Higher Fuel Subsidies May Weigh on PETRONAS' Capital Allocation

PETRONAS' dividend payout to the government may be increased to RM48 billion in 2026, according to BIMB Securities. This comes as fuel subsidy costs are expected to rise due to higher Brent crude prices, which have averaged between US$94 and US$98 a barrel over the past three months.

A larger dividend payout could put pressure on PETRONAS' long-term capital allocation, including spending on upstream activities, gas infrastructure, and energy-transition initiatives. BIMB Securities also expects PETRONAS' cash generation through its listed subsidiaries to draw greater attention.

Brent crude is projected to ease to US$85 a barrel in 2027 and US$75 a barrel in 2028, which may lead to a moderation of PETRONAS' dividend payout to RM32 billion in 2027 and RM25 billion in 2028.