A prominent oil and gas (O&G) player feels that one of the primary tasks of the newly appointed president and chief executive officer of Petroliam Nasional Bhd (Petronas) should be to encourage consolidation within the industry.
“He has to encourage consolidation, as a lot of service companies had mushroomed in the last five to 10 years, enjoying US$100 oil. Having said that, at US$50 oil, we will all have to revisit our cost structures and find efficiencies to help with bringing costs down,” says SapuraKencana Petroleum Bhd vice-chairman Tan Sri Mokhzani Mahathir (pic) of Petronas’ new head Datuk Wan Zulkiflee Wan Ariffin.
Mokhzani is one of the major shareholders in SapuraKencana with a 10.38% equity stake. He also has a 18.55% stake in Yinson Holdings Bhd via Kencana Capital Sdn Bhd.
To paint a clearer picture, there are currently about 4,000 O&G firms that come under the purview of the International Trade and Industry Ministry, while only about 40 of them are listed on the local bourse.
National O&G company Petronas has also indicated that it will be reducing operating expenditure by between 25% and 30% in order to preserve profitability, following the near-50% tumble in oil prices.
It added that it would slash its capital expenditure up to 15% this year.
Malaysia is not the only country that could see a kickstart of consolidation within the O&G scene occurring.
In the global market, industry insiders have hinted at the possibility of ExxonMobil, the world’s biggest energy company, swallowing BP Plc whole, with shares in the latter still suffering from the Deepwater Horizon disaster in the Gulf of Mexico five years on.
UK-based business daily The Financial Times reported that the latest round of cost cuts and asset disposals by BP’s chief executive will shrink the company to a point that could question its place among the “big five” – an elite bracket of oil majors with the resources to develop the world’s biggest projects.
If both companies were to link arms, BP would bring its big inventory of deepwater development and exploration opportunities to the table.
ExxonMobil’s possible move to acquire BP would not be the first following the plunge in oil prices, as last November, the O&G global avenue saw US O&G services giant Halliburton Co making a takeover bid for rival company Baker Hughes Inc.
Wan Zulkiflee will be taking over the helm from Tan Sri Shamsul Azhar Abbas starting April 1.
Mokhzani foresees more companies turning to Petronas for help and shelter during this “rough patch” for the next two years.
“Shamsul has repositioned Petronas on the global arena, so it now has a more diversified revenue base. It cannot ignore developing the Malaysian reserves and industry, so will have to ensure local companies survive,” he says.
While there is no more cheap oil production, innovative solutions can help save, Mokhzani adds.
“That’s where Petronas has to encourage Vestigo/Carigali to work smarter with contractors to do this. I think Wan Zulkiflee will be the right person to spearhead this new business approach.
“He has to manage the expectations of both his shareholder and stakeholders (everyone involved in the O&G industry),” he says.
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