THE realities of low oil prices have forced Malaysia's oil-and-gas (O&G) industry to undertake extensive cost- cutting, in addition to deferring projects demanding large capital expenditure, although national oil company Petronas has braved the global headwinds to press on with two multibillion-dollar projects.
Prime Minister Najib Razak noted at the official opening of OTC Asia (Offshore Technology Conference Asia) 2016 in Kuala Lumpur on Tuesday that Petronas had been forced to employ measures to ride out the storm resulting from an acute and dramatic decline in oil prices over the last two years.
Petronas CEO Wan Zulkiflee Wan Ariffin (commonly known as Wan Zul) said the Malaysian O&G industry has collectively saved RM2.44 billion (S$817 million) by implementing cost-cutting - through which efforts by Petronas towards "internal cash management, cost efficiency and simplification" yielded RM1.4 billion in cost savings alone in 2015.
Despite the cost savings, Petronas had for the fiscal year 2015 recorded a 56 per cent slump in net profit to RM21 billion on non-cash asset impairments of RM18 billion.
The Malaysian national oil company has also unveiled a group-wide transformation that will see about 1,000 employees made redundant, equivalent to slightly under 2 per cent of its 51,000 global headcount.
The announced staff redundancy plan at Petronas may appear relatively insignificant compared to a quarter of a million jobs reportedly lost globally. But BT has learnt that the job cuts announced by Petronas apply only to permanent staff; separately, the company has been trimming the headcount of its contracted workforce.
Petronas has also gone ahead to sanction two billion-dollar-bracket projects: the Petronas FLNG Satu (PFLNG-1), and the RAPID complex at Pengerang in Johor state.
PFLNG-1 is touted as the world's first floating liquefaction plant and is expected to enter operation in the Kanowit field off Sarawak in the second quarter, following a naming ceremony at South Korea's Daewoo Shipbuilding & Marine Engineering earlier this month.
RAPID (an acronym for the refinery and petrochemical integrated development project in Pengerang) is being executed, albeit scaled down to fit the current economic climate.
BT understands Petronas is still going ahead with the construction of at least three plants for polymer, elastomer and polyethylene production under the revised RAPID development.
Mr Najib described PFLNG-1 as a "tremendous achievement for Petronas and the nation". He also viewed RAPID as positioning Malaysia to "capitalise on growing energy and petrochemical needs".
Petronas has otherwise slowed down sanctioning new field developments and enhanced oil recovery (EOR) projects in Malaysian waters.
At an industry meeting held in early March, Mr Wan Zul is said to have officially acknowledged the deferment of three major upstream projects: Angsi chemical EOR, the Kasawari gas project, and the development of the high-carbon-dioxide gas field, Sepat.
All three projects were expected to cost at least US$1 billion each to execute.
Malaysian sources told BT that Petronas is likely to focus its resources on downstream or refining projects that are not adversely affected by low oil prices. Recent indications have shown the national oil company is also more inclined towards prioritising certain piped-gas projects that will meet the needs of energy-hungry states in Peninsular Malaysia.
This article was first published on March 23, 2016.
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