KUALA LUMPUR: Even as oil prices have improved in recent months, national oil company Petroliam Nasional Bhd (Petronas) is maintaining a cautious outlook this year and warns against slipping into complacency.
Its president and group chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin said Petronas has formulated its budget based on the assumption of oil price of below US$60 (RM236) per barrel.
“Some consultants have forecast higher than that, but then they change their forecasts every three months. Petronas cannot do that. We have to be more prudent,” he told editors at a briefing ahead of the group’s full-year results announcement, here, recently.
Oil prices are currently hovering at about US$67 per barrel, from a 52-week low of US$45 per barrel.
Oil prices even breached US$70 per barrel earlier this year.
Wan Zulkiflee said the Global Upstream Cost Index, used by some investors to track costs in the upstream oil and gas (O&G) sector, is also starting to trend upwards after falling since 2014.
“This is my concern. It would be great if our O&G industry does not follow that trend (of rising costs). If we can still be competitive, we can have more projects,” he added.
Wan Zulkiflee acknowledged that with higher oil price, some service providers might expect their charges to also increase in tandem, but that should not be the case.
“We want to have a very competitive O&G industry in Malaysia. Part of Petronas’ job is to shape the industry.”
Wan Zulkiflee said O&G service providers should not look at their charges as purely a function of oil price.
“I think cost is one area that the whole industry should work on to make us all as competitive as possible. This is one risk I worry about, that all the inefficiencies would start to creep in again,” he added.
Wan Zulkiflee said there is still excess capacity in the O&G support services industry, and players have been rather slow to embrace consolidation or mergers to boost cost efficiency.
“For example, we have 230 plus offshore vessels that we know of in Malaysia.
“There are about 130 in service today. The rest are not, unless they find other jobs around the region.
“Even with the 130 vessels in service, if Petronas wants to optimise further, there’s still room. There’s still a lot of things to be done to make the whole Malaysian oil and gas industry competitive.”
Wan Zulkiflee said Petronas’ involvement in the Cost Reduction Alliance 2.0 (Coral 2.0) has resulted in savings of more than RM10 billion since it started in 2015.
The long-term industry-wide programme driven by Petronas to inculcate a cost-conscious mindset across upstream Malaysia has also attracted the interest of its counterparts in Canada and Mozambique, among others.
“It’s real savings and all about behaviour. Now we share plans, common specifications and warehouse inventories. We have taken a structural change in terms of how the industry spends, just by sharing.
“We will continue with Coral and we hope this will be business-as-usual practices,” Wan Zulkiflee added.