PETROLIAM Nasional Bhd’s (Petronas) president and CEO Datuk Wan Zulkiflee Wan Ariffin is a man with a big task ahead. Helming one the world’s largest and most successful national oil companies (NOCs), Wan Zul has to steer the behemoth company through the treacherous waters of the oil and gas industry today. The affable Wan Zul, who took over the reins last April, has had to make many tough decisions. Ones that impact the livelihoods of the thousands of employees, contract staff, agents, contractors and other business associates of the oil giant.
Wan Zul had also inherited two massive projects which had been entered into by Petronas when the price of oil was above US$100 a barrel. These are the Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor, and the US$36bil (RM137bil) Petronas-led Pacific NorthWest liquefied natural gas (LNG) project in Canada.
Globally, oil majors are slashing capital expenditure (capex), lowering operational expenditure (opex), deferring projects and laying off workers.
Not surprisingly, Petronas has to follow suit. And Wan Zul, who has had a 32-year track record at the national oil corporation, has the unenviable task of heading this cost-cutting exercise.
At a townhall briefing this week, Petronas’ management said that the oil giant had no choice but to take the unpopular move of cutting as many as 1,000 jobs as it reorganises its businesses and trim the fat to counter the slump in crude oil prices.
Aside from this, Wan Zul also has to plan for cuts in its capex and opex. Last week, he acknowledged that Petronas faces cashflow problems due to the prevailing low oil price environment, which necessitated its RM50bil cut in capex and opex from this year up until 2020. Between RM15bil and RM20bil worth of expenditure will be cut from the oil giant’s budget for this year alone, the bulk of which is likely to come from the upstream segment.
Wan Zul had assumed the Petronas top job at a challenging time, just when oil prices started to plummet.
Other oil majors are doing the same and in fact their steps are much more drastic.
Here are just some examples: Shell has indicated that it will reduce some 10,000 employees and had previously announced an 87% drop in annual net profits. ExxonMobil said that it would cut its 2016 capital budget by 25% to US$23.2bil (RM98bil), from the US$31.1bil (RM131bil) spent in 2015. BP, on the other hand, planned to cut around 7,000 jobs over the next two years. It would also limit its capex to between US$17bil (RM71bil) and US$19bil (RM80bil) a year through 2017.
Another move that Wan Zul and Petronas are nudging for is industry consolidation.
This is a clearly needed move and Wan Zul has been calling for it since late last year. Among other things, he has said previously that in Petronas’ projection, there will not be enough jobs for all the registered service provider companies in the next few years.
He gave an example of the utilisation of fabrication yards in Malaysia. There are eight fabrication yards with a combined capacity of 120,000 tonnes but there will be a big drop in the volume of works to just 20,000 tonnes next year. There are 3,700 companies registered with Petronas while in Norway, the number stands at only around 700 companies.
The industry should support Petronas in its consolidation call, say industry observers.
In an interview with an English daily last October, Wan Zul said that since taking over the helm of Petronas, he had spent plenty of time rallying his commanders and troops around him and also opted to look for opportunities within the increasingly chaotic oil and gas industry.
In that interview, he also said he noticed several shortcomings that could be rectified even in the weak business environment. Among them were the fact that the company had been laden with processes, many of which have been rendered obsolete by technology.
Wan Zul said in that interview that he wanted to cut unnecessary processes and simplify work in the company so that the time spent making reports, for instance, could be utilised in revenue-generating activities.
Those moves and the latest ones clearly indicate that Wan Zul is coping well in his role of Petronas’ chief at one of its most challenging times ever.