President and group chief executive officer Datuk Wan Zulkiflee Wan Ariffin said the reduction would be part of the national oil company’s move to reduce the capex and opex by RM50bil over the next four years.
He said the cuts would include revision and negotiation of contracts such as risk-sharing contracts, enhanced oil recovery and this reduction would also impact Petronas’ second floating liquified natural gas (PFLNG2).
Forecasting the oil prices to remain low in 2016, he said Petronas had taken its cost optimisation measures to another level to counter adverse impact to its business.
“These cuts will impact some of our capital projects. At this point, we have taken the decision to re-phase the PFLNG 2 project, to be commissioned at a later date than originally planned,” he said.
He added Petronas had also completed a review of its business operating model to facilitate higher efficiency levels and robustness in the organisation, resulting in a new organisation structure which would take effect on April 1.
"Company's cash flow from operation is unlikely to be able to cover capex and dividend commitments to the government," he told reporters at the Petronas financial year 2015 results on Monday.
He added that Petronas might tap into the debt market and its cash reserves if necessary to fund its capex.
In FY15, Petronas' cash flow dropped 33% to RM69.6il from RM103.6bil in 2014. Total cash inflow in 2015 totalled up to RM98.5bil while cash outflow was RM98bil.
For the fourth quarter ended Dec 31, 2015, Petronas posted a net loss of RM3bil due to RM12.9bil assets impairment.
Revenue for the quarter fell 24% to RM60.1bil from RM79.4bil in same quarter in FY14.
Cumulatively, for FY15, the group reported a 56% decline in profit after tax to RM20.8bil from RM47.6bil in FY14. Revenue for the period fell 25% to RM247.7bil.
“The company anticipates its financial performance for 2016 to continue to be affected by the prolonged volatility in oil prices and is intensifying efforts to cushion the impact to remain competitive and sustainable,” it said.
Wan Zulkiflee said Petronas had persevered through the challenging year to remain profitable and fulfil its dividend commitment to its shareholders.
“Our strong operations are a testament to the hard work put in by the dedication of our team to keep this organisation going during these trying times,” he said.
With Brent price averaging US$52 per barrel and despite the current industry downturn, Petronas in 2015 achieved notable operational milestones in both its upstream and downstream businesses.
Below are Petronas’ 2015 operational highlights:
* An increase in upstream production by 3% as compared to 2014, driven by enhanced production and new production streams from Malaysia and Indonesia, and additional production from Azerbaijan.
* However, the sharp and prolonged decline in oil prices resulted in a 64% per cent drop in upstream business’ PAT to RM19.6bil. Non-cash impairments of RM18bil brought this down further to RM1.6bil for the year.
* The achievement of Greenfield first hydrocarbon from 11 fields, six of which are located in Malaysia.
* Seventeen exploration discoveries in 2015 places three-year average overall resource replenishment ratio at 1.1; while reserve additions in 2015 bring the three-year average replenishment ratio to 1.2.
* Better performance from downstream business, where the segment’s profit margin rose by over 50% to RM8.9bil.
* The downstream business’ result was attributed to the realisation of post acquisition synergies at Petronas’ Melaka Refinery, PETRONAS GAS BHD’s transformation initiative, cross-business plant performance improvement initiatives, as well as cost savings initiatives across PETRONAS’ global lubricants business.
* The Pengerang Integrated Complex project is progressing as planned with the refinery and steam cracker construction on-track.
* PETRONAS CHEMICALS GROUP BHD acquired three of Petronas’ petrochemical companies undertaking RAPID’s petrochemical projects.
* Petronas Lubricants International broke ground on its first lubricants blending plant in India.
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