KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is projecting global oil price to hover between US$50 and US$60 per barrel next year, following the adherence of the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC members to cut production of 1.8 million barrels per day.
Petronas group procurement vice president Samsudin Miskon said the uncertainty in the oil and gas industry remains a topic of constant discussion, citing that it is imperative for industry players to understand key trends as a barometer for the industry.
"Petronas’ effort to counter this uncertainty is to push for transparency of information, which would help rebalance market activities.
"This will positively impact supporting ecosystem like investment and financing, which are crucial in promoting a thriving oil and gas services and equipment (OGSE) sector," he said in a statement released today, in reference to Petronas Activity Outlook (PAO) report for 2018-2020.
He said Petronas has carried out several efforts internally to reduce cost and improve efficiency through transformation initiatives such as Cactus and investing in technology and digitalisation.
The national oil corporation had also decided to reduce its capital expenditure (capex) by RM50 billion over four years, which would lead to a stronger financial position and cost efficiency.
Industry-wide, Coral 2.0 initiative to promote collaboration among upstream players has also achieved positive results towards ensuring the industry’s long-term sustainability.
"In the lower for longer environment, we have chosen to remain prudent and this is reflected in the activity level illustrated in this report until we are confident that the current uptrend is sustainable," he said, adding that majority of analysts agree that less than US$100 per barrel is now a thing of the past.
The report, published to improve market information flow, is part of Petronas efforts to promote and encourage a more robust, resilient and competitive OGSE sector.
For the past five months, crude oil has been on an upward trend from a low of US$45 per barrel on June 21, this year to the current US$63.42 per barrel.
Despite the challenging business environment, Petronas said there are sustainable operation and maintenance activities within upstream production and downstream business segments.
The report also highlighted future opportunities in Pengerang Integrated Complex (PIC), one of the largest oil and gas industrial developments in this region and Petronas’ largest downstream investment to date.
It said PIC, which is on track for a start-up in 2019 is set to become a catalyst for growth, attributed to its size of the complex and activities are expected to double once operation commences.
MIDF Research oil and gas analyst Aaron Tan said oil prices is likely continue to be strong. However, he noted more importantly downstream business would rather have pricing stability.
"That’s what we are looking at it now – the stability. When it comes to volatility, if the oil price goes up, it can come down quickly and it is not what we want,” he told NST Business recently.
Tan said whenever the price comes down, it would very difficult to estimate the capital expenditure (capex) needed throughout the value chain.
“For example, Petronas is more concern with the crude oil price, which is the main indicator they must follow. They extract and sell crude oil – that is their main business model.”
He said the company is concerned on how much it can sell the oil and how much capex allocation for the future expansion like oil drilling.
"Moving forward, we expect stable crude oil prices.
The stability would come from OPEC decision to continue to suppressing oil production," he said.
He said previously, OPEC has been suppressing oil production however, not all members had follow the cutback it.
Now that, all members are cutting back on oil output, oil prices are on uptrend.
“It will be the OPEC member’s initiative to make sure the oil prices, trade at stable pricing in the months ahead.”
JF Apex Securities analyst Lee Cherng Wee said oil majors’ profitability from the current hike in oil prices would dependent on their sustainability.
“The industry cannot exert impact oil price. It depends on supply and demand, which is mainly fuelled by OPEC's decision to cap production and also higher production from the competing shale oil in the US,” he said.
Petronas third quarter net profit surged 64 per cent to RM10 billion, ended September, 2017, from RM6.1 billion a year ago.
This was due to improved performances of its upstream and downstream businesses and supported by recovering prices.