Cost reduction saves billions for Petronas

  • Business
  • Thursday, 24 Mar 2016

Petronas vice-president of Malaysia Petroleum Management, Zamri Jusoh speaking during the press conference on Petronas call for industry consolidation through Coral 2.0. IZZRAFIQ ALIAS / The Star. March 23, 2016.

An estimated RM2.4bil in savings realised to date

KUALA LUMPUR: Petronas’ industry wide programme, Cost Reduction Alliance 2.0 or better known as Coral 2.0, is expected to generate cost savings of RM1.5bil to RM2bil for 2016 for its upstream business.

An estimated RM2.4bil in savings has been realised to date under the programme.

“We have identified three main cost buckets that we are focusing on, namely engineering and construction, drilling and completion, as well as operation and maintenance.

“These three buckets constitute nearly 90% of our cost structure in the upstream business.

“From these three cost buckets, we have identified 11 initiatives that we worked in since March 2015,” said Petronas Malaysia Petroleum Management vice-president Muhammad Zamri Jusoh (pic).

The current unit production cost is US$8 to US$9 per barrel, which Zamri said he is not satisfied with, which is why Petronas is continuing with the 11 initiatives.

As for crude oil prices, Petronas is taking a conservative outlook, expecting prices to remain at current levels for quite some time.

One of the main contributors to the cost savings is the logistics control tower.

The movement of supply vessels in Malaysian waters was tracked manually in the past.

However, through the logistics control tower initiative and integrated operations, movements of these vessels can now be detected real time, such as current locations and destinations of the vessels.

This initiative has saved fuel consumption and during emergency situations, the vessels nearest to an area of incidence can be deployed immediately.

As Coral 2.0 is expanded across other oil and gas operators, it serves as a platform for petroleum arrangement contractors (PAC) to collaborate and share services, such as the sharing of vessels, among others.

Apart from that, the low cost drilling initiative has contributed RM1.5bil in cost savings.

Moving forward, Coral 2.0 is focusing on cash generation and will explore an additional five new areas, some of which are reactivation of idle wells, unplanned deferment of barrels as well as efficiency in water injection facilities.

“Moving forward, we will also focus on cash generation. The key word is collaboration; collaboration among PACs, service providers and product suppliers.

“Essentially, what we hope to garner from this Coral 2.0 exercise is for the entire industry to rebase its costs to a sustainable level.

“The current low oil price environment gives us the urgency to expand Coral 2.0 initiatives further,” said Zamri.

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