Petronas adjusts to "ups and downs" of oil price

Its Executive Vice-President/Chief Executive Officer of Upstream, Datuk Wee Yeow Hin, said this time people thought the oil price will be soft for a little bit longer.

"Therefore all companies, including us, are adjusting our capital expenditure (capex)," he told Bernama.

Unlike the previous cycle in 1998/1999 whereby the price stabilised by 2000, and during the 2008 global recession where it went down to US$45 per barrel to recover by 2009, this time there is no indication that the oil price will pick up to US$100 per barrel in the next three to four years.

Wee said for oil, short-term duration contract will be one year, unlike liquefied natural gas, where the contracts could last 20 to 30 years.

"Projects may not necessarily be profitable within these period, so you either cut or postpone them.

“We only undertake projects that are profitable, within the time frame that we look at and we have to reduce cost. How can we do a project in a smarter way, simplify and cost less?” Wee said.

In relation to this, Petronas is leading an industry-wide effort, the Cost Reduction Alliance initiative involving 25 petroleum arrangement contractors to embrace a structural change in the oil and gas upstream business environment in Malaysia.

“(We look at) how we can do things differently, design cheaper projects, collaborate in areas where we can be more efficient, streamlining and centralising operations. Within Petronas, we have started in January and has saved a couple of hundred million,” he said.

Moving forward, Wee said, Petronas will concentrate in areas where there will be growth and value.

He said Malaysia will always be its priority, which now accounted for about 65 per cent of its business.

“I think it is okay for now, and we review this every two years. However, our focus area for oil is overseas and geographically we like West Africa because it has a lot of good prospects,” said Wee.

It was reported earlier that from the RM70 billion capex allocated by Petronas for this year, RM54 billion would be spent in Malaysia.