E D

B U S I N E S S

C O N T I N U I T Y

M A N A G E M E N T

( B C M ) T O E N S U R E

C O N T I N U I T Y O F

T H E G R O U P ’ S

O P E R A T I O N S A N D

S E R V I C E S I N

T H E E V E N T O F

D I S R U P T I O N S O R

C R I S E S .

Infrastructure

Process

People

Standards

RiskProfiling

& Control

BusinessImpact

Analysis

BusinessContinuity

Plan

Test & Exercise

ContinualImprovement

StrategySelection

PGB BUSINESS CONTINUITYMANAGEMENT FRAMEWORK

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

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BUSINESS CONTINUITY MANAGEMENT

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 193 of this Annual Report, risks are periodically assessed and monitored to ensure the Group’s crit ical r isks are managed and mitigated.

Business Impact Analysis prioritises the Group’s key business functions and spells out the timeframe to resume each function in the event of disruptions. Post organisational realignment activities in 2013, the Group undertook a second review of its Head Office’s Business Impact Analysis to ensure alignment with its revised structure.

Business Continuity Plans (BCP) are in place to address business disruptions. During the year under review, the Group enhanced its Gas Supply BCP by adopting a three-tiered approach in escalating gas supply disruptions from operations to management. The Group is also part of the Integrated PETRONAS Gas Supply Peninsular Malaysia (GSPM) of which, a BCP will be activated in the event of salesgas supply disruption to PETRONAS customers.

The Company has also formulated B C P i n r e s p o n d i n g t o t h e inaccessibility of PETRONAS Twin Towers where i ts Head Off ice operates. An alternate worksite has been established to resume its critical Head Office’s functions in the event the PETRONAS Twin Towers is inaccessible. The Company recently participated in another PETRONAS Twin Towers integrated simulation exercise involving building evacuation and mobilisation of key business personnel to the alternate worksite.

The Group acknowledges the importance of capability building in m a n a g i n g c r i s i s . C o n t i n u o u s awareness and capability building programmes are carried out for various level of staff of the Group.

During the year under review, an Incident Command System training was conducted on emergency and crisis management, led by the Company’s Heal th, Safety and E n v i r o n m e n t a n d O p e r a t i o n a l Excellence Division, targeting the Management and relevant staff involved in the Emergency Response Team (ERT) and Crisis Management Team (CMT). The training was intended to provide the fundamentals and principles in managing crisis, including the process, roles and responsibilities.

The Group has also successfully conducted a Tier-3 Emergency Response Exercise in collaboration with local authorities, which simulated a pipeline rupture affecting part of its Peninsular Gas Utilisation System located in Jawi, Seberang Prai, Pulau Pinang. During the exercise, the Group’s crisis and emergency response processes were tested as well as its Emergency Response Team (ERT) and Crisis Management Team’s (CMT) capability in responding to emergency and crisis. The exercise also further strengthened teamwork between the Group’s operating divisions and the local authorities in managing crisis. Several gaps were identified with further improvement plans put in place to address the gaps.

The Group has programmes in place to drive continuous enhancements in the Group’s BCM as well as to keep Management and staff up-to-date on the requirements and processes. These are periodically tested to ensure business continuity and effective response to crises and business disruptions.

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BUSINESS CONTINUITY MANAGEMENT

COMPOSITION

As at 31 December 2015, the NomRem Committee comprises three Independent Non-Executive Directors. In line with the Malaysian Code on Corporate Governance 2012 (MCCG 2012), all NomRem Committee members including the Chairman are Non-Executive Directors.

The members of the NomRem Committee as at 31 December 2015 are:

No. Name of Members Directorate

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

2. Habibah binti Abdul Independent Non-Executive Director

3. Dato’ N. Sadasivan N.N. Pillay Senior Independent Non-Executive Director

I N C O M P L I A N C E W I T H P A R A G R A P H 1 5 . 0 8 A

O F T H E M A I N M A R K E T L I S T I N G

R E Q U I R E M E N T ( M M L R ) O F B U R S A M A L A Y S I A

S E C U R I T I E S B E R H A D ( B U R S A M A L A Y S I A ) ,

T H E N O M I N A T I O N A N D R E M U N E R A T I O N

( N O M R E M ) C O M M I T T E E O F P E T R O N A S G A S

B E R H A D ( P G B O R T H E C O M P A N Y ) W A S

E S T A B L I S H E D O N 1 4 N O V E M B E R 2 0 1 1 . T H E

N O M R E M C O M M I T T E E I S P L E A S E D T O

P R E S E N T T H E R E P O R T F O R T H E F I N A N C I A L

Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5 .

Lim Beng Choon

Habibah binti Abdul

Dato’ N. Sadasivan N.N. Pillay

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NOMINATION AND REMUNERATION COMMITTEE REPORT

The NomRem Committee is chaired by an Independent Director, Lim Beng Choon. Whilst the MMLR has recommended that the NomRem Committee be chaired by the Senior Independent Director of the Company, the Senior Independent Director of PGB serves as the Chairman of the Board Audit Committee. As such, the Board has instead elected Lim Beng Choon as the Chairman of the NomRem Committee so as to have different Directors chairing the committees to leverage on different perspectives and dynamics. This will also ensure that each Independent Director has equitable roles and responsibilities. Based on the Board Evaluation, the NomRem Committee has performed effectively under Lim Beng Choon’s stewardship.

With the re-designation of Dato’ N. Sadasivan N.N. Pillay as Non-Independent Non-Executive Director with effect from 24 February 2016, the NomRem Committee now comprises two Independent Directors and one Non-Independent Non-Executive Director.

The current composition of the NomRem Committee comprises exclusively of Non-Executive Directors, in compliance with the requirement of Paragraph 15.08A (1) of MMLR, which provides that the NomRem Committee must comprise exclusively of Non-Executive Directors, the majority of whom are Independent Directors. This is also in line with the recommendation 2.1 of the MCCG 2012.

Apart from the re-designation of Dato’ Sadasivan as Non-Independent Non-Executive Director, there has been no change to the composition of the NomRem Committee since the previous year. Based on the Board Evaluation findings, the Board is satisfied with the performance and effectiveness of the NomRem Committee in providing sound advice and recommendations to the Board.

TERMS OF REFERENCE

The NomRem Committee is governed by the NomRem Committee Terms of Reference (TOR) as stipulated on page 213 to page 215 of this Annual Report. The TOR are consistent with the requirements of MMLR and MCCG 2012.

MEETINGS

During the financial year under review, the NomRem Committee met twice and the attendance of the members are as follows:

Name of Members No. of meetings attended

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

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

Habibah binti Abdul 2/2 (100%)

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T h e M a n a g i n g D i r e c t o r / C h i e f E x e c u t i v e O f f i c e r ( M D / C E O ) , Company Secretaries, Head of Human Resource Management Division and any other persons deemed necessary by the NomRem Committee are invited to attend and are present for deliberations of matters which require their input or advice. The Company Secretaries and the Head of Human Resource Management Division act as joint secretaries to the NomRem Committee.

The NomRem Committee meetings for year 2015 were scheduled in November 2014 to facilitate the D i r e c t o r s t o p l a n a h e a d a n d incorporate the NomRem Committee meetings into their respect ive 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 NomRem Committee members in advance of the meeting dates.

All proceedings of the NomRem Commit tee meet ings are duly recorded in the minutes of each meeting and signed minutes of each NomRem Committee meeting are properly kept by the Secretary. The draft NomRem Committee minutes are circulated to the NomRem Committee members subsequent to the NomRem Committee meeting and approved by the NomRem Committee prior to the Board of Directors (Board) meeting. This assists the NomRem Committee Chairman to

effectively convey to the members of the Board matters deliberated at the NomRem Committee meeting. The minutes of the NomRem Committee 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 th rough engagement o f a professional recruitment firm to find suitable candidates to fill in the posi t ion of Independent Non-Executive Directors.

All nominees to the Board are first c o n s i d e r e d b y t h e N o m R e m Committee, taking into consideration m i x o f s k i l l s , c o m p e t e n c i e s , experience, integri ty and t ime 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.

DIRECTORS’ RE-ELECTION AND RE-APPOINTMENT

Based on the schedule of retirement by rotation, the NomRem Committee 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 qual i t ies in part icular level of independence and ability to act in the best interest of the Company.

Article 93 of the Articles of Association of the Company (AA) 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 AA, one Director is to retire in accordance with Article 93 of the AA. Eligible director may seek re-election at the AGM.

The NomRem Committee at their meeting held on 12 February 2016 endorsed for Yusa’ bin Hassan who is retiring at the 33rd AGM pursuant to Article 93 of the AA for re-election at the forthcoming AGM.

Article 96 of the AA 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.

During the year under review, Tan Sri Dato’ Seri Shamsul Azhar bin Abbas was appointed as Non-Executive Director/Chairman to the Board of the Company on 1 September 2015. The NomRem Committee at their

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meeting held on 12 February 2016 recommended for Tan Sri Dato’ Seri Shamsul Azhar bin Abbas for re-election at the forthcoming AGM.

At the same meeting, the NomRem C o m m i t t e e e n d o r s e d t h e recommendation to re-designate Dato’ N. Sadasivan N.N. Pillay as Non-Independent Director so as to be in compliance with the recommendation of MCCG 2012 for directors who have completed nine years tenure as an Independent Director to be re-designated as a Non-Independent Director.

Pursuant to Section 129(6) of the Companies Act 1965, Dato’ Sadasivan and Dato’ Ab. Halim bin Mohyiddin both of whom attained the age of 76 years and 70 years respectively in February 2016, shall retire at the forthcoming 33rd AGM. Their re-appointment is subject to the approval of not less than three-fourths of the shareholders attending the AGM. If appointed, Dato’ Sadasivan and Dato’ Ab. Halim shall hold office unti l the subsequent AGM and henceforth their re-appointment shall be decided at every AGM. Taking i n t o a c c o u n t t h e i r i n v a l u a b l e contributions, continued commitment, support and guidance as well as their leadership and management skills, both Dato’ Sadasivan and Dato’ Ab. Halim are recommended by the N o m R e m C o m m i t t e e f o r r e -appointment as Directors of the Company.

BOARD EVALUATION

Every year, under the purview of the NomRem Committee, 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 Evaluat ion) . The Board Evaluation focuses on maximising the effectiveness and performance of the Board in the best interest of the Company. The NomRem Committee had, on 12 February 2016, reviewed the outcome of the Board Evaluation for 2015 and initiated improvement actions.

SUMMARY OF ACTIVITIES OF THE NOMREM COMMITTEE

The following activities were carried out by the NomRem Committee during the financial year ended 31 December 2015:

(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 B o a r d E f f e c t i v e n e s s a n d Directors’ Evaluation exercise.

(b) R e v i e w o f t h e s u c c e s s i o n planning of the Management positions of PGB.

(c) R e v i e w o f t h e P E T R O N A S E m p l o y e e P e r f o r m a n c e Management System and the evaluation of the performance of PGB’s Management.

(d) Review of Directors’ Training

Requirements.

(e) Review of re-election of Directors.

(f) Review of nomination of Tan Sri Dato’ Seri Shamsul Azhar bin Abbas as the Chairman of the Company.

(g) Review of NomRem Committee Report for Annual Report 2014.

(h) R e v i e w o f P G B ’ s T a l e n t Management Framework.

Lim Beng ChoonChairmanNomination and Remuneration Committee24 February 2016

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The Nomination and Remuneration (NomRem) Committee was formed by the Board pursuant to its meeting on 14 November 2011.

MEMBERSHIP

The members of the NomRem Committee shall be appointed by the Board from amongst their number and shall consist of not less than three members. In line with the Malays ian Code of Corporate Governance 2012 (MCCG 2012), all NomRem Commit tee members including the Chairman shall be Non-Executive Directors. The majority of the NomRem Committee members including the Chairman shall be Independent Directors.

The members of the NomRem Committee shall elect a Chairman from amongst their number who shall be an Independent Director.

The actual number of members shall be determined from time to time by resolution of the Board.

T H E N O M I N A T I O N A N D R E M U N E R A T I O N C O M M I T T E E I S

T O A S S I S T T H E B O A R D I N E X E R C I S I N G I T S A U T H O R I T Y

I N R E L A T I O N T O T H E M A T T E R S S E T O U T I N T H E T E R M S

O F R E F E R E N C E .

The terms of office and performance of the NomRem Committee and each of its members shall be reviewed by the Board periodically as to whether the NomRem Committee and/or its members have carried out its duties in accordance with its Terms of Reference.

RESIGNATION OF MEMBERS

Any NomRem Committee member may resign effective upon the date of the member giving oral or written notice to the Chairman of the Board, the Company Secretary or the Board (unless the notice specifies a later time for the effectiveness of such resignation). The Board will elect a successor to take office when the resignation becomes effective.

The appointment of a NomRem C o m m i t t e e m e m b e r s h a l l automatically be terminated if the member ceases to be a director for any reason whatsoever or as determined by the Board.

MEETING

To form a quorum, two of the members of the NomRem Committee must be present, one of whom must be Independent Director.

The Chairman of the NomRem Committee will be designated by the Board based upon recommendation by the Members. In the absence of the Chairman, the remaining members present shall elect one of their members from the Independent Directors as Chairman of the meeting. Other Directors, key executives and employees may attend any particular meet ing only at the NomRem Committee invitation.

The Company Secretary or in his/her absence, his/her deputy shall be the Secretary of the NomRem Committee. Minutes of the meetings shall be duly entered in the books provided therefor.

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NOMINATION AND REMUNERATION COMMITTEE’S TERMS OF REFERENCE

Meetings shall be held at least twice a year or at such other times as the Chairman of the NomRem Committee deems necessary. In addition to the schedule of regular m e e t i n g s e s t a b l i s h e d b y t h e Committee, the Chairman of the NomRem Committee may call a special meeting at any time.

Meetings of the NomRem Committee shall be arranged by the Secretary at the request of the Chairman or any other member of the NomRem Committee. Unless otherwise agreed, notice of each meeting confirming the venue, time and date shall be issued to each NomRem Committee member and to other attendees (as appropriate) in advance of each scheduled meeting date together with an agenda and supporting papers.

The NomRem Committee shal l regulate its own detailed procedure, in particular:

(i) the calling of meetings;(ii) the notice to be given for

meetings;(iii) the voting and proceedings of

meetings;(iv) the keeping of minutes; and(v) the custody; production and

inspection of minutes.

AUTHORITY

T h e N o m R e m C o m m i t t e e i s authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employees, company officers and external parties.

The NomRem Committee is authorised to engage external consultants and other advisers, or otherwise obtain such independent legal or other professional services it requires.

The NomRem Committee will have or be provided with sufficient resources undertaking its duties, including access to the company secretariat.

DUTIES AND FUNCTIONS

The following shall be the common recurring duties and responsibilities of the NomRem Committee in carrying out its purpose. These duties and responsibilities are set forth as a guide to the NomRem Committee with the understanding that the NomRem Committee may amend or supplement them as appropriate under the circumstances to the extent permitted by applicable laws:

(a) To assess Directors on an on-going basis, the effectiveness of the Board as a whole, the Committees of the Board and t h e c o n t r i b u t i o n o f e a c h individual Director;

(b) To review regularly the selection criteria for Board membership, the Board structure, size and c o m p o s i t i o n a n d m a k e recommendations to the Board with regard to any adjustments which are deemed necessary;

(c) T o d e v e l o p m e m b e r s h i p qualifications for the Board and all Board Committees, including defining specific criteria for director independence and committee membership;

(d) To look into suggestions for candidates for membership on t h e B o a r d , r e c o m m e n d prospective Directors, with a view, to provide an appropriate b a l a n c e o f k n o w l e d g e , experience and capability on the Board, including shareholder’s nominations to the Board and assess the suitability of potential candidates against the set criteria;

(e) To review annually the Board’s mix of skills, education and experience and other qualities including core competencies which Directors should bring to the Board, taking into account the current and future needs of the Company;

(f) To review and recommend to the Board appropriate corporate g o v e r n a n c e p o l i c i e s a n d procedures of the Company;

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NOMINATION AND REMUNERATION COMMITTEE’S TERMS OF REFERENCE

(g) To monitor compliance with corporate governance standard;

(h) To annually convene a meeting wi th the Chairman of any committee appointed by the Board for purpose of reviewing their roles and responsibilities and facil itating appropriate coordination;

(i) To implement a formal appraisal process for the evaluation of the effectiveness of the Board as a whole, the committees and the individual contribution of each Board Member; and

(j) To carry out other actions and do such other things as may be referred to it from time to time by the Board.

The NomRem Committee shall also, amongst others, establ ish and recommend the remunerat ion structure and policy for directors and review changes to the policy, as necessary.

REPORTING PROCEDURES

Draft minutes of each meeting shall be distributed to all members of the NomRem Committee. The minutes of the NomRem Committee Meeting shall be confirmed at the next meeting of the NomRem Committee and shall be available on request from the Company Secretary to all N o n - E x e c u t i v e D i r e c t o r s . T h e confirmed minutes of the meeting will be tabled to the Board for notation succeeding the NomRem Committee Meeting.

Any decision shall be decided by a majority of votes. In the case of an equality of votes, the Chairman of the meeting shall have a second or casting vote.

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Dato’ N. Sadasivan N.N. PillayHabibah binti Abdul Dato’ Ab. Halim bin Mohyiddin

Datuk Rosli bin Boni Lim Beng Choon

T H E B O A R D A U D I T C O M M I T T E E ( B A C ) O F P E T R O N A S G A S

B E R H A D ( P G B O R T H E C O M P A N Y ) I S P L E A S E D T O P R E S E N T

T H E B A C R E P O R T F O R T H E F I N A N C I A L Y E A R E N D E D 3 1

D E C E M B E R 2 0 1 5 I N C O M P L I A N C E W I T H P A R A G R A P H 1 5 . 1 5

O F M A I N M A R K E T L I S T I N G R E Q U I R E M E N T ( M M L R ) O F

B U R S A M A L A Y S I A S E C U R I T I E S B E R H A D ( B U R S A M A L A Y S I A ) .

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BOARD AUDIT COMMITTEE REPORT

COMPOSITION

The BAC was formed by the Board pursuant to its meeting held on 14 August 1995. As at 31 December 2015, the BAC comprises three Directors, in compliance with Paragraph 15.09(1)(a) of the MMLR.

As at 31 December 2015, the BAC members are as follows:


1. Dato’ N. Sadasivan N.N. Pillay (Chairman) Senior Independent Non-Executive Director

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

3. Datuk Rosli bin Boni Non-Independent Non-Executive Director

Dato’ Ab. Halim bin Mohyiddin is currently a Council Member of the Malaysian Institute of Certified Public Accountants and also serves as the Chairman of the Education Training Committee of the Institute. He is also a member of the Malaysian Institute of Accountants. In this regard, the Company is in compliance with Paragraph 15.09(c)(i) under the MMLR which requires at least one member of the BAC to be a qualified accountant.

The Board reviews the terms of office of the BAC members and assesses the performance of the BAC and its members through an annual Board effectiveness evaluation. The Board is satisfied that the BAC and its members have duly discharged their functions, duties and responsibilities in accordance with the BAC’s Terms of Reference.

On 24 February 2016, the Board has approved for the re-designation Dato’ N. Sadasivan N.N. Pillay as Non-Independent Non-Executive Director. With this, Dato’ Sadasivan has accordingly vacated the Chairmanship of the BAC. On the same date, the Board has approved Habibah binti Abdul as the Senior Independent Director of PGB. Habibah will effectively take the role of the Chairman of the BAC. The Senior Independent Director of PGB acts as the representative of the Board to whom any concerns pertaining to the Group may be conveyed by shareholders and other stakeholders. At the same meeting on 24 February 2016, the Board has approved the appointment of Lim Beng Choon as an additional member to the BAC. Consequently, as at 24 February 2016, the BAC composition is as follows:


1. Habibah binti Abdul (Chairman) Senior Independent Non-Executive Director

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

3 Dato’ Ab. Halim bin Mohyiddin Independent Non-Executive Director

4 Datuk Rosli bin Boni Non-Independent Non-Executive Director

5 Lim Beng Choon Independent Non-Executive Director

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In line with the Paragraph 15.09(1)(b) of the MMLR and Malaysian Code on Corporate Governance 2012 (MCCG 2012), all the five BAC members are Non-Executive Directors, three of whom are Independent Directors who satisfy the test of independence under Paragraph 1.01 of the MMLR. None of the Independent Directors have appointed alternate directors.

TERMS OF REFERENCE

The Terms of Reference of the BAC sets out the authority, duties and responsibilities of the BAC. The terms of reference of the BAC as set out on page 222 to page 224 of this Annual Report are consistent with the requirements of the MMLR and the MCCG 2012.

MEETINGS

The BAC meets at least quarterly with additional meetings convened as and when necessary. The BAC meetings for year 2015 are scheduled in November 2014 to facilitate the Directors to plan ahead and incorporate 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 six meetings. The meeting attendance record of the members are as follows:

Name of Members No. of meetings attended

Dato’ N. Sadasivan N. N. Pillay (Chairman) 6/6 (100%)

Dato’ Ab. Halim bin Mohyiddin 6/6 (100%)

Datuk Rosli bin Boni 6/6 (100%)

By invitation, the Managing Director/Chief Executive Officer, Company Secretaries, Head of Finance Division, Head of Risk Management Unit, external and internal auditors were also present during deliberations of matters which required their inputs and advice.

The Head of Group Internal Audit Division of PETRONAS (GIAD) presents the internal audit reports to the BAC. Relevant members of the Management are invited to brief the BAC on specific issues arising from the audit findings. The external auditors also attend the BAC meeting to present the external audit plan for the year as well as the outcome of the statutory audit conducted on the Company and its subsidiaries. In addition, the BAC met with the external auditors twice during the financial year without the presence of the Management.

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 in advance of the meeting dates.

Deliberations during the BAC meetings included performance review of the Company quarterly results for announcements to Bursa Malaysia, assessment of related party transactions and recurrent related party transactions 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.

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(d) Review of the PGB RPT/RRPT Policies and Procedures. Further details on RPT and RRPT process and procedures which is provided for under the SORMIC on page 202 to page 204 of this Annual Report.

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 complied w i t h a p p l i c a b l e a p p r o v e d Malaysian Financial Reporting Standards (MFRS) issued by the Malaysian Accounting Standards Board, MMLR and other relevant regulatory requirements.

(b) Reviewed the Company’s annual and quarterly management accounts.

(c) Reviewed and endorsed the fees of the external auditors for financial year end as disclosed in N o t e 2 0 t o t h e f i n a n c i a l statements.

(d) 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 Malaysian Accounting Standards Board.

Annual Reporting

The statements for BAC Report, BAC’s Terms of Reference and SORMIC for financial year ended 2015 for the purpose of inclusion in the Company Annual Report 2015, were reviewed and endorsed by the BAC on 16 February 2016. Related Party Transaction and Conflict of Interest

The BAC reviews all RPT and RRPT in accordance with the PGB RPT Policies & Procedures (P&P) 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. During the financial year under review, the BAC reviewed on quarterly basis, the status update of the Company’s RPT and RRPT. The BAC also ensures that any conflicts of interests in the deliberation of a transaction is appropriately declared in advance.

Internal Audit

(a) Reviewed and deliberated on reports of audits conducted by the GIAD.

(b) Monitored all corrective actions on audit findings identified by the GIAD until all issues are resolved.

(c) Reviewed the annual internal audit plan for the year including its scope, basis of assessments and risk ratings of the proposed areas of audit.

The above assists the BAC Chairman to effectively convey to the Board the matters deliberated at the BAC meetings. Minutes of the BAC meeting are tabled for confirmation at the next BAC meeting, after which it is distributed to the Board for notation. In addition to communicating to the Board on matters deliberated during the BAC meeting, the BAC Chairman also recommends to the Board the approval of annual financial statements, quarterly financial results and proposed interim dividends.

SUMMARY OF ACTIVITIES OF THE BAC DURING THE FINANCIAL YEAR 2015

During the financial year ended 31 December 2015, the fol lowing activities were carried out by the BAC:

Internal Control

(a) Reviewed the effectiveness of the system of internal controls, taking into account 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 Messrs KPMG.

(c) Quarterly review of all related party transactions (RPT) and recurrent related party transactions (RRPT).

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External Audit

(a) Reviewed the external auditors’ audit strategies and scope for the statutory audit of the Company’s financial statements for the financial year ended 31 December 2015.

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

Risk Monitoring

Reviewed on quarterly basis the Company’s Enterprise Risk Report and Status of Risk Monitoring. The BAC also deliberated on the risk exposures and the mitigation plans required.

INTERNAL AUDIT

PETRONAS Internal Audit functions support the BAC in their responsibilities by providing an independent, objective assurance designed to add value and improve PETRONAS Group’s operations.

PETRONAS GIAD 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 was carried out by GIAD currently headed by Syed Sheikh Syed Idrus Alhabshi.

GIAD 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 received reports on all audits performed.

The internal audit function performs independent audits in diverse areas within the Group including management, accounting, financial and operational activities, in accordance with the risk-based annual audit plan which is presented to the BAC for approval.

The audits conducted during the year for PGB were:

No. Audit Titles

1 Audit on Gas Processing Santong Plant Operations Activities of PGB

2 Audit on Materials, Corrosion and Inspection Activities of Gas Processing & Utilities (GPU), PGB

3 Audit on Risk Management Practices of PGB

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The resulting reports from the audits were reviewed by the BAC and subsequently forwarded to the Management for the necessary corrective actions. The Management is responsible for ensuring that corrective actions are taken within the r e q u i r e d t i m e f r a m e a n d a l l outstanding/open items are reported to the BAC on a quarterly basis.

In addition to the above audit exercises, GIAD had also conducted a review of the PGB’s P&P so as to provide assurance to the BAC that the P&P conforms to the requirements of Bursa Malaysia and operations adhered to the P&P. The said reviews were conducted on quarterly basis as well as for the year ended 31 December 2015.

GIAD monitors the status of agreed corrective actions through Quarterly Audit Status Report (QASR) submitted by the auditees which will be assessed a n d v e r i f i e d b y G I A D . T h e consolidated QASR is submitted and presented to the BAC for deliberation.

The BAC reviews reports on all internal audits performed under its purview, including the agreed corrective actions to be undertaken by the auditees’ management.

The Internal Audit processes and activities are guided by the approved Internal Audit Charter and aligned with internal audit industry standards (i.e. The International Professional Practices Framework (IPPF) issued by the Institute of Internal Auditors (IIA)).

GIAD also undertake to ensure that t h e s t a f f a r e c o m p e t e n t a n d adequately equipped in carrying out their duties and responsibilities by putt ing in place development programmes and providing sufficient and relevant trainings. The total fees payable to GIAD for the internal audit function of the Company and the Group for the financial year was RM538,000.

RISK MANAGEMENT

The Board has establ ished an organisation structure with clearly defined lines of responsibility and accountability pursuant to its business and operational requirements while ensuring appropriate risk management processes are in place to protect shareholders and stakeholders value.

The Planning and Risk Management Department (PRMD) of PGB has been tasked to conduct assessment of risks for PGB Group of Companies (PGB Group). PRMD reports directly to the BAC on quarterly basis or as and when is necessary.

Pursuant to Recommendation 6.1 of the MCCG 2012, Risk Management is enforced through an Enterprise Risk Report (ERR) reporting tool. Further details on the Risk Management is provided under the SORMIC on page 193 to page 199 of this Annual Report.

BAC plays a vital role in reviewing the adequacy and effectiveness of Risk Management processes within PGB Group. In this regard, BAC reviews and challenges the ERR which entails amongst others the risk profile and status of risk mitigation implementation.

REPORTING TO THE EXCHANGE

For the year under review, the BAC was of the view that the Company was in compliance with the MMLR and as such, the reporting to Bursa Malaysia under Paragraph 15.16 of the MMLR was not required.

Habibah binti AbdulChairmanBoard Audit Committee24 February 2016

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CONSTITUTION

The Board Audit Committee (BAC) was formed by the Board pursuant to its meeting on 14 August 1995.

MEMBERSHIP

The members of the BAC shall be appointed by the Board from amongst their number and shall consist of not less than three members. In line with the Malaysian Code of Corporate Governance, al l BAC members including the Chairman shall be Non-Executive Directors. The majority of the BAC members including the Chairman shall be Independent Directors. An Independent Director shall be a director who fulfills the requirements as provided in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (MMLR).

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

O V E R S I G H T T H E F I N A N C I A L R E P O R T I N G P R O C E S S ,

S E L E C T I O N O F E X T E R N A L A U D I T O R , R E C E I P T O F A U D I T

R E S U L T S B O T H I N T E R N A L A N D E X T E R N A L , I N T E R N A L

C O N T R O L S Y S T E M , R I S K M A N A G E M E N T S Y S T E M A N D

I N T E R N A L A N D E X T E R N A L A U D I T F U N C T I O N S .

All BAC members must be financially literate with at least one member of the BAC:

(a) shal l be a member of the M a l a y s i a n I n s t i t u t e o f Accountants; or

(b) if he/she is not a member of the M a l a y s i a n I n s t i t u t e o f Accountants, he/she must have at least three years’ working experience; and

(i) passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967; or

(ii) is a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or

(c) fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad.

The members of the BAC shall elect a Chairman from amongst their number who shall be an Independent Director.

If a member of the BAC resigns, dies or for any other reason ceases to be a member with the result that the number of members is reduced to below three, the Board shall within three months of that event, appoint such number of new members as may be required to make up the minimum number of three members.

No a l ternate d i rector can be appointed as a member of the BAC.

The terms of office and performance of the BAC and each of its members shall be reviewed by the Board periodically to whether the BAC and/or its members have carried out its duties in accordance with its Terms of Reference.

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BOARD AUDIT COMMITTEE’S TERMS OF REFERENCE

MEETING

To form a quorum, the majority of the m e m b e r s p r e s e n t m u s t b e Independent Directors and one of whom shall be the Chairman of the BAC. The BAC shall be able to convene meetings with the external auditors, internal auditors or both without the presence of any other directors or employees whenever it deems necessary. The external auditors and internal auditors have the right to appear and be heard at any meeting of the BAC and shall appear before the Committee when required to do so by the BAC.

The Company Secretary or in his/her absence, his/her deputy shall be the Secretary of the BAC. Minutes of the meetings shall be duly entered in the books provided therefor.

Meetings shall be held not less than four times a year. The external auditors may request a meeting if they consider it necessary. The Chairman of the BAC shall convene a meeting of the Committee to consider any matters the external auditor believes should be brought to the attention of the Board or shareholders.

AUTHORITY

The BAC is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employee and all employees are directed to cooperate with any request made by the BAC.

The BAC is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

The BAC is authorised by the Board to communicate directly with internal and external auditors, as well as the members of Management such as the Chairman of the Company and Managing Director/Chief Executive Officer on a continuous basis in order to be informed and updated with matters related to the Company.

DUTIES AND FUNCTIONS

The duties and functions of the BAC shall be:

(1) External Audit

(a) To consider the appointment of the external auditors, the audit fees, and any question in relation to resignation or dismissal of the external auditors before making recommendation to the Board; and

(b) To review and discuss with the external auditors, before the audit commences, the nature and scope of the a u d i t , a n d e n s u r e coordination where more than one audit f i rm is involved.

(2) Internal Audit

(a) To review the internal audit plan, consider the major findings of internal audits a n d M a n a g e m e n t ’ s responses, and ensure coordination between the i n t e r n a l a n d e x t e r n a l auditors;

(b) To review the adequacy of t h e s c o p e , f u n c t i o n s , competency and resources o f t h e i n t e r n a l a u d i t functions and that it has the necessary authority to carry out its work;

(c) To review the audit reports;

(d) T o d i r e c t a n d w h e r e appropriate supervise any s p e c i a l p r o j e c t o r investigation considered necessary;

(e) To prepare periodic reports to the Board summarising the work performed in fulfilling the BAC’s primary responsibilities; and

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(f) To determine the remit of internal audit function which reports directly to the BAC. The internal audit function should be independent of the activities they audit and should be performed with impartiality, proficiency and due professional care.

(3) Financial Reporting Review

To review with the Management and the external auditors the quarterly results and year-end financial statements prior to the approval by the Board, focusing particularly on:

(a) any change in accounting policies and practices;

(b) s ignif icant and unusual events;

(c) major judgemental areas;(d) s igni f icant adjustments

resulting from the audit;(e) t h e g o i n g c o n c e r n

assumption;(f) compliance with accounting

standards; and(g) compliance with other legal

requirements and MMLR.

(4) Related Party Transactions

To review any related party transact ion and confl ict of interest situation that may arise in the Company including any transaction, procedure or course of conduct that raises the ques t ions o f management integrity.

(5) Risk Management

To review the adequacy and effectiveness of risk management practices and procedures as well as conducting risk profiling reviews on the Company, on a quarterly basis.

(6) Internal Control

To keep under review the effectiveness of internal control systems and the internal and/or external auditors’ evaluation of these systems and in particular review the external auditors’ M a n a g e m e n t L e t t e r a n d Management’s responses.

(7) Other Matters

(a) To arrange for periodic reports from Management, the external auditors and the internal auditors to a s s e s s t h e i m p a c t o f s i g n i f i c a n t r e g u l a t o r y changes, and accounting or reporting developments proposed by accounting and other bodies, or any significant matter that may have a bearing on the annual examination;

(b) To discuss problems and reservations arising from the internal audits, interim and final audits, and matters the internal and external auditors may wish to discuss (in the absence of Management where necessary);

(c) Where the BAC is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the M M L R , t h e B A C m u s t promptly report such matter to the Securities Commission; and

(d) Carrying out any other funct ions that may be mutually agreed upon by BAC and the Board.

REPORTING PROCEDURES

The Secretary shall circulate the minutes of meetings of the BAC to all members of the Board.

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BOARD AUDIT COMMITTEE’S TERMS OF REFERENCE

Other than CoBE and the ABC manual, we also adopt the No Gift Policy as a means to address the issues of bribery and conflict of interest in any business dealings between the Company and any third parties.

Various kinds of employee awareness programmes on CoBE and ABC manual have been undertaken such as briefings to all staff and contractors, availability of the CoBE and ABC manual in the Company’s online portal, briefings to the new entrants, distribution of the CoBE and ABC manual booklet to employees and refresher briefings during engagement sessions.

All contractors serving the PETRONAS Group had participated in the “Pledge for Integrity” signing ceremony conducted by PETRONAS on 30 November 2015. Prior to that, a b r i e f i n g s e s s i o n w i t h a l l t h e P E T R O N A S c o n t r a c t o r s w e r e conducted on 3 November 2015. The main objective of the “Pledge for Integrity” is to encourage PETRONAS’ business partners to implement anti-corruption commitments in their organisation and business dealings.

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

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

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

R E P R E S E N T I N G P E T R O N A S A N D I T S S U B S I D I A R I E S A R E

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

B U S I N E S S E T H I C S ( C O B E ) A N D T H E P E T R O N A S A N T I -

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

( A B C M A N U A L ) W H I C H P G B H A S A D O P T E D .

Starting December 2015, an on-line E-Learning CoBE and ABC training were launched and all staff were made compulsory to enroll and complete the online training and assessment in order to ensure thorough understanding of the CoBE and ABC manual. Meanwhile, about 70% of staff at Gas Processing and Utilities Division have attended the CoBE and ABC manual refresher training. For all new employees, the briefings on CoBE and ABC manual w e r e c o n d u c t e d d u r i n g t h e PETRONAS Induction Programme as well as at respective Divisions.

We have adopted the PETRONAS’ W h i s t l e b l o w i n g P o l i c y w h e r e employees or members of the public are encouraged to disclose any improper conduct (misconduct or criminal offence or malpractices) in accordance with the procedures as provided under this Policy and the Company gives the assurance that the identity of the whistleblowers shall be kept confidential and all reported cases shall be investigated and followed through until closure.

Such misconduct or criminal offences include the following:

i. Fraud;ii. Bribery;iii. Abuse of Power;iv. Conflict of Interest;v. Theft or embezzlement;vi. Misuse of Company’s Property;vii. Non-Compliance with Procedure.

The above list is not exhaustive and includes any act or ommissions, which if proven, will constitute an act of misconduct under CoBE or any criminal offence under relevant legislations in force.

Upon receiving report on violations of the policies/manuals or improper conduct, it shall be investigated thoroughly to determine the prima facie of the case. If the case is valid, appropriate consequence management shall be taken in accordance to the Company’s Disciplinary Actions Process and Procedures.

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CODE OF CONDUCT AND BUSINESS ETHICSG4-56, G4-SO3

1983 PETRONAS Gas Sdn Bhd (PGSB) was incorporated as a wholly-owned subsidiary of Petroliam Nasional Berhad (PETRONAS) on 23 May 1983.

1984 Commissioning of Peninsular G a s U t i l i s a t i o n ( P G U ) 1 , Commissioning of Gas Processing Plant (GPP) 1 with first gas in and first salesgas delivery to power and industrial customers.

1987 Appointment of PGSB as a throughput and servicing agent to PETRONAS in relation to the PGU project in Peninsular Malaysia (Throughput Agreement) on 2 November 1987.

1991Commissioning of PGU 2 and the official opening of the Segamat Gas Transmission Operation Centre by then the Prime Minister of Malaysia, Tun Dr. Mahathir bin Mohamad

1992First salesgas delivery to Senoko Power Station in Singapore via submarine pipeline and the commissioning of GPP2 and GPP3.

1994 Commissioning of GPP4.

1995Signing of a 20-year agreement between PGSB and PETRONAS for the provision of services relating to Gas Processing and Gas Transmission Agreement (GPTA) in Malaysia on 31 March 1995 with effective date 1 April 1994.

Conversion of PGSB from private limited to a public listed company (PETRONAS Gas Berhad (PGB)) and was listed on the main board of Kuala Lumpur Stock Exchange (now Bursa Malays ia Secur i t ies Berhad (Bursa Malaysia)).

1998Completion of PGU 3 project and the signing of first Sale and Purchase Agreement wi th Centralised Utility Facilities (CUF).

1999 Commissioning of GPP5 and GPP6, first delivery of electricity from CUF Kertih and CUF Gebeng to customers.

2000PGB secured RM1.4 billion worth of Islamic Financing from the domestic private debt securities to partly finance its CUF project.

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CORPORATE MILESTONESO U R J O U R N E Y 1 9 8 3 - 2 0 1 6

2005 First gas-in from Malaysia- Thailand Joint Development Area; Signing of Operation and Maintenance Services Agreement with Trans Thai-Malaysia (M) Sdn Bhd.

2009Ground breaking ceremony of Kimanis Power Plant project on 26 November 2009 by Chief Minister of Sabah, Datuk Seri Panglima Musa bin Haji Aman.

2010 Prime Minister of Malaysia, Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak announced on 10 June 2010 the development of Malaysia’s first liquefied natural gas (LNG) Regasification Terminal in Sungai Udang, Melaka (RGTSU) by PETRONAS under the 10th Malaysia Plan.

2011S i g n i n g o f E n g i n e e r i n g , Procurement, Construction, Installation and Commissioning Alliance agreement between PGB and a consortium of contractors for LNG Regasification Terminal Project in Sungai Udang Melaka on 25 February 2011.

P G B N e t w o r k C o d e w a s unveiled to public via official announcement to Bursa Malaysia on 23 December 2011.

2013Commissioning of RGTSU on 23 May 2013; Commissioning and testing of PGB’s Power Venture arm, Kimanis Power Plant.

2014 I n N o v e m b e r 2 0 1 4 , P G B achieved another milestone as its power venture arm, Kimanis Power Plant, became fully operationalise, allowing additional power for the people of Sabah.

P G B s i g n e d a s e r i e s o f agreements towards developing M a l a y s i a ’ s S e c o n d L N G Regasif icat ion Terminal in Pengerang and a Heads of Agreement with Linde to develop an Air Separation Unit Plant to produce industrial gases for Pengerang Integrated Complex.

S i g n i n g o f t h e n e w G a s Processing Agreement (GPA) a n d G a s T r a n s p o r t a t i o n A g r e e m e n t s ( G T A ) w i t h PETRONAS for 20 years , ensuring steady income for PGB.

2015Completion of the last series of Plant Rejuvenation and Revamp Project for Gas Processing plant 2, 3 and 4, extending their useful life for another 20 years.

2016E x e c u t i o n o f a F a c i l i t y Agreement with Mizuho Bank on 7 January 2016 for a USD500 million term loan facility to fund capital projects.

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INFORMATION

PGB, as the owner and operator of a 22 km gas pipeline and metering infrastructure project which is known as Prai II Lateral Gas Pipeline (PRISM), signed an Operation and Communication Manual (OCM) with TNB Prai Sdn Bhd to ensure smooth execution of operational activities and communication. The pipeline is able to supply up to 250 mmscfd of natural gas to TNB Prai for a maximum generating capacity of 1000 MW. Earlier, TNB Prai has sealed a Gas S a l e s A g r e e m e n t ( G S A ) w i t h PETRONAS for the delivery of gas to cater for the former’s growing electricity demand and economic development in Penang, Kedah and the northern region of Peninsular Malaysia.

PGB held a ceremony to commemorate the receipt of gas from the Joint Development Area (JDA) in Thailand to Terengganu Gas Terminal (TGAST) Project in Malaysia (TGAST Phase 1) and TGAST-OSC-GPU Modification Project (TOG Project). The overall scope was to perform interplant piping and blending facilities at OSC and GPU for proper blending of the high carbon dioxide (CO2) JDA gas with existing feedgas supply to meet CO2 design limit at Gas Processing Plants.

PGB inked an agreement with the State Secretary, Johor (Incorporated) (SSI Johor) and Dialog LNG Sdn Bhd to undertake the development of Liquefied Natural Gas (LNG) Regasification Terminal in Pengerang, Johor, under a joint-venture company, Pengerang LNG (Two) Sdn Bhd (PLNG2).

The LNG Regasification Facilities will provide fuel requirement for the Pengerang Cogeneration Plant to power up the PETRONAS’ Refinery and Pet rochemica l In tegra ted Development (RAPID) complex. Once completed in 2017, it will comprise a regasification unit and two units of 200,000 m3 LNG storage tanks with an initial send out capacity of 3.5 million tonnes per annum (MTPA), equivalent to approximately 490 million standard cubic feet per day (mmscfd).

FEB

05MAY

11

APR

22

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2015 SIGNIFICANT EVENTS

Board of Directors visited PGB’s projects in Pengerang, Johor, and were enl ightened on the LNG Regasification Terminal and Air Separation Unit, which are progressing per schedule. The two projects, located wi th in the 6 ,242-acre Pengerang Integrated Complex, will supplement the business growth of PETRONAS Downstream at RAPID.PGB won for the second consecutive

year the Industry Excellence Award f o r L i s t e d C o m p a n i e s o f t h e prestigious National Annual Corporate Report Awards (NACRA) and took home the Industrial Products and Technology award category.

The theme for Annual Report 2014, “Dr iv ing Trans format ion” , was recommended by the then PGB Chairman, Datuk George Ratilal, who also called on all PGB staff to pull their resources and efforts together in embracing the success of PGB transformation journey.

PGB, together with other PETRONAS’ subsidiaries, signed the Contractors Integrity Pledge with their respective contractors at the 5th Corporate Integrity Advocacy Programme.

First held in 2013, the programme was jointly organised by the office of PETRONAS Chief Integrity Officer (CIO) and the Malaysian Anti-Corruption Commission (MACC). The event focused on elevating awareness to PETRONAS’ employees on the vitality of their roles in promoting integrity and zero tolerance against bribery and corruption, enhance understanding on consistent enforcement of PETRONAS Code of Conduct and Business Ethics (CoBE) and to highlight the significance of integrity in sustaining a high performance culture.G4-SO4

NOV

29

NOV

26

NOV

30

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2015 MEDIA MILESTONES

A S N A P S H O T O F O U R Y E A R I N

T H E N E W S

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Engagement session with one of PETRONAS’ customers, Senoko Power Ltd, at Pasir Gudang Regional Office

Engagement session with DOE-Smart Partnership for Earth Day at DOE Johor

MAR

10

MAR

16

Gotong royong and donat ion contribution to the less fortunate community staying in Kampung Bukit Merah, Paka, Terengganu

Flood relief effort to 179 families living in Membakut District affected by the unprecedented flood in Sabah

PGB Head office organised a gotong -royong activity to clean up Sekolah Menengah Kebangsaan Dabong in Kelantan affected by the recent major flood

FEB

26

JAN

15

JAN

29

FEB

10

GPU’s Engineering Department organised a CSR activity to assist flood victims at Madrasul Quran Pinang Baru in Dungun, Terengganu

Donation to 150 families living in Bongawan District affected by the major flood in Sabah

MAR

9

Ex-LUNAS Emergency Response Tier-2 Exercise to equip staff with all relevant skills during incident and accident by Gurun Regional Office

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2015 CALENDAR OF EVENTS

GPK-ABT Department organised gotong-royong, activities for the underpr iv i leged communi ty in Kampung Baru, Kertih, Terengganu

Engagement session and familiarisation visit by the newly-appointed Director General of DOSH, Dato’ Ir Mohtar Musri jointly organised by RGT with PETRONAS Penapisan (Melaka) Sdn Bhd (PPMSB)

MAR

21

MAR

17

Visit by Secretary General of the Ministry of Energy, Green Technology and Water Malaysia (KeTTHA) Datuk Loo Took Gee, to Kimanis Power Plant

APR

15

Visit by Korean Gas Corporation (KOGAS) to RGTSU

APR

23Engagement session and visit by high-ranked officers of PETRONAS’ Malaysia Marine Academy (or ALAM), accompanied by MISC officers, to witness the LNG unloading process

APR

3

Visit by analysts from various research houses to RGTSU

MAR

26

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INFORMATION

Study visit by Asian Institute of T e c h n o l o g y ( A I T ) a n d G a s Transmission Co Ltd, Bangladesh to Shah Alam Regional Office

APR

27

Engagement session and public awareness programme known as “Knowing GTR” at Putra Avenue, Putra Heights to gauge residents’ understanding and awareness on the presence of gas pipelines and Right of Way (ROW) within their residential area

APR

25

APR

28Engagement session and public awareness programme organised by S i t iawan Regional Of f ice wi th community of Kampung Merbau, Ayer Tawar

Evacuation Exercise by Pasir Gudang Regional Office

Familiarisation visit by staff from Indonesia’s Badak LNG and PT Dimensi Barumas Perdana to GPS to learn and observe Phonon Diagnostic Technology Execution

MAY

14

MAY

20

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Visit by KeTTHA, Ministry of Finance (MOF), Unit Kerjasama Awam Swasta, Jabatan Perdana Menteri (UKAS), TNB Fuel Services Sdn Bhd (TNBF), Suruhanjaya Tenaga (ST) and Single Buyer Department, TNB (SB)

JUN

4

Ex-5 Derang Emergency Response Tier-1 Exercise

JUN

8

JUN

10Exerc ise at RGTSU with other stakeholders including MISC, Sungai Udang Port, Jabatan Laut and APMM

The Launching of PGB’s Corporate Social Investment (CSI) initiative “Sayangi Sungai Paka” at Kuala Paka, Dungun, Terengganu jointly with Malaysian Nature Society (MNS) to create awareness on the importance of river care and the love for the environment

Ex-Tumpah Emergency Response Exercise at Seremban City Gate in Negeri Sembilan

JUN

15

Public awareness and engagement session with officers of Gurun Police Station at Gurun Regional Office

JUN

17

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JUL

12G o t o n g - r o y o n g , r e p a i r a n d maintenance of toilet and kitchen organised for the underprivileged community staying in Kemasik, Kemaman, Terengganu. Books and school items were also contributed

Familiarisation visit by Customs Department to Gas Processing Kertih to learn more on the operations of Downstream business

Shareholders’ familiarisation visit to PGB facility at Gas Processing Santong and Utilities Kertih to learn more about the gas processing plants

AUG

12

AUG

12

“Free Market” in conjunction with Aidilfitri for 24 less-fortunate families where they were invited to choose items ranging from clothing, shoes, shirts, trousers, shoes and many more

JUL

4

JUL

9Shopping for Aidilfitri and donation to the less fortunate families and single parents residing in the Paka and Dungun areas in Terengganu

JUN

20

Donation in cash and kind to family members of the Mountain Guides in Ranau, Sabah, and victims of the earthquakes

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Visit by TIM Naziran to RGTSU to assess potential threats and security mechanism to prevent threats. The authorities involved among others were Malaysia Royal Police (or PDRM), National Security Council (or MKN) and Works Department (or JKR)

AUG

14

ATS Fire Drill at Gas Processing Santong, Terengganu

AUG

13

Engagement session and public awareness programme by JKR Perak Tengah with contractors performing works along PGB’s pipeline

OCT

22

DEC

18

4G activity in conjunction with GTR’s HSE Month Programme. Planting of trees in support for the government’s “Go Green Campaign”

Ex-Tiga Ratus Emergency Response Tier-3 Exercise organised by Gurun Regional Of f ice wi th 24 local authorities at Jawi, Seberang Prai in Pulau Pinang

OCT

29

G o t o n g - r o y o n g a t B a l a i R a y a Kampung Bukit Raya, Hulu Langat in Selangor with NGO Yayasan Salam and the local community as part of PGB’s CSI Programme on Livelihood

AUG

20

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AA W A R D S A N DA C H I E V E M E N T S

W E W E R E B E S T O W E D

W I T H N U M E R O U S

A W A R D S A N D

C E R T I F I C A T I O N S

D U R I N G T H E Y E A R

U N D E R R E V I E W I N

R E C O G N I T I O N O F O U R

C O M M E N D A B L E

A C C O M P L I S H M E N T S

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NACRA

Best Excellence Award in the Industrial Products and Technology Category

FTSE4GOOD

Obtained the prestigious Certificate of Membership for inclusion in the FTSE4Good Index

FOCUS MALAYSIA

9th Most Transparent Big Stock Award

INSTITUT KIMIA MALAYSIA

IKM Laboratory Excellence Award in the testing of Gas, Water, Waste Water

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G4-16

Awards:

1. M S W G - A S E A N C o r p o r a t e Governance Index 2014– PETRONAS Gas Berhad was

recognised for having the best corporate governance p r a c t i c e s i n c l u d i n g transparency and performance in the Oil and Gas Sector.

2. NACRA 2014– PETRONAS Gas Berhad won

the Best Annual Report in the Indust r ia l Products and Technology Category at the National Annual Corporate Report Awards (NACRA) 2014 for annual report produced for the year ended December 2013.

A W A R D S A N D A C H I E V E M E N T S 2014W E A R E T H R I L L E D T O H A V E B E E N B E S T O W E D W I T H

N U M E R O U S A W A R D S A N D C E R T I F I C A T I O N S I N T H E

Y E A R U N D E R R E V I E W I N R E C O G N I T I O N O F O U R

S T E L L A R A C C O M P L I S H M E N T S .

3. Finance Asia Award– PETRONAS Gas Berhad was

n a m e d t h e t h i r d B e s t M a n a g e d C o m p a n y i n Malaysia by a Finance Asia poll which tallied the votes of 265 investors and analysts across the region.

4. The Edge Billion Ringgit Club– PETRONAS Gas Berhad was

honoured for having the Best Performing Industrial Stock with a market capitalisation of more than RM10 billion in the Industrial Sector.

5. Focus Malaysia Award– PETRONAS Gas Berhad was

named the fourth Most Transparent Big Stock in Malaysia in a poll conducted by Focus Malaysia, a leading English business weekly.

Certifications

1. The fol lowing certi f ications validate the high standards to which PETRONAS Gas Berhad adheres in its processes and systems.• Jabatan Alam Sekitar Award

for compl iance wi th a l l stipulated conditions related t o t h e m a n a g e m e n t o f scheduled wastes.

• IQNet and SIRIM International Quality Management System ISO 9001:2008.

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PAST AWARDS

Awards:

1. The Edge Billion Ringgit Club – PETRONAS Gas Berhad (PGB)

was recognised as one of M a l a y s i a ’ s t o p t h r e e Companies in the Industrial Products Sector in terms of Return on Equity.

2. Alpha Annual Southeast Asia Institutional Investor Corporate Awards– PGB won the Best Senior

M a n a g e m e n t I n v e s t o r R e l a t i o n s ( I R ) S u p p o r t Category in Malaysia.

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

• MSOSH Gold Merit Award Winner 2012 for Segamat Operation Centre (SOC), Segamat Regional Office, Transmission Operations Division, (TOD)

• MSOSH Gold Merit Award Winner 2012 for Pasir Gudang Regional Office, TOD

• MSOSH Gold Merit Award Winner 2012 for Gas Processing Plant Paka (GPPB), Plant Operations Division (POD)

A W A R D S A N D A C H I E V E M E N T S 2013D U R I N G T H E Y E A R U N D E R R E V I E W , P E T R O N A S G A S

B E R H A D W A S A C C R E D I T E D W I T H S E V E R A L A W A R D S

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

S T A N D A R D S I N I T S O P E R A T I O N S .

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

– Gold Class 1• MSOSH Gold Class 1

Award Winner 2012 for Gurun Regional Office, TOD

4. NCOSH (National Council for Occupational Safety and Health)– OSH National Award Winner

for Gurun Regional Office, TOD

5. N A C R A ( N a t i o n a l A n n u a l Corporate Reports Award)– Industry Excellence Awards

Merit Winner under the Indust r ia l Products and Technology category in National Annual Corporate Reward Awards (NACRA 2013) for Annual Report Ending 31 December 2012

6. ICC (Innovative and Creative Circle)– Team BUBBLE from PGB was

awarded• Best Young ICC Award at

the Central Mini Regional Convent ion on Team Excellence

• Gold Medal at the Central Regional Convention on Team Excellence

• 3 Stars Gold Medal and Most Potential Group Award at the National C o n v e n t i o n T e a m Excellence ICC

7. IKM (Institut Kimia Malaysia)– IKM Laboratory Excellence

Award

Certifications:

1. S I R I M C e r t i f i c a t i o n o f Occupational Health and Safety Assessment Series (OHSAS) 18001:2007, MS1722:2011 for Occupational Health and Safety Management System

2. SIRIM Certification of MS ISO 9 0 0 1 : 2 0 0 8 f o r Q u a l i t y Management System

3. SIRIM Certification of MS ISO 1 4 0 0 1 f o r E n v i r o n m e n t a l Management System

4. C e r t i f i c a t i o n o f Q u a l i t y Improvement Practices (5S) from t h e M a l a y s i a P r o d u c t i v i t y Corporation (MPC) for Tanjung Sulong Export Terminal (TSET)

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FINANCIAL STATEMENTS

246 Statement of Directors’ Responsibility in Relation to the Financial Statements

247 Directors’ Report

252 Statement by Directors

252 Statutory Declaration

253 Consolidated Statement of Financial Position

254 Consolidated Statement of Profit or Loss and Other Comprehensive Income

255 Consolidated Statement of Changes in Equity

257 Consolidated Statement of Cash Flows

258 Statement of Financial Position

259 Statement of Profit or Loss and Other Comprehensive Income

260 Statement of Changes in Equity

261 Statement of Cash Flows

262 Notes to the Financial Statements

332 Independent Auditors’ Report to the members of PETRONAS Gas Berhad

245

OUR RIGHTRESULTS

The financial statements of the Group and of the Company as set out on pages 253 to 331, are properly drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2015 and of the results of its operations and cash flows for the year ended on that date.

The Directors consider that in preparing the financial statements of the Group and of the Company:

• appropriate accounting policies have been used and consistently applied;

• reasonable and prudent judgements and estimates were made;

• all Malaysian Financial Reporting Standards and the Malaysian Companies Act, 1965 have been followed; and

• are prepared on a going concern basis.

The Directors are responsible for ensuring that the accounting and other records and registers required by the Malaysian Companies Act, 1965 to be retained by the Company and its subsidiaries have been properly kept in accordance with the provisions of the said Act.

The Directors also have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group and the Company, and to prevent and detect fraud and other irregularities.

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STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RELATION TO THE FINANCIAL STATEMENTS

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2015.

PRINCIPAL ACTIVITIES

The principal activities of the Company in the course of the financial year remain unchanged and consist of separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities.

The principal activities of the subsidiaries, associate and joint ventures are as stated in note 5, note 6 and note 7 to the financial statements respectively.

RESULTS

GroupRM’000

CompanyRM’000

Profit for the year 1,985,870 2,321,548

Attributable to:Shareholders of the Company 1,987,452 –Non-controlling interests (1,582) –

DIVIDENDS

During the financial year, the Company paid:

i. a third interim dividend of 15 sen per ordinary share amounting to RM296,810,000 in respect of the financial year ended 31 December 2014 on 25 March 2015;

ii. a first interim dividend of 14 sen per ordinary share amounting to RM277,022,000 in respect of the financial year ended 31 December 2015 on 16 June 2015;

iii. a second interim dividend of 14 sen per ordinary share amounting to RM277,022,000 in respect of the financial year ended 31 December 2015 on 11 September 2015; and

iv. a third interim dividend of 15 sen per ordinary share amounting to RM296,810,000 in respect of the financial year ended 31 December 2015 on 14 December 2015.

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DIRECTORS’ REPORTF O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

DIVIDENDS (continued)

The Directors had on 24 February 2016 declared a fourth interim dividend of 17 sen per ordinary amounting to RM336,384,000 in respect of the financial year ended 31 December 2015.

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend, will be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31 December 2016.

RESERVES AND PROVISIONS

There were no material movements to and from reserves and provisions during the year other than as disclosed in the financial statements.

DIRECTORS OF THE COMPANY

Directors who served since the date of the last report are:

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas (appointed on 1 September 2015)Dato’ N. Sadasivan N.N. PillayDatuk Rosli bin BoniPramod Kumar KarunakaranDato’ Ab. Halim bin MohyiddinLim Beng ChoonYusa’ bin HassanHabibah binti AbdulDatuk Manharlal Ratilal (resigned on 1 September 2015)

In accordance with Article 93 of the Company’s Articles of Association, Yusa’ bin Hassan will retire by rotation from the Board at the forthcoming Annual General Meeting, and being eligible, offers himself for re-election.

In accordance with Article 96 of the Company’s Articles of Association, Tan Sri Dato’ Seri Shamsul Azhar bin Abbas who was appointed to fill a casual vacancy on the Board, will retire at the forthcoming Annual General Meeting, and being eligible, offers himself for re-election.

In accordance with Section 129(6) of the Companies Act, 1965, Dato’ N. Sadasivan N.N. Pillay and Dato’ Ab. Halim bin Mohyiddin are retiring at the forthcoming Annual General Meeting. Dato’ N. Sadasivan N.N. Pillay and Dato’ Ab. Halim bin Mohyiddin offer themselves for re-appointment and are eligible to be re-appointed.

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DIRECTORS’ INTERESTS

The Directors in office at the end of the year who have interests in the shares of the Company and of its related corporations other than wholly owned subsidiaries (including the interests of the spouses and/or children of the Director who themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each in the Company

NameBalance at

1.1.2015 Bought SoldBalance at

31.12.2015

Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM0.50 each in Malaysia Marine and Heavy Engineering Holdings Berhad

NameBalance at

1.1.2015 Bought SoldBalance at

31.12.2015

Dato’ Ab. Halim bin Mohyiddin 5,000 – – 5,000

Number of ordinary shares of RM0.10 each in PETRONAS Chemicals Group Berhad

Name

Balance at1.1.2015/

at appointmentdate Bought Sold

Balance at31.12.2015

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas 20,000 – – 20,000Datuk Rosli bin Boni 12,000 – (2,000) 10,000Pramod Kumar Karunakaran 6,000 – – 6,000Dato’ Ab. Halim bin Mohyiddin

– own 5,000 – – 5,000– others 5,000 – – 5,000

Yusa’ bin Hassan 14,000 – (14,000) –

None of the other Directors holding office at 31 December 2015 had any interest in the ordinary shares of the Company and of its related corporations during the financial year.

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INFORMATION

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of related corporations), by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

ISSUE OF SHARES

There were no changes in the issued and paid up capital of the Company during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i. there are no bad debts to be written off and no provision need to be made for doubtful debts; and

ii. any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

i. that would render it necessary to write off any bad debts or provide for any doubtful debts; or

ii. that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading; or

iii. which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or

iv. not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

i. any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person; or

ii. any material contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

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OTHER STATUTORY INFORMATION (continued)

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, except for the loss on unrealised foreign exchange as disclosed in the note 20 to the financial statements, the financial performance of the Group and of the Company for the financial year ended 31 December 2015 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

There were no significant events during the financial year other than as disclosed in note 25.

SUBSEQUENT EVENTS

There were no material events subsequent to the end of the financial year.

AUDITORS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directorsin accordance with a resolution of the Directors:

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas

Yusa’ bin Hassan

Kuala Lumpur,24 February 2016

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INFORMATION

In the opinion of the Directors, the financial statements set out on pages 253 to 331, are drawn up in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company at 31 December 2015 and of their financial performance and cash flows for the year ended on that date.

In the opinion of the Directors, the information set out in note 35 on page 331 to the financial statements has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directorsin accordance with a resolution of the Directors:

Tan Sri Dato’ Seri Shamsul Azhar bin Abbas Yusa’ bin Hassan

Kuala Lumpur,24 February 2016

I, Aida Aziza binti Mohd Jamaludin, the officer primarily responsible for the financial management of PETRONAS GAS BERHAD, do solemnly and sincerely declare that the financial statements set out on pages 253 to 331 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the above namedAida Aziza binti Mohd Jamaludin at Kuala Lumpur inWilayah Persekutuan on 24 February 2016.

BEFORE ME:

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STATEMENT BY DIRECTORS

STATUTORY DECLARATION

Note31.12.2015

RM’00031.12.2014

RM’000

ASSETSProperty, plant and equipment 3 11,323,848 10,858,461Prepaid lease payment 4 4,518 –Investment in associate 6 128,063 132,335Investment in joint ventures 7 547,647 468,399Deferred tax assets 8 456,360 511,434

TOTAL NON-CURRENT ASSETS 12,460,436 11,970,629

Trade and other inventories 10 46,367 43,384Trade and other receivables 11 644,389 608,718Cash and cash equivalents 12 1,230,815 637,746

TOTAL CURRENT ASSETS 1,921,571 1,289,848

TOTAL ASSETS 14,382,007 13,260,477

EQUITYShare capital 13 1,978,732 1,978,732Reserves 14 9,460,067 8,555,146

Total equity attributable to the shareholders of the Company 11,438,799 10,533,878Non-controlling interests 15 156,137 35,125

TOTAL EQUITY 11,594,936 10,569,003

LIABILITIESFinance lease liabilities 16 1,029,596 861,223Deferred tax liabilities 8 922,594 1,033,321Deferred income 17 6,852 7,798

TOTAL NON-CURRENT LIABILITIES 1,959,042 1,902,342

Trade and other payables 18 796,539 668,185Finance lease liabilities 16 28,664 21,027Taxation 2,826 99,920

TOTAL CURRENT LIABILITIES 828,029 789,132

TOTAL LIABILITIES 2,787,071 2,691,474

TOTAL EQUITY AND LIABILITIES 14,382,007 13,260,477

The notes set out on pages 262 to 331 are an integral part of these financial statements.

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INFORMATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

A T 3 1 D E C E M B E R 2 0 1 5

Note2015

RM’0002014

RM’000

Revenue 19 4,455,955 4,391,716Cost of revenue 19 (2,316,526) (2,179,498)

Gross profit 19 2,139,429 2,212,218Administration expenses (89,468) (74,843)Other expenses (205,211) (96,215)Other income 172,213 100,899

Operating profit 20 2,016,963 2,142,059Financing costs 21 (90,055) (76,328)Share of profit after tax of equity-accounted associate and joint ventures 75,202 288,728

Profit before taxation 2,002,110 2,354,459Tax expense 22 (16,240) (512,379)

Profit for the year 1,985,870 1,842,080

Other comprehensive incomeItem that may be reclassified subsequently to profit or lossShare of cash flow hedge of an equity-accounted joint venture 28,939 7,950Net movement from exchange differences 55,955 –

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,070,764 1,850,030

Profit/(loss) attributable to:Shareholders of the Company 1,987,452 1,843,186Non-controlling interests 15 (1,582) (1,106)

PROFIT FOR THE YEAR 1,985,870 1,842,080

Total comprehensive income/(expense) attributable to:Shareholders of the Company 2,058,705 1,851,136Non-controlling interests 12,059 (1,106)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,070,764 1,850,030

Basic and diluted earnings per ordinary share (sen) 24 100.4 93.1


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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


Attributable to shareholders of the Company

Non-distributable

Note

Sharecapital

RM’000

Sharepremium

RM’000

HedgingreserveRM’000

Foreigncurrency

translationreserveRM’000

Balance at 1 January 2014 1,978,732 1,186,472 4,596 –

Share of cash flow hedge of an equity-accounted joint venture – – 7,950 –

Profit for the year – – – –

Total comprehensive income for the year – – 7,950 –

Issuance of shares to non-controlling interest – – – –Dividends – 31.12.2013 final 23 – – – –Dividends – 31.12.2014 interim 23 – – – –

Total transactions with shareholders of the Company – – – –

Balance at 31 December 2014 1,978,732 1,186,472 12,546 –

Balance at 1 January 2015 1,978,732 1,186,472 12,546 –

Net movement from exchange differences – – – 42,314Share of cash flow hedge of an equity-

accounted joint venture – – 28,939 –Profit for the year – – – –

Total comprehensive income for the year – – 28,939 42,314

Issuance of shares to non-controlling interest – – – –Dilution of equity shareholding in a

subsidiary 25 – – – (5,943)Dividends – 31.12.2014 interim 23 – – – –Dividends – 31.12.2015 interim 23 – – – –

Total transactions with shareholders of the Company – – – (5,943)

Balance at 31 December 2015 1,978,732 1,186,472 41,485 36,371

continue to next page


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



Distributable

Note

Retained profits

RM’000Total

RM’000

Non-controlling

interestsRM’000

Total equity

RM’000

Balance at 1 January 2014 7,095,930 10,265,730 (183) 10,265,547

Share of cash flow hedge of an equity-accounted joint venture – 7,950 – 7,950

Profit for the year 1,843,186 1,843,186 (1,106) 1,842,080

Total comprehensive income for the year 1,843,186 1,851,136 (1,106) 1,850,030

Issuance of shares to non-controlling interest – – 36,414 36,414

Dividends – 31.12.2013 final 23 (791,494) (791,494) – (791,494)Dividends – 31.12.2014 interim 23 (791,494) (791,494) – (791,494)

Total transactions with shareholders of the Company (1,582,988) (1,582,988) 36,414 (1,546,574)

Balance at 31 December 2014 7,356,128 10,533,878 35,125 10,569,003

Balance at 1 January 2015 7,356,128 10,533,878 35,125 10,569,003

Net movement from exchange differences – 42,314 13,641 55,955

Share of cash flow hedge of an equity-accounted joint venture – 28,939 – 28,939

Profit for the year 1,987,452 1,987,452 (1,582) 1,985,870

Total comprehensive income for the year 1,987,452 2,058,705 12,059 2,070,764

Issuance of shares to non-controlling interest – – 102,833 102,833Dilution of equity shareholding in a

subsidiary 25 (177) (6,120) 6,120 –Dividends – 31.12.2014 interim 23 (296,810) (296,810) – (296,810)Dividends – 31.12.2015 interim 23 (850,854) (850,854) – (850,854)Total transactions with shareholders

of the Company (1,147,841) (1,153,784) 108,953 (1,044,831)

Balance at 31 December 2015 8,195,739 11,438,799 156,137 11,594,936

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYF O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

Note2015

RM’0002014

RM’000

CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers 4,574,476 4,547,268Cash paid to suppliers and employees (1,591,607) (1,631,831)

2,982,869 2,915,437Interest income from fund investments 31,755 37,056Taxation paid (168,987) (375,830)

Net cash generated from operating activities 2,845,637 2,576,663

CASH FLOWS FROM INVESTING ACTIVITIESDividends received from associate and joint ventures 29,165 26,987Acquisition of subsidiary, net of cash acquired – 2,101Prepaid lease payment (4,133) –Purchase of property, plant and equipment (1,169,372) (1,254,029)Maturity of other investments – 15,000Reimbursement of project cost 56,236 –Proceeds from disposal of property, plant and equipment 368 268

Net cash used in investing activities (1,087,736) (1,209,673)

CASH FLOWS FROM FINANCING ACTIVITIESDividends paid (1,147,664) (1,582,988)Financing costs paid (88,814) (76,247)Repayment of finance lease liabilities (23,861) (18,546)Proceeds from shares issued to a non-controlling interest 102,833 36,414

Net cash used in financing activities (1,157,506) (1,641,367)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 600,395 (274,377)NET FOREIGN EXCHANGE DIFFERENCE (7,326) –CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 637,746 912,123

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 12 1,230,815 637,746


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CONSOLIDATED STATEMENT OF CASH FLOWSF O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

Note31.12.2015

RM’00031.12.2014

RM’000

ASSETSProperty, plant and equipment 3 7,608,286 7,537,445Investment in subsidiaries 5 2,776,901 2,514,767Investment in associate 6 76,466 76,466Investment in joint ventures 7 192,250 192,250

TOTAL NON-CURRENT ASSETS 10,653,903 10,320,928

Trade and other inventories 10 44,197 42,904Trade and other receivables 11 553,519 613,330Cash and cash equivalents 12 1,116,541 492,474

TOTAL CURRENT ASSETS 1,714,257 1,148,708

TOTAL ASSETS 12,368,160 11,469,636

EQUITYShare capital 13 1,978,732 1,978,732Reserves 14 8,906,360 7,732,476

TOTAL EQUITY 10,885,092 9,711,208

LIABILITIESDeferred tax liabilities 8 922,594 1,033,321Deferred income 17 6,852 7,798

TOTAL NON-CURRENT LIABILITIES 929,446 1,041,119

Trade and other payables 18 550,796 617,390Taxation 2,826 99,919

TOTAL CURRENT LIABILITIES 553,622 717,309

TOTAL LIABILITIES 1,483,068 1,758,428

TOTAL EQUITY AND LIABILITIES 12,368,160 11,469,636


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STATEMENT OF FINANCIAL POSITIONA T 3 1 D E C E M B E R 2 0 1 5

Note2015

RM’0002014

RM’000

Revenue 19 3,818,817 3,775,496Cost of revenue 19 (1,976,943) (1,871,257)

Gross profit 19 1,841,874 1,904,239Administration expenses (89,262) (73,339)Other expenses (2,158) (43,389)Other income 532,260 327,622

Profit before taxation/Operating profit 20 2,282,714 2,115,133Tax income/(expense) 22 38,834 (420,764)

PROFIT FOR THE YEAR REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,321,548 1,694,369


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INFORMATION

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME



Non-distributable Distributable

Note

Sharecapital

RM’000

Sharepremium

RM’000

Retainedprofits

RM’000Total

RM’000

Balance at 1 January 2014 1,978,732 1,186,472 6,434,623 9,599,827

Profit for the year – – 1,694,369 1,694,369

Total comprehensive income for the year – – 1,694,369 1,694,369

Dividends – 31.12.2013 final 23 – – (791,494) (791,494)Dividends – 31.12.2014 interim 23 – – (791,494) (791,494)

Total distribution to shareholders of the Company – – (1,582,988) (1,582,988)

Balance at 31 December 2014 1,978,732 1,186,472 6,546,004 9,711,208

Balance at 1 January 2015 1,978,732 1,186,472 6,546,004 9,711,208

Profit for the year – – 2,321,548 2,321,548

Total comprehensive income for the year – – 2,321,548 2,321,548

Dividends – 31.12.2014 interim 23 – – (296,810) (296,810)Dividends – 31.12.2015 interim 23 – – (850,854) (850,854)

Total distribution to shareholders of the Company – – (1,147,664) (1,147,664)

Balance at 31 December 2015 1,978,732 1,186,472 7,719,888 10,885,092


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STATEMENT OF CHANGES IN EQUITYF O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

Note2015

RM’0002014

RM’000

CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers 3,941,100 3,916,009Cash paid to suppliers and employees (1,390,395) (1,427,079)

2,550,705 2,488,930Interest income from fund investments 26,390 28,484Taxation paid (168,986) (375,830)

Net cash generated from operating activities 2,408,109 2,141,584

CASH FLOWS FROM INVESTING ACTIVITIESRepayment from subsidiaries 64,050 289,190Acquisition of subsidiary 25 – (94,666)Subscription of additional shares in existing subsidiaries (262,134) –Dividends received 384,217 226,987Purchase of property, plant and equipment (822,879) (1,208,747)Maturity of other investments – 15,000Proceeds from disposal of property, plant and equipment 368 268

Net cash used in investing activities (636,378) (771,968)

CASH FLOWS FROM FINANCING ACTIVITIESDividends paid (1,147,664) (1,582,988)

Net cash used in financing activities (1,147,664) (1,582,988)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 624,067 (213,372)CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 492,474 705,846

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 12 1,116,541 492,474


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INFORMATION

STATEMENT OF CASH FLOWSF O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 5

PETRONAS GAS BERHAD is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of the principal place of business and registered office of the Company is as follows:

Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre50088 Kuala Lumpur

The Company is principally engaged in separating natural gas into its components and storing, transporting and distributing such components thereof for a fee and the sale of industrial utilities. The principal activities of its subsidiaries, associate and joint ventures are as stated in note 5, note 6 and note 7 to the financial statements respectively.

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (PETRONAS), a company incorporated in Malaysia.

The consolidated financial statements of the Company as at and for the financial year ended 31 December 2015 comprises the Company and its subsidiaries (collectively referred to as the “Group”) and the Group’s interest in an associate and joint ventures.

1. BASIS OF PREPARATION

1.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (MFRS), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

These financial statements also comply with the applicable disclosure provisions of the Listing Requirements of Bursa Malaysia Securities Berhad.

As of 1 January 2015, the Group and the Company have adopted amendments to MFRS (collectively referred to as “pronouncements”) that have been issued by the Malaysian Accounting Standards Board (MASB) as described fully in note 32.

MASB has also issued new and revised pronouncements which are not yet effective for the Group and the Company and therefore, have not been adopted for in these financial statements. These new pronouncements including their impact on the financial statements in the period of initial application are set out in note 33. New and revised pronouncements that are not relevant to the operation of the Group and of the Company are set out in note 34.

These financial statements were approved and authorised for issue by the Board of Directors on 24 February 2016.

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NOTES TO THE FINANCIAL STATEMENTS– 3 1 D E C E M B E R 2 0 1 5

1. BASIS OF PREPARATION (continued)

1.2 Basis of measurement

The financial statements of the Group and the Company have been prepared on the historical cost basis except that, as disclosed in the accounting policies below, certain items are measured at fair value.

1.3 Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Group’s and the Company’s financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency.

All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

1.4 Use of estimates and judgements

The preparation of the financial statements in conformity with MFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the following notes:

(i) Note 3 : Property, plant and equipment;(ii) Note 6 : Investment in associate;(iii) Note 7 : Investment in joint ventures;(iv) Note 8 : Deferred tax; and(v) Note 30 : Financial instruments.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and have been applied consistently by the Group and the Company, unless otherwise stated.

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INFORMATION

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1 Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive. The Group considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return.

The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date that control commences until the date that control ceases.

All inter-company transactions are eliminated on consolidation and revenue and profits are related to external transactions only. Unrealised losses resulting from inter-company transactions are also eliminated unless cost cannot be recovered.

Business combinations

A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate of the fair value of the consideration transferred and the amount of any non-controlling interests in the acquiree. Non-controlling interests are stated either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

When a business combination is achieved in stages, the Group remeasures its previously held non-controlling equity interest in the acquiree at fair value at the acquisition date, with any resulting gain or loss recognised in the profit or loss. Increase in the Group’s ownership interest in an existing subsidiary is accounted for as equity transactions with differences between the fair value of consideration paid and the Group’s proportionate share of net assets acquired, recognised directly in equity.

The Group measures goodwill as the excess of the cost of an acquisition as defined above and the fair values of any previously held interest in the acquiree over the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Transaction costs, other than those associated with the issuance of debt or equity securities that the Group incurs in connection with a business combination, are expensed as incurred.

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2.1 Basis of consolidation (continued)

Non-controlling interests

Non-controlling interests at the reporting period, being the portion of the net assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented in the consolidated statement of profit or loss and other comprehensive income as an allocation of the profit or loss and other comprehensive income for the year between non-controlling interests and shareholders of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

2.2 Associate

An associate is an entity in which the Group has significant influence including representation on the Board of Directors, but not control or joint control, over the financial and operating policies of the investee company.

Associate is accounted for in the consolidated financial statements using the equity method. The consolidated financial statements include the Group’s share of post-acquisition profits or losses and other comprehensive income of the equity accounted associate, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

The Group’s share of post-acquisition reserves and retained profits less losses is added to the carrying value of the investment in the consolidated statement of financial position. These amounts are taken from the latest audited financial statements or management financial statements of the associate.

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2.2 Associate (continued)

When the Group’s share of post-acquisition losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that associate, with the resulting gain or loss being recognised in profit or loss. Any retained interest in the former associate at the date when significant influence is lost is re-measured at fair value and this amount is regarded as the initial carrying amount of a financial asset.

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets and liabilities.

Unrealised profits arising from transactions between the Group and its associate are eliminated to the extent of the Group’s interests in the associate. Unrealised losses on such transactions are also eliminated partially, unless cost cannot be recovered.

2.3 Joint arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified as either joint operation or joint venture. A joint arrangement is classified as joint operation when the Group or the Company has rights to the assets and obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation to the joint operation. A joint arrangement is classified as joint venture when the Group has rights only to the net assets of the arrangements. The Group accounts for its interest in the joint venture using the equity method as described in note 2.2.

2.4 Property, plant and equipment and depreciation

Freehold land and projects-in-progress are measured at cost less any accumulated impairment losses and are not depreciated. Other property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

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2.4 Property, plant and equipment and depreciation (continued)

Cost includes expenditure that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the assets to working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised in the profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit or loss as incurred.

Buildings are depreciated over 50 years or over the remaining land lease period, whichever is shorter.

Depreciation for property, plant and equipment other than freehold land and projects-in-progress is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Property, plant and equipment are not depreciated until the assets are ready for their intended use.

Lease properties are depreciated over the lease term or the estimated useful lives, whichever is shorter. Leasehold land is depreciated over the lease term.

The estimated useful lives of the other property, plant and equipment are as follows:

Plant and pipelines 5 – 55 yearsOffice equipment, furniture and fittings 6 – 7 yearsOther plant and equipment 3 – 7 yearsComputer hardware and software 5 yearsMotor vehicles 4 yearsPlant turnaround/major inspection 3 – 7 years

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2.4 Property, plant and equipment and depreciation (continued)

The depreciable amount is determined after deducting residual value. The residual value, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, period and method of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in the profit or loss.

2.5 Leased assets

A lease arrangement is accounted for as finance or operating lease in accordance with the accounting policy stated below. When the fulfilment of an arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, it is accounted for as a lease although the arrangement does not take the legal form of a lease.

Finance lease

A lease is recognised as a finance lease if it transfers substantially to the Group and the Company all the risks and rewards incidental to ownership. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. The corresponding liability is included in the statement of financial position as financial lease liabilities.

Minimum lease payments made under finance leases are apportioned between the finance costs and the reduction of the outstanding liability. The finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss and allocated over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each accounting period.

Contingent lease payments, if any, are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

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2.5 Leased assets (continued)

Operating lease

All leases that do not transfer substantially to the Group and the Company all the risks and rewards incidental to ownership are classified as operating leases and, the leased assets are not recognised on the Group’s and the Company’s statement of financial position.

Payments made under operating leases are recognised as an expense in the profit or loss on a straight-line

basis over the term of the lease. Lease incentives received are recognised as a reduction of rental expense over the lease term on a straight-line basis. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

Leasehold land which in substance is an operating lease is classified as prepaid lease payments.

Prepaid lease payments

The payment made on entering into a lease arrangement or acquiring a leasehold land are accounted for as prepaid lease payments that are amortised over the lease term of 65 years in accordance with the pattern of benefits provided.

Leasehold land is classified into long lease and short lease. Long lease is defined as a lease with an unexpired lease period of 50 years or more. Short lease is defined as a lease with an unexpired lease period of less than 50 years.

2.6 Investments

Long term investments in subsidiaries, associate and joint ventures are stated at cost less impairment loss, if any, in the Company’s financial statements, unless the investment is classified as held for sale. The cost of investment includes transaction costs.

The carrying amount of these investments includes fair value adjustments on shareholder’s loans and advances, if any.

2.7 Intangible asset – goodwill

Goodwill arising from business combinations is initially measured at cost as described in note 2.1. Following the initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

In respect of equity accounted associate, the carrying amount of goodwill is included in the carrying amount of the investment. The entire carrying amount of the investment is reviewed for impairment when there is objective evidence of impairment.

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2.8 Financial instruments

A financial instrument is recognised in the statement of financial position when, and only when, the Group or the Company becomes a party to the contractual provisions of the instrument.

i) Financial assets

Initial recognition

Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. The Group and the Company determine the classification of financial assets at initial recognition.

Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of financial assets not at fair value through profit or loss, any directly attributable transaction costs.

Purchases or sales that require delivery of financial assets within a timeframe established by regulation or convention in the marketplace concerned (regular way purchases) are recognised on the trade date, i.e. the date that the Group and the Company commit to purchase or sell the financial asset.

Fair value adjustments on shareholder’s loans and advances at initial recognition, if any, are added to the carrying value of investments in the Company’s financial statements.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business combination and financial assets that are specifically designated into this category upon initial recognition.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair value with gains or losses recognised in the profit or loss. The methods used to measure fair value are stated in note 2.21.

Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market. Subsequent to initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest method as described in note 2.8(vi).

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2.8 Financial instruments (continued)

i) Financial assets (continued)

Held-to-maturity investments

The Group and the Company did not have any held-to-maturity investments during the year ended 31 December 2015 and the year ended 31 December 2014.

Available-for-sale financial assets

Available-for-sale category comprises investment in equity and debt securities instruments that are not held for trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at fair value with unrealised gains and losses recognised directly in other comprehensive income and accumulated under available-for-sale reserve in equity until the investment is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recorded in equity is recognised in the profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see note 2.9(i)).

ii) Financial liabilities

Initial recognition

Financial liabilities are classified as financial liabilities at fair value through profit or loss, or financial liabilities measured at amortised cost as appropriate. The Group and the Company determine the classification of financial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value less, in the case of financial liabilities measured at amortised cost, any directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

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ii) Financial liabilities (continued)

Financial liabilities at fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business combination and financial liabilities that are specifically designated into this category upon initial recognition.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

Financial liabilities measured at amortised cost

Subsequent to initial recognition, financial liabilities measured at amortised cost are measured at amortised cost using the effective interest method as described in note 2.8(vi).

Gains and losses are recognised in the profit or loss when the liabilities are derecognised, as well as through the amortisation process.

iii) Hedge accounting

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow hedge, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the ineffective portion is recognised in profit or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedge item is a non-financial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be recovered in one or more future periods is reclassified from equity into profit or loss.

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iii) Hedge accounting (continued)

Cash flow hedge (continued)

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss recognised in other comprehensive income on the hedging instrument is reclassified from equity into profit or loss.

iv) Derivative financial instruments

The Group and the Company use derivative financial instruments such as forward currency contracts to manage certain exposures to fluctuations in foreign currency exchange rates.

Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains and losses arising from changes in fair value on derivatives during the year, other than those accounted for under hedge accounting as described in note 2.8(iii), are recognised directly to the profit or loss.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised as at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

In general, contracts to sell or purchase non-financial items to meet expected own use requirements are not accounted for as financial instruments. However, contracts to sell or purchase commodities that can be net settled or which contain written options are required to be measured at fair value, with gains and losses recognised in the profit or loss.

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v) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

vi) Amortised cost of financial instruments

Amortised cost is computed using the effective interest method. This method uses effective interest rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the net carrying amount of the financial instrument. Amortised cost takes into account any transaction costs and any discount or premium on settlement.

vii) Derecognition of financial instruments

Financial assets

A financial asset is derecognised when the rights to receive cash flows from the asset have expired, or the Group and the Company have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement without retaining control of the asset or substantially all the risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in the profit or loss.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the profit or loss.

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2.9 Impairment

i) Financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investment in subsidiaries, investment in associate and investment in joint ventures) are assessed at each reporting date to determine whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an investment in an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists, then the impairment loss of the financial asset is estimated.

An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale is not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

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2.9 Impairment (continued)

ii) Other assets

The carrying amounts of other assets, other than inventories, deferred tax assets and financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or the cash-generating-unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised in the profit or loss.

A cash-generating-unit is the smallest identifiable asset group that generates cash flows from continuing use that are largely independent from other assets and groups. An impairment loss recognised in respect of a cash-generating-unit is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to reduce the carrying amounts of the other assets in the unit on a pro-rata basis.

The recoverable amount of an asset or cash-generating-unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating-unit. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating-unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed in the subsequent period. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the profit or loss in the year in which reversals are recognised.

2.10 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank balances, and deposits with licensed financial institutions and highly liquid investments which have an insignificant risk of changes in value. For the purpose of statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and deposits restricted, if any.

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2.11 Inventories

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost of material stores and spares consists of the invoiced value from suppliers and import duty charges and is determined on a weighted average basis.

Cost of liquefied gases and water is determined on a weighted average basis.

2.12 Provisions

A provision is recognised if, as a result of a past event, the Group and the Company have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future net cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the accretion in the provision due to the passage of time is recognised as finance cost.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

Possible obligations whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, not wholly within the control of the Group, are not recognised in the financial statements but are disclosed as contingent liabilities unless the possibility of an outflow of economic resources is considered remote.

2.13 Employee benefits

Short term benefits

Wages and salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and of the Company.

Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (EPF).

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2.14 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit or loss except to the extent it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using the statutory tax rates at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is provided for, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unabsorbed capital allowances, unutilised reinvestment allowances, unutilised investment tax allowances, unutilised tax losses and unutilised tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unabsorbed capital allowances, unutilised reinvestment allowances, unutilised investment tax allowances, unutilised tax losses and unutilised tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the assets is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, where they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax asset is reviewed at each reporting date and is reduced to the extent that it is no longer probable that the future taxable profits will be available against which related tax benefit will be realised.

Unutilised reinvestment allowance and unutilised investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against which the unutilised tax incentive can be utilised.

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2.15 Foreign currency transactions

In preparing the financial statements of individual entities in the Group, transactions in currencies other than the entity’s functional currency (foreign currencies) are translated to the functional currencies at rates of exchange ruling on the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at reporting date are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at reporting date, except for those that are measured at fair value, are retranslated to the functional currency at the exchange rate at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated.

Gains and losses on exchange arising from retranslation are recognised in the profit or loss.

On consolidation, the assets and liabilities of subsidiaries with functional currencies other than Ringgit Malaysia, are translated into Ringgit Malaysia at the exchange rates approximating those ruling at the reporting date, except for goodwill and fair value adjustments arising from business combinations before 1 April 2011 which are treated as assets and liabilities of the acquirer company pursuant to the adoption of MFRS framework.

The income and expenses are translated at the average exchange rates for the year, which approximates the exchange rates at the date of transactions. All resulting exchange differences are taken to the foreign currency translation reserve within equity.

2.16 Revenue

Revenue from gas processing services is recognised in the profit or loss based on actual and estimates of work done in respect of services rendered for separating natural gas into its components.

Revenue from gas transportation services is recognised in the profit or loss based on services rendered for transporting and distributing the processed gas.

Revenue from sale of industrial utilities is recognised in the profit or loss based on utilities distributed to the buyer at pre-determined rates.

Revenue from regasification of liquefied natural gas is recognised in the profit or loss based on actual and estimates of work done in respect of services rendered for conversion of natural gas from liquid to gas.

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2.17 Financing costs

Finance costs comprise interest payable on borrowings.

All interest and other costs incurred in connection with borrowings are expensed as incurred. The interest component of finance lease payments is accounted for in accordance with the policy set out in note 2.5.

2.18 Deferred income

Deferred income is recognised in the profit or loss on a time proportion basis over the agreed contract period or applicable period.

2.19 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the period, for the effects of potential ordinary shares, if any.

2.20 Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, and for which discrete financial information is available. All operating segment’s operating results are reviewed regularly by entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance.

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2.21 Fair value measurements

Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

Financial instruments

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at reporting date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

Non-financial assets

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group/Company uses observable market data as far as possible. Fair value are categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).• Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable

input).

The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer.

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3. PROPERTY, PLANT AND EQUIPMENT

Group31.12.2015

At1.1.2015

RM’000Additions

RM’000

Disposals/ write-offs

RM’000

At costFreehold land 4,504 – –Leasehold land 538,876 726 –Buildings 264,561 – (74)Plant and pipelines 18,453,586 1,246 (184,602)Office equipment, furniture and fittings 36,318 282 (549)Other plant and equipment 243,561 11,047 (11,199)Computer hardware and software 92,908 821 (120)Motor vehicles 28,915 2,199 (2,460)Plant turnaround/major inspection 532,160 – (43,407)Projects-in-progress 1,627,856 1,206,072 –

21,823,245 1,222,393 (242,411)

Group31.12.2015

At1.1.2015

RM’000

Charge for the yearRM’000


RM’000

Accumulated depreciation & impairment losses:Freehold land – – –Leasehold land 116,683 6,855 –Buildings 93,635 30,148 (74)Plant and pipelines 10,223,024 643,076 (182,547)Office equipment, furniture and fittings 27,377 2,745 (549)Other plant and equipment 93,859 5,833 (11,065)Computer hardware and software 74,427 6,736 (120)Motor vehicles 23,178 2,722 (2,460)Plant turnaround/major inspection 312,601 78,703 (43,407)Projects-in-progress – – –

10,964,784 776,818 (240,222)

continue to next page

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3. PROPERTY, PLANT AND EQUIPMENT (continued)

Group31.12.2015

Transfers/ adjustment

RM’000

Translation exchange difference

RM’000

At31.12.2015

RM’000

At costFreehold land – – 4,504Leasehold land – – 539,602Buildings 77,636 – 342,123Plant and pipelines 1,087,665 – 19,357,895Office equipment, furniture and fittings 3,942 – 39,993Other plant and equipment 41,680 – 285,089Computer hardware and software 6,048 – 99,657Motor vehicles 10 – 28,664Plant turnaround/major inspection 53,004 – 541,757Projects-in-progress (1,327,687) 79,703 1,585,944

(57,702)* 79,703 22,825,228

Group31.12.2015


RM’000

Translation exchange difference

RM’000

At31.12.2015

RM’000

Accumulated depreciation & impairment losses:Freehold land – – –Leasehold land 6 – 123,544Buildings 2 – 123,711Plant and pipelines (4,649) – 10,678,904Office equipment, furniture and fittings 257 – 29,830Other plant and equipment 5,102 – 93,729Computer hardware and software 4 – 81,047Motor vehicles 11 – 23,451Plant turnaround/major inspection (733) – 347,164Projects-in-progress – – –

– – 11,501,380

continued from previous page

* Relates to adjustments upon finalisation of cost previously accrued and reimbursement of project cost amounting to RM18,631,000 and RM39,071,000 respectively.

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INFORMATION


Group31.12.2014

At1.1.2014

RM’000Additions

RM’000

Acquisition of

a subsidiaryRM’000


RM’000


RM’000

At31.12.2014

RM’000

At costFreehold land 4,544 – – – (40) 4,504Leasehold land 541,287 4,589 – – (7,000) 538,876Buildings 241,532 130 – – 22,899 264,561Plant and pipelines 17,671,585 8,062 – (131,338) 905,277 18,453,586Office equipment,

furniture and fittings 39,629 69 – (3,942) 562 36,318Other plant and

equipment 187,734 14,679 – (967) 42,115 243,561Computer hardware

and software 84,564 41 – (405) 8,708 92,908Motor vehicles 29,014 909 – (1,008) – 28,915Plant turnaround/major

inspection 457,952 – – (72,946) 147,154 532,160Projects-in-progress 1,697,329 1,058,423 94,294 – (1,222,190) 1,627,856

20,955,170 1,086,902 94,294 (210,606) (102,515)* 21,823,245

* Relates to adjustments upon finalisation of cost previously accrued amounting to RM102,515,000.

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Group31.12.2014

At1.1.2014

RM’000


ImpairmentRM’000


RM’000


RM’000

At31.12.2014

RM’000

Accumulated depreciation & impairment losses:

Freehold land – – – – – –Leasehold land 109,827 6,856 – – – 116,683Buildings 87,533 6,102 – – – 93,635Plant and pipelines 9,645,397 671,628 30,850 (124,851) – 10,223,024Office equipment,

furniture and fittings 25,236 2,971 – (830) – 27,377Other plant and

equipment 83,736 10,865 – (742) – 93,859Computer hardware and

software 67,771 7,061 – (405) – 74,427Motor vehicles 20,938 3,080 – (840) – 23,178Plant turnaround/

major inspection 303,624 78,372 – (69,395) – 312,601Projects-in-progress – – – – – –

10,344,062 786,935 30,850 (197,063) – 10,964,784

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INFORMATION


Company31.12.2015

At1.1.2015

RM’000Additions

RM’000


RM’000


RM’000

At31.12.2015

RM’000

At costFreehold land 4,504 – – – 4,504Leasehold land 538,876 726 – – 539,602Buildings 264,561 – (74) 61,847 326,334Plant and pipelines 15,057,418 1,223 (184,602) 1,127,562 16,001,601Office equipment, furniture and fittings 27,590 264 (549) 3,482 30,787Other plant and equipment 245,136 10,957 (11,199) 9,654 254,548Computer hardware and software 92,876 803 (120) 5,243 98,802Motor vehicles 28,823 2,199 (2,460) 13 28,575Plant turnaround/major inspection 514,665 – (43,407) 53,012 524,270Projects-in-progress 1,437,203 640,530 – (1,260,962) 816,771

18,211,652 656,702 (242,411) (149)* 18,625,794

* Relates to adjustments upon finalisation of cost previously accrued amounting to RM149,000.

Company31.12.2015

At1.1.2015

RM’000



RM’000


RM’000

At31.12.2015

RM’000


Freehold land – – – – –Leasehold land 116,683 6,855 – 6 123,544Buildings 93,635 29,938 (74) 1 123,500Plant and pipelines 9,940,442 466,865 (182,547) (3,148) 10,221,612Office equipment, furniture and fittings 25,303 1,389 (549) 262 26,405Other plant and equipment 91,441 4,366 (11,065) 3,598 88,340Computer hardware and software 74,425 6,695 (120) 4 81,004Motor vehicles 23,176 2,700 (2,460) 10 23,426Plant turnaround/major inspection 309,102 64,715 (43,407) (733) 329,677Projects-in-progress – – – – –

10,674,207 583,523 (240,222) – 11,017,508

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Company31.12.2014

At1.1.2014

RM’000Additions

RM’000


RM’000


RM’000

At31.12.2014

RM’000

At costFreehold land 4,544 – – (40) 4,504Leasehold land 541,287 4,589 – (7,000) 538,876Buildings 241,532 130 – 22,899 264,561Plant and pipelines 14,189,248 701 (131,338) 998,807 15,057,418Office equipment, furniture and fittings 30,901 69 (3,942) 562 27,590Other plant and equipment 187,738 14,679 (967) 43,686 245,136Computer hardware and software 84,564 9 (405) 8,708 92,876Motor vehicles 29,012 819 (1,008) – 28,823Plant turnaround/major inspection 457,952 – (72,946) 129,659 514,665Projects-in-progress 1,627,601 1,014,251 – (1,204,649) 1,437,203

17,394,379 1,035,247 (210,606) (7,368)* 18,211,652

* Relates to adjustments upon finalisation of cost previously accrued amounting to RM7,368,000.

Company31.12.2014

At1.1.2014

RM’000


ImpairmentRM’000


RM’000


RM’000

At31.12.2014

RM’000


Freehold land – – – – – –Leasehold land 109,827 6,856 – – – 116,683Buildings 87,533 6,102 – – – 93,635Plant and pipelines 9,537,681 496,762 30,850 (124,851) – 9,940,442Office equipment,

furniture and fittings 24,471 1,662 – (830) – 25,303Other plant and equipment 83,736 8,447 – (742) – 91,441Computer hardware

and software 67,771 7,059 – (405) – 74,425Motor vehicles 20,938 3,078 – (840) – 23,176Plant turnaround/

major inspection 303,624 74,873 – (69,395) – 309,102Projects-in-progress – – – – – –

10,235,581 604,839 30,850 (197,063) – 10,674,207

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INFORMATION


GroupCarrying amount

CompanyCarrying amount

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Freehold land 4,504 4,504 4,504 4,504Leasehold land 416,058 422,193 416,058 422,193Buildings 218,412 170,926 202,834 170,926Plant and pipelines 8,678,991 8,230,562 5,779,588 5,116,976Office equipment, furniture and fittings 10,163 8,941 4,382 2,287Other plant and equipment 191,360 149,702 166,609 153,695Computer hardware and software 18,610 18,481 17,798 18,451Motor vehicles 5,213 5,737 5,149 5,647Plant turnaround/major inspection 194,593 219,559 194,593 205,563Projects-in-progress 1,585,944 1,627,856 816,771 1,437,203

11,323,848 10,858,461 7,608,286 7,537,445

Restrictions of land title

The titles of certain land are in the process of being registered in the Company’s name.

Leased floating storage unit

The Group leases certain plant and pipelines under a finance lease agreement with a net book value of RM768,670,000 (2014: RM812,804,000).

Leasehold land

Included in the carrying amounts of leasehold land are:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Leasehold land with unexpired lease period of more than 50 years 288,977 292,063 288,977 292,063

Leasehold land with unexpired lease period of less than 50 years 127,081 130,130 127,081 130,130

416,058 422,193 416,058 422,193

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4. PREPAID LEASE PAYMENT

Group31.12.2015

At1.1.2015

RM’000Additions

RM’000

Translationexchangedifference

RM’000

At31.12.2015

RM’000

At costLeasehold land– long lease – 4,133 414 4,547

Group31.12.2015

At1.1.2015

RM’000


Translationexchangedifference

RM’000

At31.12.2015

RM’000

Accumulated amortisationLeasehold land- long lease – 26 3 29

Carrying amount

Group2015

RM’0002014

RM’000

Leasehold land– long lease 4,518 –

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INFORMATION

5. INVESTMENT IN SUBSIDIARIES

Company

2015RM’000

2014RM’000

Investment at cost:– unquoted shares

At beginning of the year 2,514,767 2,420,101Additional investment during the year 262,134 –Acquisition during the year – 94,666

At end of the year 2,776,901 2,514,767

Details of the subsidiaries are as follows:

Name of entity Principal activitiesCountry of

incorporationEffective ownership and voting interest

2015%

2014%

Regas Terminal (Sg. Udang) Sdn. Bhd. Manage and operate LNG regasification terminal

Malaysia 100 100

Regas Terminal (Pengerang) Sdn. Bhd. Dormant Malaysia 100 100Regas Terminal (Lahad Datu) Sdn. Bhd. Dormant Malaysia 99 99Pengerang LNG (Two) Sdn. Bhd. Intended to manage and operate

LNG regasification terminalMalaysia 65 72

6. INVESTMENT IN ASSOCIATE

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Investment at cost:– quoted shares in Malaysia 76,466 76,466 76,466 76,466Share of post-acquisition profits and reserves 51,597 55,869 – –

128,063 132,335 76,466 76,466

Market value of quoted shares 456,024 611,832 456,024 611,832

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6. INVESTMENT IN ASSOCIATE (continued)

Details of the associate are as follows:



2015%

2014%

Gas Malaysia Berhad Selling, marketing, distribution and promotion of natural gas

Malaysia 14.8 14.8

Although the Group has less than 20% of the ownership in the equity interest of Gas Malaysia Berhad, the Group has determined that it has significant influence over the financial and operating policy of the associate through representation on the associate’s board of directors.

2015RM’000

2014RM’000

Group’s share of results Share of total comprehensive income for the year 17,693 26,773

Other informationDividends received 21,965 23,485

7. INVESTMENT IN JOINT VENTURES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Investment at cost: – unquoted shares 192,250 192,250 192,250 192,250Share of post-acquisition profits and reserves 355,397 276,149 – –

547,647 468,399 192,250 192,250

The Group’s involvement in joint arrangements are structured through separate vehicles which provide the Group rights to the net assets of these entities. Accordingly, the Group has classified these investments as joint ventures.

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7. INVESTMENT IN JOINT VENTURES (continued)

2015RM’000

2014RM’000

Group’s summarised financial information

As at 31 DecemberNon-current assets 1,882,842 1,855,127Current assets 347,668 295,143Non-current liabilities (1,020,364) (1,118,883)Current liabilities (297,167) (248,461)

Net assets 912,979 782,926

Included in the net assets are:Cash and cash equivalents 231,719 200,901Non-current liabilities (excluding other payables and provisions) (1,020,364) (1,118,883)Current liabilities (excluding trade and other payables and provisions) (99,790) (34,788)

Group’s share of net assets 547,647 468,399

Year ended 31 DecemberProfit for the year 99,140 436,932Other comprehensive income 48,233 13,250

Total comprehensive income for the year 147,373 450,182

Included in the total comprehensive income are:Revenue 252,774 1,744,096Depreciation and amortisation (367) (368)Interest income 90,508 40,091Interest expense (58,725) (4,987)Tax (expenses)/income (5,725) 291,179

Group’s share of resultsShare of profit for the year 57,509 261,955Share of other comprehensive income 28,939 7,950

Share of total comprehensive income for the year 86,448 269,905

Other informationDividends received 7,200 3,502

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7. INVESTMENT IN JOINT VENTURES (continued)

Group’s share of the net assets and results is significantly contributed by Kimanis Power Sdn. Bhd.

Details of the joint ventures are as follows:



2015%

2014%

Kimanis Power Sdn. Bhd. (KPSB) Generation and sale of electricity Malaysia 60 60

Kimanis O&M Sdn. Bhd. Provision of operation and maintenance services to KPSB

Malaysia 60 60

Industrial Gases Solutions Sdn. Bhd. Selling, marketing, distribution and promotion of industrial gas

Malaysia 50 50

Although the Group has more than 50% of the ownership in the equity interest of Kimanis Power Sdn. Bhd. and Kimanis O&M Sdn. Bhd., the Group has determined that it does not have sole control over these investees considering that strategic and financial decisions of the relevant activities of these investees require unanimous consent by all shareholders.

8. DEFERRED TAX

The components and movements of deferred tax liabilities and assets during the year prior to and after offsetting are as follows:

Group31.12.2015

At 1.1.2015

RM’000

Charged/(credited) to

profit or lossRM’000

At31.12.2015

RM’000

Deferred tax liabilitiesProperty, plant and equipment 1,110,201 108,279 1,218,480

Deferred tax assetsDeferred income 16,684 227 16,911Unutilised investment tax allowance (604,998) (164,159) (769,157)

(588,314) (163,932) (752,246)

Net deferred tax 521,887 (55,653) 466,234

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8. DEFERRED TAX (continued)

Group31.12.2014

At 1.1.2014

RM’000

Charged to profit or loss

RM’000

At31.12.2014

RM’000


Deferred tax assetsDeferred income (2,325) 19,009 16,684Foreign currency translation (14,080) 14,080 –Unutilised investment tax allowance (626,395) 21,397 (604,998)

(642,800) 54,486 (588,314)

Net deferred tax 377,951 143,936 521,887

Company31.12.2015

At 1.1.2015

RM’000

Charged/(credited) to

profit or lossRM’000

At31.12.2015

RM’000


Deferred tax assetsDeferred income 16,684 227 16,911Unutilised investment tax allowance – (154,466) (154,466)

16,684 (154,239) (137,555)

Net deferred tax 1,033,321 (110,727) 922,594

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8. DEFERRED TAX (continued)

Company31.12.2014

At 1.1.2014

RM’000

Charged toprofit or loss

RM’000

At31.12.2014

RM’000

Deferred tax liabilitiesProperty, plant and equipment 983,325 33,312 1,016,637

Deferred tax assetsDeferred income (2,325) 19,009 16,684

Net deferred tax 981,000 52,321 1,033,321

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The amounts determined after appropriate offsetting are as follows:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Deferred tax assetsDeferred tax liabilities 158,331 93,564 – –Deferred tax assets (614,691) (604,998) – –

(456,360) (511,434) – –

Deferred tax liabilitiesDeferred tax liabilities 1,060,149 1,035,419 1,060,149 1,035,419Deferred tax assets (137,555) (2,098) (137,555) (2,098)

922,594 1,033,321 922,594 1,033,321

Net deferred tax 466,234 521,887 922,594 1,033,321

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INFORMATION

9. DERIVATIVE

Group

Note

Nominal value2015

RM’000

Carrying amount

2015RM’000

Derivative assets held for trading at fair value through profit or loss Forward foreign exchange 18,200 112

Derivative liabilities held for trading at fair value through profit or loss

Forward foreign exchange (121,131) (998)

Included within:Trade and other receivables 11 112

Trade and other payables 18 (998)

In the normal course of business, the Company enters into derivative financial instruments to manage the Company’s normal business exposures in relation to foreign currency exchange rates consistent with its risk management policies and objectives. The forward foreign exchange contract has maturity of less than one year after the end of the reporting period.

10. TRADE AND OTHER INVENTORIES

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Liquefied gases and water 2,144 1,931 2,144 1,931Maintenance materials and spares 44,223 41,453 42,053 40,973

46,367 43,384 44,197 42,904

Recognised in profit or loss:Inventories recognised as cost of sales 30,660 37,038 30,265 36,621

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11. TRADE AND OTHER RECEIVABLES

Group Company

Note2015

RM’0002014

RM’0002015

RM’0002014

RM’000

Trade receivables 13,933 22,580 13,933 22,580Other receivables 11.1 28,733 46,063 14,311 45,405Deposits 1,001 1,030 1,001 1,030Prepayments 22,045 15,964 252 360Derivative assets 9 112 – – –Amount due from:

Holding company 11.2 350,708 287,551 287,456 235,668Subsidiaries 11.3 – – 8,710 72,760Related companies 11.4 198,390 200,793 198,389 200,790Joint ventures 11.5 16,726 16,323 16,726 16,323Related parties 11.6 12,741 18,414 12,741 18,414

644,389 608,718 553,519 613,330

11.1 Included in other receivables for the year are good and service tax (GST) receivables amounting to RM14,023,000 for the Group.

11.2 The amount due from holding company relates to:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Trade 306,136 287,036 250,658 235,156Non-trade 44,572 515 36,798 512

350,708 287,551 287,456 235,668

Included in amount due from holding company for the year are good and service tax (GST) receivables amounting to RM34,169,000 for the Group and RM26,459,000 for the Company.

11.3 The amount due from subsidiaries are non-trade in nature and arose in the normal course of business. Included in these receivables are accrual of payment to be made on behalf of subsidiaries amounting to RM Nil (2014: RM2,194,000).

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11. TRADE AND OTHER RECEIVABLES (continued)

11.4 The amount due from related companies arose in the normal course of business relates to:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Trade 83,268 110,104 83,268 110,104Non-trade 115,122 90,689 115,121 90,686

198,390 200,793 198,389 200,790

11.5 The amount due from joint ventures arose in the normal course of business relates to:

Group/Company2015

RM’0002014

RM’000

Trade 1,786 3,452Non-trade 14,940 12,871

16,726 16,323

11.6 The amount due from related parties are trade in nature and is in relation to associates and joint ventures of the holding company.

12. CASH AND CASH EQUIVALENTS

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Cash with PETRONAS Integrated Financial Shared Services Centre 1,217,024 550,010 1,103,983 407,648

Cash and bank balances 13,791 87,736 12,558 84,826

1,230,815 637,746 1,116,541 492,474

The Group’s and the Company’s cash and bank balances are held in the In-House Account (IHA) managed by PETRONAS Integrated Financial Shared Services Centre (IFSSC) to enable more efficient cash management for the Group and the Company.

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12. CASH AND CASH EQUIVALENTS (continued)

Included in cash with IFSSC and cash and bank balances are interest-bearing balances (including fund investments) amounting to RM1,229,442,000 (2014: RM637,594,000) for the Group and RM1,116,399,000 (2014: RM492,322,000) for the Company.

13. SHARE CAPITAL

Company

2015RM’000

2014RM’000

Authorised:2,000,000,000 ordinary shares of RM1 each 2,000,000 2,000,000

Issued and fully paid:

1,978,732,000 ordinary shares of RM1 each 1,978,732 1,978,732

14. RESERVES

Share Premium

Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

Hedging Reserve

This reserve records the portion of the gain or loss on hedging instruments in a cash flow hedge that is determined to be an effective hedge in accordance with accounting policy stated in note 2.8(iii).

Foreign Currency Translation Reserve

The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of subsidiaries whose functional currency are different from that of the Company’s functional currency as well as foreign currency differences arising from the translation of monetary items that are considered to form part of a net investment in a foreign operation.

15. NON-CONTROLLING INTERESTS

This consists of the non-controlling interests’ proportion of share capital and reserves of partly-owned subsidiaries.

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16. FINANCE LEASE LIABILITIES

Finance lease liabilities are payable as follows:

2015 2014

Group

Minimum lease

paymentsRM’000

Interest RM’000

Principal RM’000

Minimum lease

payments RM’000

Interest RM’000

Principal RM’000

Less than one year 124,132 95,468 28,664 100,744 79,717 21,027Between 1 – 2 years 123,793 92,765 31,028 101,020 77,693 23,327Between 2 – 5 years 371,718 259,387 112,331 302,232 219,036 83,196More than 5 years 1,443,121 556,884 886,237 1,275,446 520,746 754,700

2,062,764 1,004,504 1,058,260 1,779,442 897,192 882,250

The finance lease liabilities are in relation to charter hire of floating storage units from a related company.

17. DEFERRED INCOME

Group/Company Note2015

RM’0002014

RM’000

At beginning of the year 12,877 27,656Addition 1,268 540Less: recognised in the profit or loss (6,306) (15,319)

At end of the year 7,839 12,877

Analysis of deferred income:Current 18 987 5,079Non-current 6,852 7,798

7,839 12,877

Deferred income mainly relates to the payments received in advance or the right to receive payments from third party amounting to RM41,000 (2014: RM540,000), a related company amounting to RM Nil (2014: RM3,594,000) and a related party amounting to RM7,798,000 (2014: RM8,743,000) for the rights given to these parties to use the Company’s properties over a period of time or early termination of supply contract with the Company. The deferred income is subsequently recognised in the profit or loss on a time apportionment basis over the specified period.

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18. TRADE AND OTHER PAYABLES

Group Company

Note2015

RM’0002014

RM’0002015

RM’0002014

RM’000

Other payables and accruals 18.1 627,692 523,034 402,656 504,503Derivative liabilities 9 998 – – –Amount due to:

Holding company 18.2 69,590 119,859 68,785 102,204Related companies 18.2 97,272 20,213 78,368 5,604Deferred income 17 987 5,079 987 5,079

796,539 668,185 550,796 617,390

18.1 Included in other payables and accruals are amounts owing to suppliers and contractors for purchase of property, plant and equipment for the Group of RM279,178,000 (2014: RM244,788,000) and for the Company of RM72,089,000 (2014: RM238,415,000). Also included in other payables is interest payable of RM7,918,000 (2014: RM6,677,000) for the Group.

18.2 The amount due to holding company and related companies are non-trade in nature and arose in the normal course of business. These payables arise in the normal course of business.

19. REVENUE AND GROSS PROFIT

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Revenue– gas processing fees 1,533,622 1,480,247 1,533,622 1,480,247– gas transportation fees 1,311,611 1,286,690 1,311,611 1,286,690– sale of industrial utilities 973,584 1,008,559 973,584 1,008,559– regasification fees 637,138 616,220 – –

Total 4,455,955 4,391,716 3,818,817 3,775,496

Cost of revenue– cost of gas processing (836,669) (778,579) (836,669) (778,579)– cost of gas transportation (302,465) (280,024) (302,465) (280,024)– cost of industrial utilities (837,809) (812,654) (837,809) (812,654)– cost of regasification (339,583) (308,241) – –

Total (2,316,526) (2,179,498) (1,976,943) (1,871,257)

Gross profit 2,139,429 2,212,218 1,841,874 1,904,239

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20. OPERATING PROFIT

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Included in operating profit are the following charges:

Audit fees 395 376 262 249Depreciation of property, plant and equipment 776,818 786,935 583,523 604,839Impairment losses on property, plant and

equipment – 30,850 – 30,850Loss on changes in fair value of other

investments – 10 – 10Loss on realised foreign exchange – 1,264 – 572Loss on unrealised foreign exchange 203,123 51,969 71 2Property, plant and equipment

– expensed off 2,428 592 1,828 592– written off 2,087 13,362 2,087 13,362

Rental of – equipment and motor vehicles 16,644 7,131 9,395 6,482– land and buildings 10,457 9,199 9,295 8,032

Staff costs– wages, salaries and others 324,385 318,365 313,825 309,986– contributions to Employees Provident Fund 50,163 49,696 48,803 48,662

and crediting:

Dividend income in Malaysia from– subsidiary (unquoted) – – 355,052 200,000– associate (quoted) – – 21,965 23,485– joint venture (unquoted) – – 7,200 3,502

Gain on realised foreign exchange 10,931 – 1,319 –Gain on disposal of property, plant and

equipment 266 87 266 87Interest income from fund investments 31,755 36,895 26,390 28,323Reimbursement of project cost 17,165 – – –Rental income on land and buildings 2,468 3,484 2,930 3,945

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21. FINANCING COSTS

Group

2015RM’000

2014RM’000

Interest expense recognised in profit or loss– Finance lease liabilities 90,055 76,328

22. TAX EXPENSE/(INCOME)

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Current tax expense– current year 113,020 365,441 113,020 365,441– (over)/under provision in prior year (41,127) 3,002 (41,127) 3,002

Total current tax expense 71,893 368,443 71,893 368,443

Deferred tax (income)/expenses– origination and reversal of temporary

differences (45,924) 121,101 (110,727) 52,321– (over)/under provision in prior year (9,729) 22,835 – –

Total deferred tax (income)/expenses (55,653) 143,936 (110,727) 52,321

Total tax expenses/(income) recognised in profit or loss 16,240 512,379 (38,834) 420,764

Tax expense on share of profit of associate 4,846 7,333 – –

Tax expenses/(income) on share of profit of joint ventures 3,340 (174,765) – –

Total tax expenses/(income) 24,426 344,947 (38,834) 420,764

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22. TAX EXPENSE/(INCOME) (continued)

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to total tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Profit for the year 1,985,870 1,842,080 2,321,548 1,694,369Total tax expenses/(income) 24,426 344,947 (38,834) 420,764

Profit excluding tax 2,010,296 2,187,027 2,282,714 2,115,133

Taxation at Malaysian statutory tax rate of 25% (2014: 25%) 502,574 546,757 570,679 528,783

Non-deductible expenses 63,860 36,502 1,660 9,934Effect of unabsorbed capital allowance and

unutilised tax losses recognised (21,012) (77,817) – –Income not subject to tax (910) (1,772) – –Tax exempt income (6,297) (8,799) (101,010) (63,402)Tax incentives (462,933) (175,761) (469,036) (57,553)

75,282 319,110 2,293 417,762(Over)/under provision in prior year (50,856) 25,837 (41,127) 3,002

Total tax expenses/(income) 24,426 344,947 (38,834) 420,764

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23. DIVIDENDS

Company

2015RM’000

2014RM’000

Ordinary

Final paid: 2013 – Final dividend of 40 sen per ordinary share. – 791,494

Interim paid:2014 – First interim dividend of 20 sen per ordinary share. – 395,7472014 – Second interim dividend of 20 sen per ordinary share. – 395,7472014 – Third interim dividend of 15 sen per ordinary share. 296,810 –2015 – First interim dividend of 14 sen per ordinary share. 277,022 –2015 – Second interim dividend of 14 sen per ordinary share. 277,022 –2015 – Third interim dividend of 15 sen per ordinary share. 296,810 –

1,147,664 1,582,988

The Directors had on 24 February 2016 declared a fourth interim dividend of 17 sen per ordinary share amounting to RM336,384,000 in respect of the financial year ended 31 December 2015.

The financial statements for the current financial year do not reflect the declared interim dividend. The dividend, will be accounted for in equity as an appropriation of retained profits in the financial statements for the financial year ending 31 December 2016.

The net dividend per ordinary share for the respective financial year ended 31 December 2015 takes into account the total interim dividends declared for the financial year as follows:

Company

2015Sen

2014Sen

First interim dividend per ordinary share declared and paid – net 14 20Second interim dividend per ordinary share declared and paid – net 14 20Third interim dividend per ordinary share declared and paid – net 15 15Fourth interim dividend per ordinary share declared but not paid – net 17 –

60 55

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24. EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per ordinary share (EPS) at 31 December 2015 was based on the Group’s net profit attributable to shareholders of the Company of RM1,987,452,000 (2014: RM1,843,186,000), over the number of ordinary shares outstanding during the year of 1,978,732,000 (2014: 1,978,732,000).

Diluted earnings per share

The Company has not issued any dilutive potential ordinary shares, hence, the diluted EPS is the same as the basic EPS.

25. ACQUISITION AND DILUTION OF INTEREST IN A SUBSIDIARY

Dilution of interest in Pengerang LNG (Two) Sdn. Bhd.

On 25 September 2015, the Group’s equity shareholding in its subsidiary, Pengerang LNG (Two) Sdn. Bhd. (PLNG), reduced from 72% to 65% upon issuance of 2,000,000 new ordinary shares of RM1 each in PLNG2 to State Secretary Johor Incorporated (SSI), a non-controlling party subsequent to registration of land lease for development of the liquefied natural gas (LNG) Regasification Terminal in Pengerang, Johor. This was in accordance with the intended equity shareholding structure prescribed in the Shareholders Agreement entered into between the Company, Dialog LNG Sdn. Bhd. (Dialog) and PLNG2 on 14 November 2014.

The decrease in equity shareholding did not result in a loss of control. PLNG2 continues to be a subsidiary of the Company.

Acquisition of Pengerang LNG (Two) Sdn. Bhd.

The Company had on 12 December 2014 subscribed for 780,000 ordinary shares of RM1 each representing 72% of the issued and paid-up capital of PLNG2 and 93,886 redeemable preference shares of RM1 each with premium of RM999 each for a total consideration of RM94,666,000. Upon subscription of the ordinary shares, PLNG2 becomes a subsidiary of the Group. PLNG2 is incorporated in Malaysia under the Companies Act, 1965.

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26. CAPITAL COMMITMENTS

Outstanding commitments in respect of capital expenditure at the end of the financial year not provided for in the financial statements are:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Property, plant and equipment

Approved and contracted forLess than one year 1,237,301 557,028 164,153 171,371Between one and five years 1,791,391 2,070,742 327,278 44,013

3,028,692 2,627,770 491,431 215,384

Approved but not contracted forLess than one year 847,472 798,122 529,605 703,689Between one and five years 966,432 1,268,096 768,915 919,332

1,813,904 2,066,218 1,298,520 1,623,021

4,842,596 4,693,988 1,789,951 1,838,405

Share of capital expenditure of joint ventures

Approved and contracted forLess than one year – – – –Between one and five years – – – –

– – – –

Approved but not contracted forLess than one year 4,151 960 – –Between one and five years 5,070 518 – –

9,221 1,478 – –

9,221 1,478 – –

Total commitments 4,851,817 4,695,466 1,789,951 1,838,405

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27. RELATED PARTY DISCLOSURES

Related parties

For the purposes of these financial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa or where the Group or the Company and the party are subject to common control. Related parties may be individuals or other entities.

The Group’s and the Company’s related parties include subsidiaries, associate, joint ventures as well as the holding and the ultimate holding company, Petroliam Nasional Berhad (PETRONAS) and its related entities. The Group’s related parties also include:

i. Government of Malaysia and its related entities as the Company’s holding company, PETRONAS is wholly-owned by the Government of Malaysia; and

ii. Key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly and an entity that provides key management personnel services to the Group. Key management personnel includes all Directors of the Group.

Key management personnel compensation

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

DirectorsFees 547 568 547 568 Other short term employee benefits

(including estimated monetary value of benefits-in-kind) 29 27 29 27

576 595 576 595

The Company paid management fee to the holding company in relation to services of key management personnel of the Company as disclosed below.

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27. RELATED PARTY DISCLOSURES (continued)

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Government of Malaysia’s related entities:Tenaga Nasional Berhad

Purchase of electricity (82,266) (78,484) (63,214) (59,209)Sales of industrial utilities 69,018 78,269 69,018 78,269

Bendahari Negeri MelakaLand lease rental, ex gratia & fisherman fund – (1,185) – –

TNB Repair and Maintenance Sdn. Bhd.Provision of repair and maintenance services (44,649) (49,391) (44,649) (49,391)

State Secretary, Johor (Incorporated)Land acquisition (4,133) – – –

Holding company:Gas processing fee income 1,533,622 1,480,247 1,533,622 1,480,247Gas transportation fee income 1,311,611 1,286,690 1,311,611 1,286,690Regasification fee income 637,138 616,220 – –Interest income from fund investments 31,661 35,196 26,390 26,624Internal gas consumption and performance

incentive 26,812 – 26,812 –Agent services fee income 9,456 – 9,456 –Reimbursement of project cost 56,236 – – –Purchase of fuel gas (496,533) (487,563) (496,533) (487,563)Insurance expense (15,171) (15,387) (12,307) (12,502)Information, communication and technology

charges (26,101) (32,848) (25,610) (32,517)Corporate security charges (10,543) (14,045) (10,309) (13,833)Rental of office premises (9,295) (8,032) (9,295) (8,032)Supply chain and management services (11,334) (14,813) (10,679) (14,005)Management fees (737) (737) (737) (737)Internal audit services (197) (766) (197) (607)Fees for representation on the Board of

Directors (172) (250) (172) (250)

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INFORMATION

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Related companies:PETRONAS Chemicals Aromatics Sdn. Bhd.

Sale of industrial utilities 47,784 47,103 47,784 47,103Vinyl Chloride (Malaysia) Sdn. Bhd.

Sale of industrial utilities 5,013 16,969 5,013 16,969PETRONAS Chemicals Ammonia Sdn. Bhd.

Sale of industrial utilities 116,398 118,851 116,398 118,851Compressed air maintenance fees (238) (414) (238) (414)Laboratory services (16) (5) (16) (5)

PETRONAS Chemicals MTBE Sdn. Bhd. Sale of industrial utilities 116,541 117,367 116,541 117,367Rental of equipments (155) (145) (155) (145)

PETRONAS Chemicals LDPE Sdn. Bhd.Sale of industrial utilities 81,716 83,484 81,716 83,484

Bekalan Air KIPC Sdn. Bhd. Purchase of treated water (13,153) (15,933) (13,153) (15,933)Management fee income 888 930 888 930

PETRONAS Dagangan Berhad Fuel card services (856) (1,072) (850) (1,072)

MISC Intergrated Logistic Sdn. Bhd. Transportation services (576) (482) (576) (482)

PETRONAS Carigali Sdn. Bhd.Project management fee income 567 2,104 567 2,104Overbilling of project management fees – (5,095) – (5,095)Operations and maintenance services income 40,793 24,887 40,793 24,887Purchase of pipeline (61,574) – (61,574) –

CEFS ResponseContribution for emergency response services (1,223) (7,898) (1,223) (7,898)

PETRONAS Chemicals Derivatives Sdn. Bhd.Sale of industrial utilities 313,560 319,310 313,560 319,310

PETRONAS Chemicals Ethylene Sdn. Bhd.Sale of industrial utilities 4,276 4,447 4,276 4,447


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Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Related companies (continued):PETRONAS Refinery and Petrochemical Sdn. Bhd.

Management fee 7,738 – 7,738 –PETRONAS Management Training Sdn. Bhd.

Training and development related costs (3,180) (2,656) (3,180) (2,656)PETRONAS Technical Training Sdn. Bhd.

Training and development related costs (9,506) (5,773) (9,289) (5,609)PETRONAS Technical Services Sdn. Bhd.

Technical consultancy fees (52,126) (22,466) (30,021) (22,025)PETRONAS Technology Ventures Sdn. Bhd.

Purchase of chemicals (583) (1,270) (583) (1,270)Purchase of software (200) – (200) –

PETRONAS Penapisan (Melaka) Sdn. Bhd.Lease of land for pipeline route (76) (76) – –Rental of office premises (14) (75) – –Lease of land for office building (11) (11) – –Facilities usage charges – (169) – –

Gas Asia Terminal (L) Pte. Ltd.Time charter services (186,293) (154,147) – –Lease and rental of building (931) (789) – –Repair and maintenance – (78) – –

PrimeSourcing International Sdn. Bhd.Supply of parts and materials (36,049) (108,551) (36,049) (108,551)

PETRONAS Penapisan (Terengganu) Sdn. Bhd.Marine facilities income 1,932 1,505 1,932 1,505

Sungai Udang Port Sdn. Bhd.Marine services (6,876) (6,927) – –

Voltage Renewables Sdn. Bhd. Sale of industrial utilities 137 – 137 –


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Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Subsidiaries:Regas Terminal (Sg. Udang) Sdn. Bhd.

Management fee income – – 5,627 5,627Rental income of warehouse – – 103 104Pipeline maintenance fee income – – 1,161 1,161Lab sampling fee income – – 20 31Annual access right fee income – – 357 357

Regas Terminal (Pengerang) Sdn. Bhd.Management fee income – – – 2,261

Regas Terminal (Lahad Datu) Sdn. Bhd.Management fee income adjustment – – (1,307) 128

Pengerang LNG (Two) Sdn. Bhd.Management fee income – – 2,865 205

Joint venture:Industrial Gases Solutions Sdn. Bhd.

Sale of industrial utilities 3,748 6,074 3,748 6,074

Associates and joint ventures of the holding company:

Kertih Terminals Sdn. Bhd.Sale of industrial utilities 6,984 7,069 6,984 7,069

BASF PETRONAS Chemicals Sdn. Bhd.Sale of industrial utilities 114,246 111,285 114,246 111,285

BP PETRONAS Acetyls Sdn. Bhd.Sale of industrial utilities 36,690 40,070 36,690 40,070

Trans Thai-Malaysia (Malaysia) Sdn. Bhd.Access right of way fee income 2,095 2,095 2,095 2,095Annual operations and maintenance fee

income 5,462 5,856 5,462 5,856


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The Directors of the Company are of the opinion that the above transactions have been entered into in the normal course of business and have been established on a commercial basis. The above has been stated at transacted amount.

Included in the fees for representation on the Board of Directors are fees paid directly to holding company in respect of certain directors who are appointees of the holding company.

Information regarding outstanding balances at reporting date arising from related party transactions are disclosed in note 11, note 16, note 17 and note 18.

28. OPERATING SEGMENTS, PRODUCTS AND SERVICES

The Group has four reporting segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s Chief Operating Decision Maker which is the Board of Directors, reviews internal management reports at least on a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

• Gas processing – activities include processing of natural gas from gas fields offshore the East Coast of Peninsular Malaysia into salesgas and other by-products such as ethane, propane and butane.

• Gas transportation – activities include transportation of the processed gas to PETRONAS’ end customers throughout Malaysia and export to Singapore.

• Utilities – activities include manufacturing, marketing and supplying of industrial utilities to the petrochemical complexes in the Kertih and Gebeng Industrial Area.

• Regasification – activities include regasification of liquefied natural gas (LNG) for PETRONAS.

Performance is measured based on segment gross profit. Segment gross profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments.

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28. OPERATING SEGMENTS, PRODUCTS AND SERVICES (continued)

GroupBusiness segments31.12.2015

Gas Processing

RM’000

GasTransportation

RM’000UtilitiesRM’000

RegasificationRM’000

TotalRM’000

Revenue 1,533,622 1,311,611 973,584 637,138 4,455,955

Segment results 696,953 1,009,146 135,775 297,555 2,139,429

Unallocated expenses (122,466)

Operating profit 2,016,963Financing costs (90,055)Share of profit after tax of

equity-accounted associate and joint ventures 75,202

Profit before taxation 2,002,110Tax expense (16,240)

Profit for the year 1,985,870

Included in the measure of segment profit are:

Depreciation and amortisation (346,636) (79,359) (157,186) (193,295) (776,476)Unallocated depreciation and

amortisation – – – – (342)

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Gas Processing

RM’000

GasTransportation



TotalRM’000

Revenue 1,480,247 1,286,690 1,008,559 616,220 4,391,716

Segment results 701,668 1,006,666 195,905 307,979 2,212,218

Unallocated expenses (70,159)

Operating profit 2,142,059Financing costs (76,328)Share of profit after tax of

equity-accounted associate and joint ventures 288,728

Profit before taxation 2,354,459Tax expense (512,379)

Profit for the year 1,842,080

Included in the measure of segment profit are:

Depreciation and amortisation (341,833) (82,296) (180,368) (182,096) (786,593)Unallocated depreciation and

amortisation – – – – (342)

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Gas Processing

RM’000

GasTransportation



TotalRM’000

Segment assets 4,376,359 2,575,063 1,184,502 4,389,278 12,525,202

Investment in associate 128,063Investment in joint ventures 547,647

Unallocated assets 1,181,095

Total assets 14,382,007

Included in the measure of segment assets are:

Capital expenditure 425,453 124,587 104,305 565,690 1,220,035Unallocated capital expenditure – – – – 2,358


Gas Processing

RM’000

GasTransportation



TotalRM’000

Segment assets 4,292,276 2,437,755 1,265,132 4,046,346 12,041,509

Investment in associate 132,335Investment in joint ventures 468,399

Unallocated assets 618,234

Total assets 13,260,477

Included in the measure of segment assets are:

Capital expenditure 803,863 134,809 77,301 51,066 1,067,039Unallocated capital expenditure – – – – 19,863

Segment results

The total segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated expenses mainly comprises forex gain or loss, other corporate income and expenses.

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Segment assets

The total of segment assets are measured based on all assets of a segment, excluding interest bearing assets and corporate assets as these are managed on a group basis.

The segmental information in respect of the associate and joint ventures is not presented as the contribution of the associate and joint ventures and the carrying amounts of investment in the associate and joint ventures have been reflected in the statement of profit or loss and other comprehensive income and statement of financial position of the Group. Details of the associate and joint ventures are disclosed in note 6 and note 7 to the financial statements respectively.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Products and services segments

Group2015

RM’0002014

RM’000

Gas processing fee 1,533,622 1,480,247Gas transportation fee 1,311,611 1,286,690Utilities

– Electricity 449,883 484,387– Steam 293,415 292,160– Industrial gases 165,517 173,880– Others 64,769 58,132

Regasification fee 637,138 616,220

4,455,955 4,391,716

Geographical information for revenue and non-current assets is not presented as the Group is pre-dominantly operating in Malaysia.

29. HOLDING AND ULTIMATE HOLDING COMPANY

The holding company as well as the ultimate holding company is Petroliam Nasional Berhad (PETRONAS), a company incorporated in Malaysia.

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30. FINANCIAL INSTRUMENTS

Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

i. Loans and receivables (L&R);ii. Fair value through profit or loss (FVTPL);

- Held for trading (HFT); andiii. Financial liabilities measured at amortised cost (FL).

Group NoteL&R/(FL) RM’000

FVTPL-HFT

RM’000

Totalcarrying amount RM’000

2015

Financial assetsTrade and other receivables (excluding prepayments

and GST receivables) 11 574,040 112 574,152

Cash and cash equivalents 12 1,230,815 – 1,230,815

1,804,855 112 1,804,967

Financial liabilitiesFinance lease liabilities 16 (1,058,260) – (1,058,260)Trade and other payables (excluding deferred income) 18 (794,554) (998) (795,552)

(1,852,814) (998) (1,853,812)

2014

Financial assetsTrade and other receivables (excluding prepayments) 11 592,754 – 592,754Cash and cash equivalents 12 637,746 – 637,746

1,230,500 – 1,230,500

Financial liabilitiesFinance lease liabilities 16 (882,250) – (882,250)

Trade and other payables (excluding deferred income) 18 (663,106) – (663,106)

(1,545,356) – (1,545,356)

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30. FINANCIAL INSTRUMENTS (continued)

Categories of financial instruments (continued)

Company NoteL&R/(FL) RM’000

Totalcarrying amount RM’000

2015

Financial assetsTrade and other receivables (excluding prepayments

and GST receivables) 11 526,808 526,808

Cash and cash equivalents 12 1,116,541 1,116,541

1,643,349 1,643,349

Financial liabilitiesTrade and other payables (excluding deferred income) 18 (549,809) (549,809)

2014

Financial assetsTrade and other receivables (excluding prepayments) 11 612,970 612,970Cash and cash equivalents 12 492,474 492,474

1,105,444 1,105,444

Financial liabilitiesTrade and other payables (excluding deferred income) 18 (612,311) (612,311)

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Financial risk management

The Group and the Company are exposed to various risks that are particular to its core business which consists of separating natural gas into its components and storing, transporting and distributing such components thereof for a fee, the sale of industrial utilities and the regasification of liquefied natural gas for a fee. These risks, which arise in the normal course of the Group’s and the Company’s business, comprise credit risk, liquidity risk and market risk relating to interest rates and foreign currency exchange rates.

The Group has policies and guidelines in place that sets the foundation for a consistent approach towards establishing an effective financial risk management across the Group.

Risk taking activities are undertaken within acceptable level of risk or risk appetite, whereby the risk appetite level reflects business considerations and capacity to assume such risks. The risk appetite is established at Board level, where relevant, based on defined methodology and translated into operational thresholds.

The Group’s and the Company’s goal in risk management is to ensure that the management understands, measures and monitors the various risks that arise in connection with their operations. Policies and guidelines have been developed to identify, analyse, appraise and monitor the dynamic risks facing the Group and the Company. Based on this assessment, the Group and the Company adopt appropriate measures to mitigate these risks in accordance with their view of the balance between risk and reward.

Credit risk

Credit risk is the potential exposure of the Group and of the Company to losses in the event of non-performance by counterparties. The Group’s and the Company’s exposure to credit risk arise from its operating activities, primarily from their receivables from customers and fund investments. The credit risk arising from the Group’s and the Company’s normal operations are controlled by individual operating units in line with PETRONAS’ policies and guidelines.

Receivables

The Group and the Company minimise credit risk by entering into contracts with highly credit rated counterparties. Potential counterparties are subject to credit assessment and approval prior to any transaction being concluded and existing counterparties are subject to regular reviews, including re-appraisal and approval of granted limits. The creditworthiness of counterparties is assessed based on an analysis of all available quantitative and qualitative data regarding business risks and financial standing, together with the review of any relevant third party and market information. Reports are prepared and presented to the management that cover the Group’s overall credit exposure against limits and securities.

Depending on the types of transactions and counterparty’s creditworthiness, the Group and the Company further mitigate and limit risks related to credit by requiring other credit enhancements such as cash deposits and bank guarantees. No collateral or other credit enhancement is required for amounts due from related parties.

As at the reporting date, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position. The ageing of trade receivables as at the reporting date is analysed on page 321.

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Credit risk (continued)

Receivables (continued)

Group Company

At net Note2015

RM’0002014

RM’0002015

RM’0002014

RM’000

Current 410,795 380,392 355,317 328,512Past due 1 to 30 days 839 55,581 839 55,581Past due 31 to 60 days – 678 – 678Past due 61 to 90 days – 590 – 590Past due more than 90 days 6,230 4,345 6,230 4,345

417,864 441,586 362,386 389,706

Representing:Trade receivables 11 13,933 22,580 13,933 22,580Amounts due from holding company 11.2 306,136 287,036 250,658 235,156Amounts due from related companies 11.4 83,268 110,104 83,268 110,104Amounts due from joint ventures 11.5 1,786 3,452 1,786 3,452Amounts due from related parties 11.6 12,741 18,414 12,741 18,414

417,864 441,586 362,386 389,706

As at the reporting date, significant receivables relate to amounts due from holding company and amounts due from related companies.

Fund investments

The Group and the Company are also exposed to counterparty credit risk from financial institutions through fund investments activities which was managed by IFSSC on behalf of the Company comprising primarily money market placement. These exposures are managed in accordance with existing policies and guidelines that define the parameters within which the investment activities shall be undertaken in order to achieve the Group’s investment objective of preserving capital and generating optimal returns above appropriate benchmarks within allowable risk parameters.

Investments are only made with approved counterparties who met the appropriate rating and other relevant criteria, and within approved credit limits, as stipulated in the policies and guidelines. The treasury function is governed by a counterparty credit risk management framework.

As at the reporting date, the maximum exposure to credit risk arising from fund investments is represented by the carrying amounts in the statement of financial position.

The fund investments are unsecured, however, in view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligation.

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Liquidity risk

Liquidity risk is the risk that suitable sources of funding for the Group’s and the Company’s business activities may not be available. In managing its liquidity risk, the Group and the Company maintain sufficient cash and liquid marketable assets.

Maturity analysis

The table below summarises the maturity profile of the Group’s and of the Company’s financial liabilities as at the reporting date based on undiscounted contractual payments:

Group

Carrying amount RM’000

Contractual interest/

profit rates

per annum

%

Contractual cash flow*

RM’000

Within 1 year

RM’000

1 – 2years

RM’000

2 – 5years

RM’000

Morethan

5 years RM’000

2015Finance lease liabilities 1,058,260 9.1 2,062,764 124,132 123,793 371,718 1,443,121Trade and other payables

(excluding deferred income) 795,552 – 795,552 795,552 – – –

1,853,812 2,858,316 919,684 123,793 371,718 1,443,121

2014Finance lease liabilities 882,250 9.1 1,779,442 100,744 101,020 302,232 1,275,446Trade and other payables


1,545,356 2,442,548 763,850 101,020 302,232 1,275,446

* The contractual cash flow is inclusive of the principal and interest payments.

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Liquidity risk (continued)

Maturity analysis (continued)

Company

Carrying amount RM’000

Contractual interest/

profit rates

per annum

%

Contractual cash flow*

RM’000

Within 1 year

RM’000

1 – 2years

RM’000

2 – 5years

RM’000

Morethan

5 years RM’000

2015Trade and other payables


2014Trade and other payables


* The contractual cash flow is inclusive of the principal and interest payments.

Market risk

Market risk is the risk or uncertainty arising from changes in market prices and their impact on the performance of the business. The market price changes that the Group and the Company are exposed to includes interest rates, foreign currency exchange rates and other indices that could adversely affect the value of the Group’s and of the Company’s financial assets, liabilities or expected future cash flows.

Interest rate risk

The Group’s and the Company’s investments in fixed rate debt instruments are exposed to a risk of change in their fair value due to changes in interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.

All interest rate exposures are monitored and managed proactively in line with PETRONAS’ policies and guidelines.

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Market risk (continued)

Interest rate risk (continued)

The interest rate profile of the Group’s and of the Company’s interest-bearing financial instruments based on carrying amounts as at reporting date is as follows:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Fixed rate instrumentsFinancial assets 12,418 87,584 12,416 84,674Financial liabilities (1,058,260) (882,250) – –

(1,045,842) (794,666) 12,416 84,674

Floating rate instrumentsFinancial assets 1,217,024 550,010 1,103,983 407,648

Cash flow sensitivity analysis for variable rate instrument

A change of 50 to 70 basis points (b.p.s) in interest rates at the end of the reporting period would have increased/(decreased) post-tax profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Changes in interest b.p.s (+/-) 50 b.p.s 70 b.p.s 50 b.p.s 70 b.p.sProfit or loss 6,085 3,850 5,520 2,854

For the Group’s and the Company’s interest-bearing financial assets and liabilities that are fixed rate instrument measured at amortised cost, a change in interest rate is not expected to have material impact on the Group’s and the Company’s profit or loss.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates.

The Group and the Company are exposed to varying levels of foreign currency risk when they enter into transactions that are not denominated in the respective companies’ functional currencies or when foreign currency monetary assets and liabilities are translated at the reporting date.

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Foreign currency risk (continued)

The Group and the Company operate predominantly in Malaysia and transact mainly in Ringgit Malaysia.

The Group’s and the Company’s foreign currency management policy is to minimise economic and significant transactional exposure arising from currency movements. For major capital projects, the Group and the Company perform assessment of potential foreign currency risk exposure at the investment decision phase to determine the appropriate foreign currency risk management strategy. When deemed necessary and appropriate, the Group and the Company will enter into derivative financial instruments to hedge and minimise their exposure to the foreign currency movements.

The Group’s and the Company’s exposure to foreign currency risk (a currency which is other than the functional currency of the Group entities), based on carrying amounts as at the reporting date are as follows:

Denominated in USDRM’000

GroupDenominated

in MYRRM’000

CompanyDenominated

in USDRM’000

2015

Financial assetsTrade and other receivables 19,680 – –

Financial liabilitiesFinance lease liabilities (1,058,260) – –Trade and other payables (56,629) (21,481) (35,602)

(1,114,889) (21,481) (35,602)

Net exposure (1,095,209) (21,481) (35,602)

2014

Financial assetsTrade and other receivables 16,566 – –

Financial liabilitiesFinance lease liabilities (882,250) – –Trade and other payables (93,585) – (72,493)

(975,835) – (72,493)

Net exposure (959,269) – (72,493)

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Currency risk sensitivity analysis

Sensitivity analysis for a given market variable provided in this note, discloses the effect on profit or loss as at 31 December 2015 assuming that a reasonably possible change in the relevant market variable had occurred at 31 December 2015 and had been applied to the risk exposures in existence at that date to show the effects of reasonably possible changes in price on profit or loss and equity to the next annual reporting date. Reasonably possible changes in market variables used in the sensitivity analysis are based on implied volatilities, where available, or historical data for equity and commodity prices and foreign exchange rates where relevant. Reasonably possible changes in interest rates are based on management judgement and historical experience.

The sensitivity analysis is hypothetical and should not be considered to be predictive of future performance because the

Group’s actual exposure to market prices is constantly changing with changes in the Group’s portfolio of among others, debt and foreign currency contracts where relevant. Changes in fair values or cash flows based on a variation in a market variable cannot be extrapolated because the relationship between the change in market variable and the change in fair value or cash flows may not be linear. In addition, the effect of a change in a given market variable is calculated independently of any change in another assumption and mitigating actions that would be taken by the Group. In reality, changes in one factor may contribute to changes in another, which may magnify or counteract the sensitivities.

The following table demonstrates the indicative pre-tax effects on the profit or loss of applying reasonably foreseeable market movements in the following currency exchange rates:

Appreciation in

foreign currency rate

%

Group

Effect on profit/(loss)

RM’000

Company

Effect on profit/(loss)

RM’000

2015

USD 10 (109,521) (3,560)MYR 10 (2,148) –

2014

USD 5 (47,963) (3,625)

A depreciation in the above foreign currency rates would have had equal but opposite effect, on the basis that all other variables remain constant.

The USD foreign currency exposure mainly relates to finance lease liabilities in relation to charter hire by floating storage units. The Group mitigates the cashflow exposure through a back to back charging arrangement with its customer.

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Fair value information

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings reasonably approximate their fair values due to the relatively short term nature of these financial instruments.

The following table analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the statement of financial position.

Group

Fair value of financial

instruments carried at fair value

Level 2RM’000

Fair value of financial

instruments not carried

at fair value

Level 3RM’000

Total fair value

RM’000

Carrying amounts

RM’000

2015

Financial assetsDerivative assets 112 – 112 112

Financial liabilitiesFinance lease liabilities – (1,058,260) (1,058,260) (1,058,260)Derivative liabilities (998) – (998) (998)

(998) (1,058,260) (1,059,258) (1,059,258)

2014

Financial liabilitiesFinance lease liabilities – 882,250 882,250 882,250

The fair value of finance lease liabilities has been estimated using the discounted cash flows method.

The fair value of forward exchange contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

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Income/(expense), net gains and losses arising from financial instruments

Interest income

RM’000

Interest expenseRM’000

OthersRM’000

TotalRM’000

Group

2015Financial instruments at fair value through

profit or loss– Held for trading – – (861) (861)

Loans and receivables 31,755 – 10,931 42,686Financial liabilities at amortised cost – (90,055) (202,262) (292,317)

Total 31,755 (90,055) (192,192) (250,492)


profit or loss– Designated upon initial recognition – – (10) (10)

Loans and receivables 36,895 – 2,265 39,160Financial liabilities at amortised cost – (76,328) (55,498) (131,826)

Total 36,895 (76,328) (53,243) (92,676)

Company

2015Loans and receivables 26,390 – – 26,390Financial liabilities at amortised cost – – 1,248 1,248

Total 26,390 – 1,248 27,638


profit or loss– Designated upon initial recognition – – (10) (10)

Loans and receivables 28,323 – – 28,323Financial liabilities at amortised cost – – (574) (574)

Total 28,323 – (584) 27,739

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31. CAPITAL MANAGEMENT

The Group and the Company define capital as its total equity and debt. The objective of the Group’s and the Company’s capital management is to maintain an optimal capital structure and ensure availability of funds in order to meet financial obligations, support business growth and maximise shareholder’s value. As a subsidiary of PETRONAS, the Group’s and the Company’s approach in managing capital is set out in the PETRONAS Group Corporate Financial Policy.

The Group and the Company monitor and maintain a prudent level of total debt to total asset ratio and ensure compliance with all covenants under debt and shareholders’ agreements and regulatory requirements, if any.

There were no changes in the Group’s and the Company’s approach to capital management during the year.

32. ADOPTION OF NEW AND REVISED PRONOUNCEMENTS

As of 1 January 2015, the Group has adopted the following amendments to MFRSs that have been issued by the MASB as listed below.

Effective for annual periods beginning on or after 1 July 2014

Amendments to MFRS 3, Business Combinations (Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle)Amendments to MFRS 8 Operating Segments (Annual Improvements 2010-2012 Cycle)Amendments to MFRS 13 Fair Value Measurement (Annual Improvements 2011-2013 Cycle)Amendments to MFRS 116 Property, Plant and Equipment (Annual Improvements 2010-2012 Cycle)Amendments to MFRS 119 Employee Benefits – Defined Benefit Plans: Employee ContributionsAmendments to MFRS 124 Related Party Disclosures (Annual Improvements 2010-2012 Cycle)

The adoption of the above amendments to MFRSs did not have material impact to the financial statements of the Group.

33. PRONOUNCEMENTS YET IN EFFECT

The following pronouncements that have been issued by the MASB will become effective in future financial reporting periods and have not been adopted by the Group and the Company in these financial statements.

Effective for annual periods beginning on or after 1 January 2016

Amendments to MFRS 5 Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements 2012-2014 Cycle)Amendments to MFRS 7 Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle)Amendments to MFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests in Joint OperationsAmendments to MFRS 101 Presentation of Financial Statements: Disclosure Initiative

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33. PRONOUNCEMENTS YET IN EFFECT (continued)


Amendments to MFRS 116 Property, Plant and Equipment: Clarification of Acceptable Methods of Depreciation and Amortisation

Amendments to MFRS 119 Employee Benefits (Annual Improvements 2012-2014 Cycle) Amendments to MFRS 127 Separate Financial Statements: Equity Method in Separate Financial Statements Amendments to MFRS 134 Interim Financial Reporting (Annual Improvements 2012-2014 Cycle)


MFRS 9 Financial Instruments (2014) MFRS 15 Revenue from Contracts with Customers

Effective for a date yet to be confirmed

Amendments to MFRS 10, Consolidated Financial Statements: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to MFRS 128, Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company are expected to apply the abovementioned pronouncements beginning from the respective dates the pronouncements become effective. The initial application of the abovementioned pronouncements are not expected to have any material impacts to the financial statements of the Group and the Company except as mentioned below:

i. MFRS 15 Revenue from Contracts with Customers

MFRS 15 replaces the guidance in MFRS 111 Construction Contracts, MFRS 118 Revenue, IC Interpretation 13 Customer Loyalty Programmes, IC Interpretation 15 Agreements for Construction of Real Estate, IC Interpretation 18 Transfers of Assets from Customers and IC Interpretation 131 Revenue – Barter Transactions Involving Advertising Services. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 15.

ii. MFRS 9 Financial Instruments

MFRS 9 replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting. The Group is currently assessing the financial impact that may arise from the adoption of MFRS 9.

34. NEW PRONOUNCEMENTS NOT APPLICABLE TO THE GROUP AND THE COMPANY

The MASB has issued amendments which are not yet effective, but for which are not relevant to the operations of the Group and of the Company and hence, no further disclosure is warranted.


Amendments to MFRS 10 Consolidated Financial Statements – Investment Entities: Applying the Consolidation Exception

Amendments to MFRS 12 Disclosure of Interests in Other Entities – Investment Entities: Applying the Consolidation Exception

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34. NEW PRONOUNCEMENTS NOT APPLICABLE TO THE GROUP AND THE COMPANY (continued)

Effective for annual periods beginning on or after 1 January 2016 (continued)

MFRS 14 Regulatory Deferral Accounts Amendments to MFRS 116 Property, Plant and Equipment – Agriculture: Bearer Plants Amendments to MFRS 128 Investments in Associates and Joint Ventures – Investment Entities: Applying the

Consolidation Exception Amendments to MFRS 138 Intangible Assets: Clarification of Acceptable Methods of Depreciation and

Amortisation Amendments to MFRS 141 Agriculture – Agriculture: Bearer Plants

35. DISCLOSURE OF REALISED AND UNREALISED PROFITS

The retained profits as at the end of reporting period consist of:

Group Company

2015RM’000

2014RM’000

2015RM’000

2014RM’000

Total retained profits/(accumulated losses) of the Company and its subsidiaries:– realised 8,494,324 7,609,990 8,642,552 7,578,575– unrealised (666,789) (574,622) (922,664) (1,032,571)

7,827,535 7,035,368 7,719,888 6,546,004Total share of retained profits/(accumulated

losses) from associated company:– realised 74,949 80,340 – –– unrealised (23,351) (24,471) – –

51,598 55,869 – –Total share of retained profits from joint

ventures:– realised 109,266 84,820 – –– unrealised 204,645 178,782 – –

313,911 263,602 – –

Consolidation adjustments 2,695 1,289 – –

Total retained profits 8,195,739 7,356,128 7,719,888 6,546,004

The realised and unrealised profits are compiled based on the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

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Report on the Financial Statements

We have audited the financial statements of PETRONAS GAS BERHAD, which comprise the Statements of Financial Position as at 31 December 2015 of the Group and of the Company, and the Statements of Profit or Loss and Other Comprehensive Income, Changes in Equity and Cash Flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 253 to 331.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2015 and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

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INDEPENDENT AUDITORS’ REPORTT O T H E M E M B E R S O F P E T R O N A S G A S B E R H A D

(COMPANY NO. 101671-H)

(INCORPORATED IN MALAYSIA)

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in note 35 on page 331 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements and is not required by the Malaysian Financial Reporting Standards or International Financial Reporting Standards. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG ADRIAN LEE LYE WANGFirm Number: AF 0758 Approval Number: 2679/11/17(J)Chartered Accountants Chartered Accountant

Petaling Jaya,

Date: 24 February 2016

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INFORMATION

CategoryNo. of

Shareholders% of Total

ShareholdersNo. of Shares

% of Total Shareholdings

Less than 100 431 4.38 2,961 0.00*100 – 1,000 6,757 68.70 6,254,040 0.321,001 – 10,000 1,853 18.84 6,179,861 0.3110,001 – 100,000 462 4.70 16,609,655 0.84100,001 to less than 5% of issued shares 330 3.35 421,243,598 21.295% and above of issued shares 3 0.03 1,528,441,800 77.24

Total 9,836 100.00 1,978,731,915 100.00

*Insignificant % shareholding

Category

No. of Shareholders No. of Shares Shares Percentage

Malaysian Foreigner Malaysian Foreigner Malaysian Foreigner

INDIVIDUALS 8,245 90 11,875,671 290,272 0.60 0.01BODY CORPORATE Banks/Finance companies 61 0 259,027,400 0 13.09 0.00 Investment trusts/Foundation/ Charities 6 0 139,000 0 0.01 0.00 Other types of companies 191 5 2,301,604 1,088,600 0.11 0.06GOVERNMENT AGENCIES/ INSTITUTIONS 6 0 1,435,000 0 0.07

0.00

NOMINEES 670 562 1,535,034,262 167,540,106 77.58 8.47OTHERS 0 0 0 0 0.00 0.00

Total 9,179 657 1,809,812,937 168,918,978 91.46 8.54

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ANALYSIS OF SHAREHOLDINGSA S A T 1 5 F E B R U A R Y 2 0 1 6

CLASSIFICATION OF SHAREHOLDERS

No. NameNo. of Shares


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)

224,431,900 11.34

3. KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 104,241,900 5.27

4. AMANAHRAYA TRUSTEES BERHAD(AMANAH SAHAM BUMIPUTERA)

55,180,000 2.79

5. CARTABAN NOMINEES (ASING) SDN BHD(EXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67))

19,408,660 0.98

6. AMANAHRAYA TRUSTEES BERHAD(AMANAH SAHAM WAWASAN 2020)

17,594,100 0.89

7. AMSEC NOMINEES (TEMPATAN) SDN BHD(AMTRUSTEE BERHAD FOR CIMB ISLAMIC DALI EQUITY GROWTH FUND (UT-CIMB-DALI))

13,877,300 0.70

8. MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD(GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD (PAR 1))

13,515,000 0.68

9. CARTABAN NOMINEES (TEMPATAN) SDN BHD(EXEMPT AN FOR EASTSPRING INVESTMENTS BERHAD)

13,459,300 0.68

10. AMANAHRAYA TRUSTEES BERHAD(AS 1MALAYSIA)

13,174,700 0.67

11. HSBC NOMINEES (ASING) SDN BHD(BBH AND CO BOSTON FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND)

12,751,196 0.64

12. AMANAHRAYA TRUSTEES BERHAD(AMANAH SAHAM MALAYSIA)

9,272,600 0.47

13. HSBC NOMINEES (ASING) SDN BHD(EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (U.S.A))

9,256,084 0.47

14. CITIGROUP NOMINEES (TEMPATAN) SDN BHD(EMPLOYEES PROVIDENT FUND BOARD (CIMB PRIN))

8,460,400 0.43

15. AMANAHRAYA TRUSTEES BERHAD(PUBLIC ISLAMIC DIVIDEND FUND)

7,563,000 0.38

A N N U A L R E P O R T 2 0 1 5

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LIST OF TOP 30 SHAREHOLDERSR E G I S T E R E D A S A T 1 5 F E B R U A R Y 2 0 1 6



16. MAYBANK NOMINEES (TEMPATAN) SDN BHD(MAYBANK TRUSTEES BERHAD FOR PUBLIC ITTIKAL FUND (N14011970240))

7,300,000 0.37

17. AMANAHRAYA TRUSTEES BERHAD(AMANAH SAHAM DIDIK)

6,289,100 0.32

18. CARTABAN NOMINEES (ASING) SDN BHD(GIC PRIVATE LIMITED FOR GOVERNMENT OF SINGAPORE (C))

6,247,000 0.32

19. AMANAHRAYA TRUSTEES BERHAD(PUBLIC ISLAMIC SELECT ENTERPRISES FUND)

5,629,400 0.28

20. MAYBANK NOMINEES (TEMPATAN) SDN BHD(MAYBANK TRUSTEES BERHAD FOR PUBLIC REGULAR SAVINGS FUND (N14011940100))

4,897,500 0.25

21. AMANAHRAYA TRUSTEES BERHAD(PUBLIC ISLAMIC SECTOR SELECT FUND)

4,741,800 0.24

22. HSBC NOMINEES (ASING) SDN BHD(EXEMPT AN FOR THE BANK OF NEW YORK MELLON (MELLON ACCT))

4,370,866 0.22

23. HSBC NOMINEES (ASING) SDN BHD(EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (JPMELAB AIF APG))

4,285,100 0.22

24. PERMODALAN NASIONAL BERHAD 4,023,600 0.20

25. HSBC NOMINEES (TEMPATAN) SDN BHD(HSBC (M) TRUSTEES BHD FOR CIMB ISLAMIC DALI EQUITY THEME FUND)

3,930,400 0.20

26. HSBC NOMINEES (ASING) SDN BHD(EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (BVI))

3,891,100 0.20

27. HSBC NOMINEES (ASING) SDN BHD(HSBC BK PLC FOR ABU DHABI INVESTMENT AUTHORITY (AGUS))

3,860,251 0.20

28. CITIGROUP NOMINEES (TEMPATAN) SDN BHDKUMPULAN WANG PERSARAAN (DIPERBADANKAN) (CIMB EQUITIES))

3,679,600 0.19

29. PERTUBUHAN KESELAMATAN SOSIAL 3,568,400 0.18

30. AMANAHRAYA TRUSTEES BERHAD(PUBLIC ITTIKAL SEQUEL FUND)

3,567,500 0.18

TOTAL 1,792,235,757 90.57

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LIST OF TOP 30 SHAREHOLDERSR E G I S T E R E D A S A T 1 5 F E B R U A R Y 2 0 1 6


% of TotalShareholding

1. Tan Sri Dato’ Seri Shamsul Azhar bin Abbas – –2. Yusa’ bin Hassan – –3. Habibah binti Abdul – –4. Lim Beng Choon – –5. Dato’ N. Sadasivan N.N. Pillay – –6. Datuk Rosli bin Boni – –7. Ir. Pramod Kumar Karunakaran – –8. Dato’ Ab. Halim bin Mohyiddin 5,000 0.00*

*Insignificant % shareholding

LIST OF MANAGEMENT’S SHAREHOLDINGS

The Management Committee members do not hold any shares in PGB.


% of TotalShareholding

1. CIMB Group Nominees (Tempatan) Sdn Bhd– Exempt AN for Petroliam Nasional Berhad– Exempt AN for PETRONAS Research Fund

1,199,768,000536,400

60.630.03

TOTAL 1,200,304,400 60.66

2. Employees Provident Fund Board 237,277,500 11.993. Kumpulan Wang Persaraan

(Diperbadankan) 109,789,400 5.55

A N N U A L R E P O R T 2 0 1 5

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INFORMATION

LIST OF DIRECTORS’ SHAREHOLDINGS

LIST OF SUBSTANTIAL SHAREHOLDERS

Company

2015RM

2014RM

Authorised:2,000,000,000 ordinary shares of RM1.00 each 2,000,000,000 2,000,000,000

Issued and fully paid:1,978,731,915 ordinary shares of RM1.00 each 1,978,731,915 1,978,731,915

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AUTHORISED & ISSUED SHARE CAPITAL

A summary and usage of the landed property, plant and equipment of PETRONAS Gas Berhad and its subsidiaries as at 31 December 2015:

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

2015 (RM’000)

TERENGGANU

Gas Processing Plants, KertihKm 105, Jalan Kuantan-Kuala Terengganu24300 Kertih, Kemaman, Terengganu Darul Iman

Lot No. 1903

Lot No. 3541

Lot No. 1902

30.09.1991

30.09.1991

30.09.1991

LeaseholdExpiry:

28.02.2043 (Sub-Lease 60 years)

03.04.2050 (60 years)

26.02.2082(99 years)

Leasehold land

PlantGPP 1GPP 2GPP 3

GPP 4/DPCU 2Compressor station

OfficeAdministration building 1Administration building 2Fire station

87.9

34.6

2.7

31.323.423.1

21.524.1

30.4

25.7

27.8

95,998123,310123,310

266,40065,010

1,282

6,892

3,248

2,429,511

A N N U A L R E P O R T 2 0 1 5

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INFORMATION

SUMMARY AND USAGE OF LANDED PROPERTY, PLANT AND EQUIPMENT

A S A T 3 1 D E C E M B E R 2 0 1 5



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

Gas Processing Plants, PakaKm 8, Kg. Tok Arun, Off Jalan Santong 23100 Paka, Dungun, Terengganu Darul Iman

Lot No. 7346

Lot No. 7220

03.08.1997

03.08.1997

LeaseholdExpiry:

13.07.2058 (60 years)

20.06.2058(60 years)

Leasehold land

PlantGPP 5GPP 6DPCU 3

OfficeAdministrationbuilding

(Vacant)

189.6

26.9

16.916.017.3

18.2

200,000220,000

60,000

12,220

967,693

Export Terminal OperationTanjung Sulong,24000 Kemaman,Terengganu Darul Iman

Lot No. 1314

Lot No. 1333

24.07.1993

24.07.1993

LeaseholdExpiry:

19.03.2025 (40 years)

11.03.2027 (40 years)

Leasehold land

PlantUnit 1,2,3,4

OfficeAdministration building

Marine facilityBreakwaterJetty

9.7

2.8

31.1

31.1

1,146

256,864

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A S A T 3 1 D E C E M B E R 2 0 1 5



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

Centralised Utility Facilities (CUF) Operations, Kertih Kertih Integrated Petrochemical Complex, Km 105, Jalan Kuantan Kuala Terengganu, 24300 Kertih, Kemaman, Terengganu Darul Iman

Lot No. 8065 21.12.1999

LeaseholdExpiry:

19.08.2060 (60 years)

Leasehold land

PlantCGN BCGN CCGN D, E, FWater plant CGN GASU Lab & workshop

Control room


37.1

16.116.115.615.615.714.814.8

14.6

14.9

667667

2,0002,000

66715,451

729

1,820

514

551,571

PAHANG

Kuantan Regional Operations Office Lot 1, Sector 1,Bandar Indera Mahkota25200 Kuantan, Pahang Darul Makmur

Lot No. PT16756 04.01.1989

LeaseholdExpiry:

04.01.2088 (99 years)

Leasehold land

OfficeRegional office

11.2 24.2 2,428

8,005

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INFORMATION



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

Kuantan Compressor Station, Kampung Mahkota, Km 19, Jalan Gambang, 26070 Kuantan, Pahang Darul Makmur

Lot No. 104462 04.01.1989

LeaseholdExpiry:

26.08.2101 (99 years)

Leasehold land

PlantCompressor stationCompressor station

20.122.1

6.2

1,142

4,378

115,521

Centralised Utility Facilities (CUF) Operations, GebengLot 139A,Gebeng Industrial Area, Phase III,26080 Kuantan, Pahang Darul Makmur

Lot No. PT15127

17.11.1999 LeaseholdExpiry: 08.01.2100(99 years)

Leasehold land

PlantCGN ACGN BCGN CN2GENWater plant

OfficeMaintenance buildingWarehouse

18.8

16.116.116.116.115.6

14.6

14.6

667667667360

2,000

1,015

1,004

258,540

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PERFORMANCE REVIEW



A S A T 3 1 D E C E M B E R 2 0 1 5



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

JOHOR

Segamat Operation Centre, Gas Transmission System,Km 10, Lebuhraya Segamat-Kuantan85000 Segamat, Johor Darul Takzim

Lot No. PTD564 22.09.1991

LeaseholdExpiry:

18.02.2102 (99 years)

Leasehold land

PlantCompressor station

OfficeOperation centre

61.318.0

23.4

2,792

8,080

59,214

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

LeaseholdExpiry:

22.04.2088 (99 years)

Leasehold land

OfficeRegional office 4.1 23.5 2,428

7,349

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INFORMATION



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (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


14.0

24.4 2,428

6,421

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


2.9

24.1 2,428

7,141

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A S A T 3 1 D E C E M B E R 2 0 1 5



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

Meru Compressor Station,Lot 1586 (G3907) Mukim of Jeram District of Kuala Selangor, Selangor Darul Ehsan

Lot No. PT6875 04.08.1998

LeaseholdExpiry:

10.08.2107 (99 years)

Leasehold land(Vacant)

5.4 N/A N/A 1,027

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


3.2

18.2 1,604

4,740

KEDAH

Gurun Regional Operations Office,PO Box 31, Km 1, Jalan Jeniang08300 Gurun, Kedah Darul Aman

Lot No. 8173 18.12.1997

Leasehold Expiry:

22.04.2102 (99 years)

Leasehold land


2.9

17.3 1,604

5,352

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INFORMATION



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

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

PipelinePipeline across 8.0 km

24.7

10.8 N/A

840

SARAWAK

Miri Operations Office,Lot 2075, Block 4, Jalan Cattleya 2B, Piasau Industrial Area, PO Box 1504, 98008 Miri, Sarawak

N/A PipelineMeter StationPipeline across 42.2 km

N/A – located along road

reserve area 25.8 2,066

14,257

Bintulu Gas Meter Station,Kidurong Industrial Area, Part of Lot 155Block 20Kemena Land District,97007 Bintulu, Sarawak

Lot No. 1646 21.10.2004

LeaseholdExpiry:

16.07.2067(60 years)

PipelineMeter Station Pipeline across 4.2 km

0.1 19.2 630

86

MELAKA

LNG Regasification Terminal,Sungai Udang PSR-1/MG3 Retrofit Site Office Revamp PETRONAS Penapisan (Melaka) Sdn BhdSungai Udang, Melaka

1.07.2011

1.10.2012

LeaseholdExpiry:30.06.2038(25 years)

30.04.2036(24 years)

Floating Storage Units

Jetty RegasificationUnit


N/A

0.3

2.6

0.5

N/A

3,000

2,899,403

15,579

346


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A S A T 3 1 D E C E M B E R 2 0 1 5



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

PIPELINES

PGU I – total gas pipeline comprises 6 km from Kertih to Paka, Terengganu & 32 km from Kertih to Teluk Kalong, Terengganu and two 40 km of lateral lines from the GPPs to the Export Terminal in Tanjung Sulong, Terengganu Darul Iman

20.03.1985 Leasehold Expiry:(40, 60 and 99 years)

PipelinesPipelines in leasehold land

Terengganu :43 lots

Terengganu:237.3

31.3 N/A

33,100

PGU II – total gas pipeline comprisesSector 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

01.01.1992 Leasehold Expiry:(99 years)


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

24.1 N/A

523,787

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INFORMATION



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

PGU III – total gas pipeline comprisesSector 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

06.01.1996 Leasehold Expiry:(99 years)


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 1:20.1

Sector 2&3:18.2

N/A

N/A

505,711

PGU Loop 1 – total gas pipeline of 265 km from Kertih, Terengganu to Segamat, Johor

04.10.1999 N/A PipelinesPipelines in leasehold land

Terengganu:77 lots

Pahang:315 lots

Terengganu:158.9

Pahang:104.6

16.4 N/A

316,168

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A S A T 3 1 D E C E M B E R 2 0 1 5



Land Area

(hectare)

Age of Plant and

Building (years)

Build-up Area

(sq. m)

Net Book Value

as at 31 December

2015 (RM’000)

PGU Loop 2 – total gas pipeline of 226 km from Segamat, Johor to Meru, Selangor

01.11.2000 N/A PipelinesPipelines in leasehold land(Part of PGU’sdocument of title)

Melaka:4 lots

Negeri Sembilan:4 lots

Melaka:1.3

Negeri Sembilan:

1.1

15.4 N/A

330,042

TOTAL 9,317,922

Abbreviations:

CGN : Cogenerator PlantDPCU : Dew Point Control Unit PlantGPP : Gas Processing PlantN2GEN : Nitrogen GeneratorASU : Air Separation Unit

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INFORMATION

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

2,914,982

Gas Processing Plants, Kertih Leasehold land, Plant and Office Buildings 2,429,511

Gas Processing Plants, Santong Leasehold land, Plant and Office Buildings 967,693

Utilities Plants, Kertih Leasehold land, Plant and Office Buildings 551,571

PGU II Leasehold land and Pipelines 523,787

PGU III Leasehold land and Pipelines 505,711

PGU Loop 2 Leasehold land and Pipelines 330,042

PGU Loop 1 Leasehold land and Pipelines 316,168

Utilities Plants, Gebeng Leasehold land, Plant and Office Buildings 258,540

Export Terminal Leasehold land, Plant and Marine Facility 256,864

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TOP 10 LANDED PROPERTYPLANT & EQUIPMENT

GAS PROCESSING AND UTILITIES DIVISION

Gas Processing Plant, KertihKm 105, Jalan Kuantan-Kuala Terengganu24300 Kertih, KemamanTerengganu Darul ImanT: +(609) 831 2345F: +(609) 827 1710

Gas Processing Plant, SantongKm 8, Kg. Tok Arun, Off Jalan Santong23100 Paka, DungunTerengganu Darul ImanT: +(609) 831 2345F: +(609) 827 4578

Utilities Plant, KertihKertih Integrated Petrochemical ComplexKm 105, Jalan Kuantan/Kuala Terengganu24300 Kertih, KemamanTerengganu Darul ImanT: +(609) 830 5500F: +(609) 830 5514

Utilities Plant, GebengLot 139A, Gebeng Industrial Area Fasa III26080 KuantanPahang Darul MakmurT: +(609) 586 3300F: +(609) 586 3311

Tanjung Sulong Export TerminalTanjung Sulong, 24000 KemamanTerengganu Darul ImanT: +(609) 862 4321F: +(609) 863 1146

GAS TRANSMISSION AND REGASIFICATION DIVISION

PETRONAS Gas Berhad SegamatKm 10, Lebuhraya Segamat-Kuantan85000 SegamatJohor Darul TakzimT: +(607) 935 3000F: +(607) 931 6521

Gurun Regional OfficeKm 1, Jalan Jeniang08300 GurunKedah Darul AmanT: +(604) 468 5518F: +(604) 468 5519

Bintulu Operations CentreLot 8, Block 16, Kemena Land DistrictKm 39.5, Bintulu/Miri Coastal Highway97000 Bintulu, P.O. Box 219097011 Bintulu, SarawakT: +(6086) 85 4800F: +(6086) 85 4999

Miri Regional OfficeLot 1590 & 1591Eastwood Valley Industrial AreaJalan Miri By Pass, P.O. Box 150498008 Miri, SarawakT: +(6085) 42 2811F: +(6085) 41 6410

Sitiawan Regional OfficeLot 33263, Jalan Dato’ Ahmad Yunus32000 Sitiawan, Perak Darul RidzuanT: +(605) 692 5611/12/13/14F: +(605) 692 5615

Shah Alam Regional OfficeLot 1, Jalan Jemuju Lima 16/13EKawasan Perindustrian Seksyen 1640200 Shah AlamSelangor Darul EhsanT: +(603) 5510 6222F: +(603) 5510 1528

Seremban Regional OfficeKm 11, Jalan Seremban Tampin71450 Sungai GadutNegeri Sembilan Darul KhususT: +(606) 677 6777F: +(606) 677 7799

Pasir Gudang Regional OfficePLO 332, Jalan Perak 4Kawasan Perindustrian Pasir Gudang81700 Pasir GudangJohor Darul TakzimT: +(607) 251 0333F: +(607) 251 0400

Kuantan Regional OfficeLot 1, Sektor 1, Bandar Indera Mahkota25200 KuantanPahang Darul MakmurT: +(609) 573 2811F: +(609) 573 2813

Kertih Regional OfficeAras 1, Kompleks Pejabat PETRONAS Wilayah Pantai Timur24300 Kertih, KemamanTerengganu Darul ImanT: +(609) 867 3500F: +(609) 864 0375

Kimanis Operation Centrec/o Sabah Oil and Gas Terminal (SOGT)Level 1, Km 53 Papar-Beaufort HighwayKimanis89608 Papar, SabahT: +(6087) 88 903410F: +(6087) 88 903312

PETRONAS GAS BERHADLevel 49-51, Tower 1, PETRONAS Twin TowersKuala Lumpur City Centre, 50088 Kuala Lumpur, MalaysiaT: +(603) 2331 5000F: +(603) 2051 6992 (General), +(603) 2051 6555 (Corporate Secretary)

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CORPORATE DIRECTORY

GENERAL STANDARD DISCLOSURES

INDICATORS DESCRIPTION PAGE REFERENCE

STRATEGY AND ANALYSIS

G4-1 Statement from the most decision-maker of the organisation. 12

ORGANISATIONAL PROFILE

G4-3 Name of the organisation Cover page

G4-4 Primary brands, products and services 2, 27

G4-5 Location of the organisation’s headquarters 27

G4-6 Countries where the organisation operates 28

G4-7 Nature of ownership and legal form 27

G4-8 Market served 14, 18, 28, 60, 76

G4-9 Scale of organisation 4, 27, 30

G4-10 Total number of employees 27

G4-12 Organisation’s supply chain 158

G4-13 Significant changes during reporting period 13, 20

G4-15 Endorsement of external economic, environmental and social characters and initiatives 24, 75, 155

G4-16 Membership in national/international associations 241

EFFLUENTS AND WASTE

G4-23 Total weight of waste by type and disposal method 165

STAKEHOLDER ENGAGEMENT

G4-24 Stakeholder groups engaged by the organisation 76

G4-25 Basis for identification of stakeholders 76

G4-26 Approach to stakeholder management 159

G4-27 Key topics and concerns raised by stakeholders 76

GOVERNANCE

G4-34 Governance structure of the organisation 175

ETHIC AND INTEGRITY

G4-56 Organisation’s codes of conduct and codes of ethics 225

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GLOBAL REPORTING INITIATIVE (GRI) CONTENT INDEX

INDICATORS DESCRIPTION PAGE REFERENCE

ENERGY

G4-EN3 Energy consumption within the organisation 165

G4-EN6 Reduction of energy consumption 165

WATER

G4-EN10 Percentages and total volume of water recycled and reused 165

BIODIVERSITY

G4-EN12 Description of significant impacts of activities, products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

23, 165

G4-EN13 Habitat protected or restored. 23, 165

EMISSIONS

G4-EN15 Direct Green House Gas (GHG) Emission (Scope 1). 164

OCCUPATIONAL HEALTH AND SAFETY

G4-LA6 Type of injury and rates of injury, occupational, diseases, lost days, and absenteeism, and total number of work related fatalities by region and gender.

163

LOCAL COMMUNITIES

G4-SO1 Percentage of operations with implemented local community engagement, impact assessments, and employment programs.

23, 168

ANTI-CORRUPTION

G4-SO3 Total number and percentage of operations assessed for risks related to corruption and the significant risks identified.

22, 156, 183, 225

G4-SO4 Communication and training on anti-corruption policies and procedures. 162, 231

G4-SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

189

SPECIFIC STANDARD DISCLOSURES FOR THE OIL AND GAS SECTOR

ENERGY

OG4 Number and percentage of significant operating sites in which biodiversity risk been assessed and monitored.

165

LOCAL COMMUNITIES

OG12 Operations where involuntary resettlement took place, the number of household resettled in each and how their livelihoods were affected in the process.

162, 168

SPECIFIC STANDARD DISCLOSURES

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INFORMATION

NOTICE IS HEREBY GIVEN THAT the 33rd Annual General Meeting of the Company will be held at the Sapphire Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Tuesday, 26 April 2016 at 10.30 a.m. to consider the following matters:

AGENDA

As Ordinary Business

1. To receive the Audited Financial Statements for the financial year ended 31 December 2015 together with the Reports of the Directors and Auditors thereon.Please refer to Explanatory Note A.

2. To re-elect the following Director pursuant to Article 93 of the Company’s Articles of Association and, being eligible, offers himself for re-election:

(Resolution 1)

(a) Yusa’ bin HassanPlease refer to Explanatory Note B.

3. To re-elect the following Director pursuant to Article 96 of the Company’s Articles of Association and, being eligible, offers himself for re-election:

(Resolution 2)

(a) Tan Sri Dato’ Seri Shamsul Azhar bin AbbasPlease refer to Explanatory Note B.

4. To approve the payment of Directors’ Fees of up to RM986,000 payable to Non-Executive Directors with effect from 1 January 2016 until the next Annual General Meeting of the Company. Please refer to Explanatory Note C.

(Resolution 3)

5. To re-appoint Messrs KPMG as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.Please refer to Explanatory Note D.

(Resolution 4)

As Special Business

6. To consider and, if thought fit, to pass the following Ordinary Resolution with or without modifications:

“THAT the following Directors retiring in accordance with Section 129(6) of the Companies Act, 1965, Malaysia, are hereby re-appointed as Directors of the Company to hold office until the conclusion of the next Annual General Meeting of the Company:

(a) Dato’ N. Sadasivan N.N. Pillay(b) Dato’ Ab. Halim bin MohyiddinPlease refer to Explanatory Note E.

(Resolution 5)(Resolution 6)

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

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NOTICE OF ANNUAL GENERAL MEETING

By Order of the Board

Intan Shafinas (Tuty) binti Hussain (LS0009774) Yeap Kok Leong (MAICSA 0862549) Company Secretary Company Secretary

Kuala Lumpur1 April 2016

Notes:

1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming 33rd Annual General Meeting (AGM) of the Company, the Company shall be request ing the Record of Depositor ies as at 18 April 2016. Only a depositor whose name appears on the Record of Depositors as at 18 April 2016 shall be regarded as a member entitled to attend, speak and vote at the meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead.

2. A member may appoint not more than two proxies to attend the same meeting. A proxy may but need not be, a member of the Company and a member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965, Malaysia, shall not apply to the Company. There shall be no restriction as to the qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (SICDA), it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the omnibus account, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies, or where an exempt authorised nominee appoints two or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointer or if the member is a corporation, either under seal or under the hand of an officer or attorney duly authorised and shall be deposited at the office of the Company’s Share Registrar, Symphony Share Registrars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, at least 48 hours before the meeting or if the meeting is adjourned at least 48 hours before the time fixed for the adjourned meeting.

7. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed by an attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

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INFORMATION

8. Explanatory Notes:

(i) Note A

Audited Financial Statements for the Financial Year Ended 31 December 2015

The audited financial statements are laid before the shareholders pursuant to the provisions of Section 169(1) and (3) of the Companies Act, 1965, Malaysia. The same is for discussion and not put forward for voting.

(ii) Note B

Re-election of Directors who retire in accordance with Article 93 and Article 96 of the Company’s Articles of Association (AA)

Article 93 of the AA 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 AA 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.

The Nomination and Remuneration Committee (NomRem) 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, exper ience, s t rength and qual i t ies , 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 page 40 to page 47 of the 2015 Annual Report.

The Board endorsed the NomRem recommendation that the Directors who retire in accordance with Article 93 and Article 96 of the AA are eligible to stand for re-election.

(iii) Note C

Non-Executive Directors’ Fees

The remuneration structure of the Non-Executive Directors (NEDs) of the Company is as follows:

• Monthly fixed fees for duties as Director/Chairman; and

• Meeting allowances for each meeting attended.

Yusa’ bin Hassan who is an Executive Director is not entitled to Directors’ fees. Whilst Ir. Pramod Kumar Karunakaran, being a Non-Independent Non-Executive Director, who is an employee of Petroliam Nasional Berhad (PETRONAS) and holding the position of Vice President, his fees are paid directly to PETRONAS.

The shareholders at the last AGM held on 30 April 2015 approved RM986,000 as payment of Directors’ fees for the financial year ended 31 December 2015 (FYE2015). The actual Directors’ fees for the Non-Executive Directors paid during the same period was RM576,000.

Details of the fees payable to the NEDs for the financial year ended 31 December 2015 are enumerated on page 181 of the 2015 Annual Report.

The Directors’ fees proposed for the period 1 January 2016 up to the next AGM are calculated based on the number of scheduled Board’s and Board Committees’ meetings and assumption that all the NEDs will remain in office until the next AGM and there is no proposed revision to the existing Directors’ fees.

The resolutions for the total Directors’ fees for the financial year ending 31 December 2016 and payment of the fees from 1 January 2017 until the conclusion of the next AGM (FYE2016/2017) are to facilitate payment of the Directors’ fees for FYE2016/2017. The Directors’ fees in FYE2016/2017 are recommended based on individual Directors’ performance and contribution in FYE2015, responsibilities undertaken and time commitment required from the Directors.

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NOTICE OF ANNUAL GENERAL MEETING

The Board will seek shareholders’ approval at the next AGM in the event the Directors’ fees proposed is insufficient due to increase in number of Board’s and Board Committees’ meetings and/or increase in Board size.

(iv) Explanatory Note D

Re-appointment of Auditors

The Board at its meeting held on 24 February 2016 endorsed for the re-appointment of Messrs KPMG as External Auditors of the Company for the financial year ending 31 December 2016 be presented to the shareholders for approval.

(v) Explanatory Note E

Re-election of Directors who retire in accordance with Section 129(6) of the Companies Act, 1965, Malaysia

Pursuant to Section 129(6) of the Companies Act, 1965, Malaysia, the proposed Resolutions 5 and 6 are to seek shareholders’ approval on the re-appointment of Dato’ N. Sadasivan N.N. Pillay and Dato’ Ab. Halim bin Mohyiddin as Directors who are over the age of 70 and if re-appointed, the appointment shall be valid until the conclusion of the next AGM.

PURSUANT TO PARAGRAPH 8.27(2) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD

The following are Directors retiring pursuant to Articles 93 and 96 of the Company’s Articles of Association:

1. The Director who is standing for re-election pursuant to Article 93 of the Articles of Association of the Company is as follows:

• Yusa‘ bin Hassan Resolution 1

2. The Director who is standing for re-election pursuant to Article 96 of the Articles of Association of the Company is as follows:

• Tan Sri Dato’ Seri Shamsul Azhar bin Abbas Resolution 2

3. The Directors who are standing for re-election pursuant to Section 129(6) of the Companies Act, 1965 are as follows:

• Dato‘ N. Sadasivan N.N. Pillay Resolution 5• Dato‘ Ab. Halim bin Mohyiddin Resolution 6

The profiles of the respective Directors who are standing for re-election as stated in the Notice of 33rd AGM are set out in the Profile of the Board of Directors on page 40 to page 47 inclusive, of the 2015 Annual Report.

The details of the Directors’ interests in the securities of the Company as at 15 February 2016 are stated on page 337 of the 2015 Annual Report.

STATEMENT ACCOMPANYING NOTICE OF 33RD ANNUAL GENERAL MEETING

A N N U A L R E P O R T 2 0 1 5

357



RIGHT RESULTSOTHER

INFORMATION

REGISTRATION

(1) Registration will start at 8.30 a.m. on 26 April 2016 in front of the Sapphire Room, Mandarin Oriental Kuala Lumpur.

(2) Please produce your original MyKad to the registration staff for verification and ensure you collect your MyKad 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 MyKad of that person.

(5) Kindly note that the registration counter will only handle the verification of identity and registration.

HELPDESK

(1) Please proceed to the Helpdesk for any clarification or enquiry.

(2) The Helpdesk will also handle revocation of Proxy’s appointment.

PARKING

(1) Please take note that PETRONAS Gas Berhad (PGB) will not be providing cash reimbursement for parking. Instead, you are advised to park at P2, P3 or P4 of Mandarin Oriental Hotel, Kuala Lumpur or Suria KLCC. Please produce your parking ticket for validation at the counter near the Sapphire Room.

(2) By validating the parking ticket, you will not be charged for parking when you leave. Please be advised, that the parking ticket will expire by 4.00 p.m. on 26 April 2016 and any additional cost incurred after the said time will not be borne by PGB.

(3) Kindly note that PGB will not reimburse any parking cost incurred at any location. As such, please observe the abovementioned parking area.

SITE VISIT

Please be informed that there will be a registration booth available for the Shareholders’ Visitation Programme, to be organised at a later date to be informed by PGB.

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ADMINISTRATIVE DETAILS FOR THE 33RD ANNUAL GENERAL MEETING

NO. OF SHARES HELD

CDS ACCOUNT NO.

I/We (Full Name In Capital Letters)

of (Full Address)

being a *Member/Members of PETRONAS GAS BERHAD, do hereby appoint (Full Name In Capital Letters)

of (Full Address)

or failing him (Full Name In Capital Letters)

of (Full Address)

or failing him, the CHAIRMAN OF MEETING, as *my/our proxy to vote for *me/us and on *my/our behalf at the 33rd Annual General Meeting to be held at the Sapphire Room, Mandarin Oriental Hotel, Kuala Lumpur City Centre, 50088 Kuala Lumpur on Tuesday, 26 April 2016 at 10.30 a.m. and at any adjournment thereof.

Please indicate with an “X” in the space provided below how you wish your votes to be casted. If no specific direction as to voting is given, the Proxy will vote or abstain from voting at his discretion.

No. Resolutions For Against

Ordinary Business

1. To re-elect the following Director pursuant to Article 93 of the Company’s Articles of Association and, being eligible, offers himself for re-election:(a) Yusa’ bin Hassan

2. To re-elect the following Director pursuant to Article 96 of the Company’s Articles of Association and, being eligible, offers himself for re-election:(a) Tan Sri Dato’ Seri Shamsul Azhar bin Abbas

3. To approve the payment of Directors’ Fees of up to RM986,000 payable to Non-Executive Directors with effect from 1 January 2016 until the next Annual General Meeting of the Company.

4. To re-appoint Messrs KPMG, as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

Special Business

5. To re-appoint Dato’ N. Sadasivan N.N. Pillay as a Director of the Company to hold office until the conclusion of next Annual General Meeting of the Company in accordance with Section 129 (6) of the Companies Act, 1965.

6. To re-appoint Dato’ Ab. Halim bin Mohyiddin as a Director of the Company to hold office until the conclusion of next Annual General Meeting of the Company in accordance with Section 129 (6) of the Companies Act, 1965.

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

* Strike out whichever not applicable.

As witness my/our hand this day 2016. Signature of Member/Common Seal

PROXY FORMP E T R O N A S G A S B E R H A D ( 1 0 1 6 7 1 - H )

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

AFFIXSTAMP

Notes:

1. For the purposes of determining a member who shall be entitled to attend and vote at the forthcoming 33rd Annual General Meeting of the Company, the Company shall be requesting the Record of Depositories as at 18 April 2016. Only a depositor whose name appears on the Record of Depositors as at 18 April 2016 shall be regarded as a member entitled to attend, speak and vote at the meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead.

2. A member may appoint not more than two proxies to attend the same meeting. A proxy may but need not be, a Member of the Company and a Member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965, Malaysia, shall not apply to the Company. There shall be no restriction as to the qualification of the proxy.

3. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991 (SICDA), it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the omnibus account, there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the SICDA which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

5. Where a member or the authorised nominee appoints two proxies, or where an exempt authorised nominee appoints two or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies.

6. The instrument appointing a proxy shall be in writing (in the common or usual form) under the hand of the appointer or if the Member is a corporation, either under seal or under the hand of an officer or attorney duly authorised and shall be deposited at the office of the Company’s Share Registrar, Symphony Share Registrars Sdn Bhd, Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, at least 48 hours before the meeting or if the meeting is adjourned at least 48 hours before the time fixed for the adjourned meeting.

7. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed by an attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

www.petronasgas.com

PETRONAS GAS BERHAD (101671-H)

Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre50088 Kuala Lumpur

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

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Annual Report 2015

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