PETALING JAYA: Petroliam Nasional Bhd (Petronas) said it will have to reassess its plans and budget following the recent collapse of oil prices amid the ongoing Covid-19 outbreak.
The national oil company said in a press statement that it, however, intends to maintain its domestic capital expenditure programme as well as the planned dividend of RM24bil that will be paid in 2020.
“Given ongoing geopolitical uncertainties and prolonged trade tensions, the volatility of prices has worsened due to the impact of the Covid-19 outbreak and the recent failure of the Opec+ talks, ” the national oil company said in its statement.
It added that since the onset of the Covid-19 outbreak, it has taken immediate measures to ensure the safety of its employees through the implementation of several proactive steps to manage the risk of exposure and reduce the risk of transmission.
“As for our operations, we are also closely monitoring the developments of the outbreak and reviewing our plans to cushion the short, medium and long-term impacts on our business, ” it said.
“We will continue to be cognisant of external factors that determine oil prices and will remain focused on elements that are within our control including driving further efficiencies and cost optimisation efforts across the group.”
Crude oil prices plunged by about 30% at its lowest point on Monday and Brent crude oil was last traded at US$35.99 per barrel at press time.
Reports said that Goldman had cut its second and third quarter Brent forecast to US$30 per barrel, and said that prices could dip into the US$20s range soon.
The fall is due to an impending price war in the oil markets with Saudi Arabia, the biggest oil producer in the world, planning to increase oil output next month, well above 10 million barrels a day as it responds aggressively to the collapse of its Opec+ alliance with Russia.
The price war in the oil markets saw crude oil prices slump by the most in at least 20 years.
Yesterday it was reported that Saudi Arabia had officially unveiled plans increase oil production. Saudi Aramco was reported to be saying that it had been asked by the Saudi energy ministry to raise its production capacity to 13 million barrels per day (bpd), up from 12 million bpd at present. Petronas is not alone in dealing with the recent issues plaguing the industry.
Bloomberg reported on Monday that an oil price plunge would mean that the world’s top energy companies will have to review their dividend plans to investors, either by slowing down share buybacks or reintroducing non-cash dividends
Jefferies analyst Jason Gammel said in a note that oil majors were entering “survival mode” in these market conditions and will have to assess where they can cut spending.