KUALA LUMPUR: Oil and gas players should keep the operating costs in check and continue to remain vigilant as the industry outlook remains uncertain.
Petroliam Nasional Bhd (Petronas) president and chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin said it is imperative to continue to be vigilant in maintaining cost discipline and drive for efficiency.
"As the outlook remains uncertain, it is imperative for us to continue to be vigilant in maintaining cost discipline and drive for efficiency. This must remain a priority to future-proof the industry from market shocks and volatility in oil prices.
"There is a concern here that with the oil price recovery, costs are showing signs of increasing at a worrying rate. This is likely being driven by a premature exuberance among industry players.
"If we do not keep these escalating costs in check, the industry as a whole runs the risk of negating the value we have gained from intensive cost-efficiency efforts over the last three years," he said during his address at the Offshore Technology Conference 2018 (OTCAsia 2018).
He highlighted earlier there is a concern of continued under investment in the oil and gas industry as it may lead to insufficient supply in meeting the future demand, especially in Asia.
"Fast forward to today, while oil prices are showing signs of recovery, the sustainability of the prices remains to be seen.
"Improved oil prices have led to a steady rise in activities as evident in the number of active drilling rigs. This should trigger more business opportunities in the industry," he said.
He said survey has shown that the economy continues its reliance on fossil fuels, with oil and gas representing 45 to 51 percent of the global energy mix in 2036.
In all these scenarios, the total volume of oil and gas consumption in 2036 will actually be bigger compared to 2016.
"In this regard, there is a concern of continued under investment in the oil and gas industry that may lead to insufficient supply in meeting the future demand, especially in Asia," he added.
Wan Zulkiflee also urged for more oil and gas players to embrace a more digital approach in their businesses.
"The potential benefits of technology and adoption of digital strategies are clear—increased productivity, safer operations, and cost savings. These are needed to improve the industry’s competitiveness and resilience.
"Technological advancements today facilitate more granular measurements, advanced data analytics and artificial intelligence as well as precise process control," he said.
He said digital technologies will improve amongst others drilling efficiency, synchronise supply chains, increase automation at plants, reduce downtime through predictive maintenance and enhancing customers’ experience.
Wan Zulkiflee stated that its CORAL 2.0 cost reduction measures have managed to result in RM11.5 billion in savings since its inception in 2015.