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As in many other developing countries, oil companies in Malaysia had been operating under what was known as a concession system. Under this system, large areas were made available to oil companies under very generous terms and the Government retained very little control. In return for these concessions, the oil companies paid a small royalty and taxes to the Government.

During the Israelite war in 1973, several Arab oil-producing countries decided to stop oil shipments to certain countries. As a result, there was a mad rush for oil; prices shot up overnight and the world experience it first energy crisis. The 1973 oil embargo also made oil producing countries of the world realize the importance of controlling their own petroleum resources.

In Malaysia, it led to the promulgation of the Petroleum Development Act in 1974 and the formation of a national oil company to ensure that the nation's petroleum resources could be developed in line with the needs and aspirations of the nation. Article 2 of the Act vests the entire ownership in, and the exclusive rights, power, liberties and privileges of exploring, exploiting, winning and obtaining petroleum whether onshore or offshore of Malaysia in PETRONAS.

Petroleum National Berhad (PETRONAS) was incorporated on 17 August 1974 to develop petroleum resources of the country which has been vested in it by the Petroleum Development Act 1974 and to participate in the refining, manufacturing and marketing of petroleum products as provided under the same Act. Since its establishment, PETRONAS has steadily expanded and diversified its business portfolio to become a fully integrated oil corporation. Today, PETRONAS is involved in the full spectrum of petroleum operations, positioning itself in the global market to achieve its vision of becoming A Leading Oil And Gas Multinational of Choice.

Source: PETRONAS

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