A larger dividend to the government on the back of elevated oil prices will limit Petroliam Nasional Bhd’s (Petronas) spending on upstream activities and gas infrastructure moving forward, a research house said.
BIMB Securities said the state-owned oil corporation’s capital allocation could come under pressure if the government seeks larger dividend contributions from Petronas to offset higher fuel subsidy costs.
In its Budget 2027 preview note today, the research house said a higher dividend payout could raise questions over Petronas’ longer-term capital allocation including spending on upstream activities, gas infrastructure and energy-transition initiatives.
It said Petronas’ dividend to the government could rise to RM48 billion in 2026 while the government’s fuel subsidy bill could reach RM50 billion, assuming Brent crude averages US$95 a barrel.
Petronas’ dividend to the government stood at RM32 billion in 2025 while the fuel subsidy bill was RM30 billion.
BIMB Securities expects Petronas’ dividend payout to moderate to RM32 billion in 2027 and RM25 billion in 2028, as Brent crude is projected to ease to US$85 a barrel in 2027 and US$75 a barrel in 2028.
In Budget 2026, the Petronas dividend was estimated at RM20 billion for 2026, while total petroleum-related revenue was projected at RM43 billion, or 12.5% of federal revenue.
However, these estimates were made before the onset of the US-Iran war earlier this year, which pushed crude oil prices above US$100 per barrel.
Oil prices have remained elevated despite talks between the US and Iran to end the months-long war. Brent crude has averaged US$92.50 per barrel in the first six months of 2026 and was trading around US$102 today.
BIMB Securities also said higher oil prices may provide only a limited boost to Malaysia’s fiscal position as wider refining margins and resilient fuel demand push up the cost of fuel subsidies.
As oil prices rose, refining margins, or crack spreads, also climbed to more than US$60 a barrel, it noted.
The divergence between crude and refined product prices means subsidy expenditure could rise faster than petroleum-related revenue, it pointed out.
“This could potentially constrain efforts to accelerate fiscal consolidation,” BIMB Securities added.
