Retrenchment: Petronas must prioritize corporate restructuring over job cuts

Malaysia’s national oil company, Petronas, is reportedly contemplating a retrenchment exercise involving up to 5,000 employees amid global energy transitions, revenue pressures, and internal restructuring plans. If confirmed, such a move would be the most extensive layoff by Petronas since the 2016 oil downturn. Yet, in a time when state-linked enterprises are expected to lead responsibly and innovatively, retrenchment should not be the default mechanism to manage financial strain or transition pressure.

Instead of terminating employees—many of whom are skilled professionals crucial to Malaysia’s energy transition—Petronas must adopt more strategic restructuring. Global energy corporations offer clear precedents: successful transformations often stem from comprehensive corporate overhauls, repackaging of top executive perks, and venturing into new business ecosystems—not mass job cuts.

The Real Issue: Corporate Inefficiencies, Not Labour Redundancy

Retrenchment is often seen as a quick fix to improve balance sheets, but it frequently masks deeper inefficiencies in corporate governance, bloated upper management structures, and lack of innovation in adapting to energy transitions. According to Forbes (2024), companies that focus on management efficiency, innovation, and employee redeployment often outperform those that rely heavily on layoffs to cut costs.

Petronas with over 46,000 employees, is not an overstaffed organisation by global standards. Instead, internal audits and performance reviews should target redundancies in overlapping management roles, outdated procurement processes, and legacy asset allocations. Management layers—particularly within GLCs—tend to be hierarchical and costly. A McKinsey & Co. report (2023) suggests that a leaner, flatter management structure improves both cost-efficiency and operational speed.

Global Precedents: Restructuring Over Retrenchment

Several international oil and gas (O&G) and energy companies have shown that transformation does not have to mean workforce reduction.

BP (British Petroleum): In 2020, BP announced it would reduce oil and gas production by 40% and invest heavily in renewables by 2030. Rather than mass layoffs, BP redeployed thousands of workers into its new renewables and EV charging divisions. CEO Bernard Looney’s move to flatten BP’s executive structure saved millions in senior executive perks and facilitated faster decision-making (The Guardian, 2020).

TotalEnergies (France): Total rebranded as TotalEnergies in 2021, signaling a shift toward cleaner energy. Rather than reduce headcount drastically, the company invested in retraining and internal mobility. Employees from legacy oil divisions were moved into solar, hydrogen, and EV battery units (Reuters, 2021).

ENI (Italy): ENI launched its “Eni 2050” plan with a strong emphasis on decarbonisation. Instead of retrenching, ENI created cross-functional teams to lead decarbonisation efforts and reskilled existing staff. CEO Claudio Descalzi restructured senior pay schemes, tying bonuses to climate goals and digital transformation deliverables (Bloomberg, 2022).

Executive Compensation: The Untouched Terrain

In Malaysia, conversations around corporate austerity rarely touch executive compensation, especially in GLCs. Petronas senior executives reportedly earn higher renumeration packages, inclusive of allowances, incentives, and benefits (The Edge Markets, 2023). Before any retrenchment exercise, Petronas must publicly disclose top management’s salary structures and perks and lead by example in imposing voluntary pay cuts or restructuring benefits.

This approach aligns with international standards. In 2021, Royal Dutch Shell’s senior management took a 20% pay cut as part of pandemic-related austerity measures, and further tied executive bonuses to clean energy milestones. Similarly, Equinor (Norway) revised its executive compensation policy to limit bonuses while oil revenues remained volatile and redirected funds toward green hydrogen and offshore wind.

New Business Ventures: Petronas ‘Missed Opportunity?

Petronas has already ventured into new energy areas—hydrogen, solar (through Gentari), and LNG bunkering—but the scale remains conservative. Rather than retrenching workers, these sectors can absorb surplus labour, provided there’s proper retraining and re-skilling.

Gentari, a Petronas subsidiary, is developing solar and EV charging networks. However, its workforce is still relatively small and has yet to become a magnet for internal transfers or fresh graduates.

Hydrogen is touted as the next big energy frontier. Japan’s Eneos and Australia’s Fortescue Future Industries (FFI) are already creating thousands of new jobs in green hydrogen plants and exports.

By leveraging its position in Southeast Asia and existing LNG expertise, Petronas can replicate such models domestically and across ASEAN, positioning itself as a regional energy transition leader.

National Responsibility and Ethical Governance

As a wholly government-owned company, Petronas has a responsibility not just to its shareholders, but also to the Malaysian public. Retrenching thousands while maintaining expensive perks for top executives and slow-walking its energy transition would damage public trust and contradict the ethos of Malaysia Madani —a governance framework based on inclusivity, compassion, and sustainable development.

Moreover, mass retrenchment may cause a brain drain of O&G professionals to other countries or competing firms, weakening Malaysia’s long-term human capital in the energy sector.

Recommendations for Petronas:

1. Freeze New Senior Hires & Repackage Executive Benefits: Before touching lower- and mid-level workers, a freeze on new C-suite hires and the restructuring of top-tier compensation should be instituted.

2. Internal Audit of Management Layers: Identify overlapping managerial functions and reduce bureaucracy through a flatter structure.

3. Re-skill and Redeploy: Invest heavily in retraining engineers, analysts, and support staff for placement in green energy and digital transformation units.

4. Transparent Communication: Petronas should issue a detailed public statement outlining its restructuring roadmap, focusing on sustainability and inclusivity, not just profit.

5. Stakeholder Engagement: Collaborate with the Ministry of Human Resources and Ministry of Economy to ensure that any transformation plan aligns with national employment and industrial policies.

Conclusion

As a flagship of Malaysia’s industrial development and a critical pillar of the national economy, Petronas must lead with foresight and empathy. Retrenching 5,000 employees may yield short-term financial relief, but it represents a failure to adopt a visionary and inclusive transformation strategy. The examples from BP, TotalEnergies, and ENI show that the path to resilience lies not in cuts, but in courageous reinvention—and Petronas must follow suit.

*The Author, Prof. Shah Nor Basri is the Principal Fellow of the Academy of Sciences, Jordan.