KUALA LUMPUR: Petroliam Nasional Bhd’s (Petronas) discussions with potential equity partners for its projects are driven by its interest in bringing in new technologies, as well as diversifying risks in exploration activity.
It is not with the view of getting funding to help finance its projects.
President and chief executive Datuk Wan Zulkiflee Wan Ariffin said that when the national oil company embarks on a project, the entire funding requirement would be factored in.
“We never take on a project with the view that we have to depend on investors for funding to complete the project,” he told senior editors at a briefing here yesterday.
“We are always in discussions with potential partners to maximise the value of our projects and better manage the cash position of the organisation. But we are not dependent on anyone for funding to complete the project. We only pursue partnerships on terms acceptable to us,” he said.
Recently, wire news reports suggested that Petronas was looking to divest a large minority stake in a key Sarawak offshore gas field, and that the sale was partly driven by a need to raise cash at a time of low oil and gas prices.
Earlier reports stated that Saudi Aramco had pulled out of a plan to get involved in Petronas’ Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor.
The reports suggested that the pressure was on Petronas to find a new partner or struggle to complete the project.
Wan Zulkiflee expressed surprise at the report of Saudi Aramco pulling out of Rapid when it had not gone into any agreement with the entity from Saudi Arabia.
“How can there be a situation of a party pulling out of something when the party was not part of it in the first place?” he said referring to reports of Saudi Aramco supposedly pulling out of Rapid.
“From day one, we have stated that we are able to fully fund Rapid. We are and will not be dependent on anyone for this project. We are close to 60% complete, costs are within projections and the refinery will be ready by 2019 followed by the petrochemical portion by 2020.”
On the potential sale of equity in the Sarawakian oil field, Wan Zulkiflee said that one of the criteria in looking for a partner was in finding one that is able to bring new technologies that make the extraction process more efficient, considering that the gas field contains high levels of carbon dioxide.
“There is also exploration work there, so it is in the normal course of business to find a production sharing partner to share the risks and rewards.”
Wan Zulkiflee also said that Petronas’ financials were intact, despite suffering from lower earnings due to the oil price collapse. Numerous cost-saving measures have also borne fruit.
“Just look at our balance sheet. We have more than RM130bil in cash. We have one of the lowest gearings among international oil companies at 17% and our ratings have not been downgraded in this entire period.”
On Petronas’ staff-rationalisation exercise, Wan Zulkiflee said that it had laid off 2,300 employees last year, which brought about an annual manpower cost savings of RM200mil.
“But the main benefit is that the exercise got rid of duplication (of roles) in the organisation and this, in turn, raises accountability. This is a much bigger win from this exercise than the cost savings,” he said.
Wan Zulkiflee also said that the oil major was using a price assumption of US$45 per barrel for Brent crude oil for its 2017 planning, and that it was maintaining its capital expenditure budget at RM60bil for the year.
The Government in Budget 2017 had also assumed oil to be at US$45 per barrel.
Despite the turbulent industry, 2016 marked many firsts for Petronas, said Wan Zulkiflee.
This included Petronas commissioning the world’s first floating liquefied natural gas (FLNG) liquefaction, storage and offloading vessel – Petronas FLNG Satu – which is now operating offshore in Sarawak. It also started commercial operations at the ninth liquefaction train at the Petronas LNG complex in Bintulu, Sarawak.
Last year, Petronas also commissioned its Sabah Ammonia Urea (Samur) project with first production expected soon. In 2016, the oil giant was also awarded deepwater exploration blocks in the Gulf of Mexico’s Salina Basin. It entered into a memorandum of understanding with National Iranian Oil Company to study two oil fields there and production of oil from Iraq crossed 100 million barrels.