KUALA LUMPUR: National oil corporation Petroliam Nasional Bhd (Petronas) will record a lower revenue for 2016 from RM248bil in 2015 owing to the plunge in crude oil prices when it reports its financial results in March.
Petronas president and chief executive officer, Datuk Wan Zulkiflee Wan Ariffin, said this was based on crude oil prices declining to an average of US$43 (RM191.80) per barrel for 2016 against an average of US$54 (RM240.85) a year earlier.
However, Wan Zulkiflee said, he was encouraged that other profit margins for the oil company increased, including that of earnings before interest, depreciation and amortisation as well as profit after tax.
He attributed Petronas’s comparatively good showing despite the tough operating environment to strategic cost-cutting responses, or Project Cactus, which was launched when prices tumbled to a historical low of US$27 in February last year,
“Project Cactus led to operational efficiency and enabled us to cut our controllable costs by 14%,” he told a media briefing in Kuala Lumpur on Tuesday.
Petronas also saved hundreds of millions of ringgit by cutting manpower by 2,300 last year to 51,000 currently, of which about 11,000 were foreign workers in view of its numerous overseas plants and projects.
“We cannot promise there will be no retrenchments this year but it will be focused on non-performers as was the case in 2016.
“But the bigger prize from Project Cactus is that we have cut down on a lot of duplication and achieved higher accountability,” he said.
Petronas’s operations would premise on a conservative crude oil price of US$45 per barrel for this year, he said.
He said Petronas would also keep to its commitment of paying out a dividend of RM13bil to the Government from RM16bil previously.
He noted that Petronas was only one of several oil majors whose credit rating was not downgraded by Standard & Poor’s or Moody’s which was a “real saviour”, as otherwise it would have to pay more when raising bonds.
“We cleaned up our books a lot in terms of impairment, whereby we allocated RM20bil for impairment in 2015 and RM13bil in 2016,” he said.
Turning to its projects, Wan Zulkiflee said there was no delay at the Refinery and Petrochemical Integrated Development Project at Pengerang in Johor and that it was 54% completed as at end-2016.
He also said Petronas emerged among the winning bidders at Mexico’s first competitive deepwater oil auction and was in arrangements to study two oil fields in Iran and commissioned the ninth liquefied natural gas (LNG) train in Bintulu.
Looking ahead, he said, 2017 would be a better year for the oil and gas industry but not necessary for service providers and vendors, citing the oversupply of vessels and fabrication yards.
He said there would be a slight improvement by steps taken by the Organisation of Petroleum Exporting Countries (Opec) and other oil producers to control supply and lift prices.
Malaysia has committed to reduce output by 3% to 20,000 barrels per day as a gesture of its camaraderie with Opec and other producers.
“But it won’t move the needle that much in the long run,” he said.
Crude oil prices are currently hovering at US$55 per barrel.
Turning to the proposed US$27bil LNG project in western Canada in which it has a 62% equity, he said, Petronas, together with other joint-venture partners, were looking at ways to bring down the cost.
He also said that Asean, including Thailand and Indonesia, as well as India, Pakistan and Bangladesh, were potentially new markets for Malaysia’s LNG.
To a question, Wan Zulkiflee shrugged off a newsreport that it was considering selling a large minority stake of 49% in the SK316 offshore gas block in Sarawak to raise cash.
He said Petronas had a cash balance of RM130bil and that there was no need to sell to get money. - Bernama
* See also Petronas Dagangan’s earnings soar in Q4 despite lower average oil price