Malaysia can withstand the shock from the fluctuations of oil prices and ringgit

Minister in the Prime Minister's Department Dato' Sri Abdul Wahid Omar speaking at the 8th International Petroleum Technology Confrence

KUALA LUMPUR: Malaysia is able to withstand the shock from the fluctuations of oil prices and ringgit due to its fiscal strategy to reduce its dependency on its oil and gas (O&G) revenue over the years.

Minister in the Prime Minister Department Datuk Seri Abdul Wahid Omar said the Government had been able to diversify its income streams and reduce its dependency on O&G revenue to 31% last year from 36% in 2011.

“Currently, 55% of our gross domestics product is contributed by the services sector, 25% from manufacturing sector, 8% from the mining sector that includes O&G and another 8% from the agricultural sector,” he said in his keynote address at the opening ceremony of International Petroleum Technology Conference (IPTC) yesterday.

Also present at the event was United Arab Emirates’ Energy Undersecretary Minister Dr Matar Al Neyadi.

Nevertheless, Wahid said the current oil price of below US$70 per barrel was at a level unseen since May 2010 and that the trend was expected to continue due to a number of reasons.

He said they were the high production of oil, the decision made by the Organisation of the Petroleum Exporting Countries not to cut output and some headwinds from China.

“Thus, oil companies are currently reviewing their capital expenditure and revisiting their investment plan but, fundamentally, demand for energy should not subside supported by growing population and other development factors,” he said.

What was more important in this volatile market condition, according to Wahid, is that energy must continue to be delivered at affordable prices.

This was because, he said the right to use energy had become a necessity similar to basic rights to adequate water, food and health services.

He said the industry, must now continue to adapt to the situation and focus on efficiency that should rely on innovation.

The implementation of the goods and services tax would further strengthen the Government’s fiscal position too, said Wahid.

Meanwhile, IPTC executive committee co-chairman Datuk Wee Yiaw Hin said there were “many moving parts” that affect the oil price.

“There is regional and global economic growth rate, supply and demand, geopolitics, costs of production as well as technology and innovation.

“My view is that the past four to five years of stability previously, the moving parts were all going in the wrong direction.

“They all come together now, resulting in a major disruption,” said Wee, who is also Petronas upstream executive vice-president and chief executive officer.

Wee said the industry needed to work out a new plan and control cost, efficiency and innovation to face this challenge.