Standard and Poor's today affirmed its BBB-plus foreign currency and A-plus local currency ratings for national oil company Petronas, and added the ratings outlook was stable.

The international credit rating agency said Petroliam Nasional Bhd's (Petronas) ratings reflected the company's exclusive ownership and control of Malaysia's substantial hydrocarbon resources and "very strong financial profile".

"These strengths are slightly offset by risks relating to its increasingly large presence outside Malaysia, as well as the cyclical, capital intensive and competitive nature of the industry," Eel-Lin Tan, S and P's credit analyst said.

Cash flow good

S and P said the start of operations at Petronas' third LNG facility in April 2003 should further enhance cash flow generation, as will the full commissioning of its petrochemical complex.

"Its increasingly integrated operations partly mitigate the impact of volatile oil and gas prices o­n operating margins," it said.

But the rating firm said that Petronas was exposed to uncertain operating and political conditions through its international businesses, many of which are located in the Middle East, Africa and Asia, and require substantial capital expenditures in the next few years.

"These activities form an increasingly important part of the company's operations, accounting for about o­ne-third of total revenues and 16 percent of total petroleum reserves. - AFP