KUALA LUMPUR: Most national oil companies (NOCs) in Asia Pacific (APAC) have adequate headroom for their standalone credit profiles (SCPs) against the expected rise in financial leverage this year, Fitch Ratings said.
This is due to Fitch's revised oil and gas price assumptions and the impact of the coronavirus pandemic on downstream demand.
It expects Petroliam Nasional Bhd to maintain its SCP at 'aa-' with a sustained, but narrowing, net cash position.
“We have revised down Petronas’ gas sales and retail marketing volumes to reflect weakening demand.”
Fitch does not expect Petronas to cut its domestic capex given the company's importance to the domestic oilfield service industry.
But the firm estimates overall capex to be somewhat lower than in 2019.
It also expects Petronas dibidend payment to fall in 2021 and rise thereafter.
Fitch said Indian oil marketing companies' (OMCs) low SCP headroom would be compressed, although they have the flexibility to delay capex to support their financial profiles.
“We expect APAC NOCs to maintain their upstream production and sales volumes even with reduced prices as most countries are net importers of oil and gas.
“Room for further cash-cost reduction is small for most NOCs, after their efforts in recent years to enhance production and efficiency,” Fitch said in a report today.
It expecs most NOCs to keep their upstream capex largely unchanged due to reserve replenish needs arising from maturing oilfields, short reserve (or developed reserve) lives, or regulatory requirements to complete works in existing blocks.
These investments will also ensure the countries' national energy security.
Fitch said the Covid-19 pandemic would weaken demand for refined products and petrochemicals and exacerbate refining overcapacity in APAC.
Chinese refiners are the most affected as their utilisation rates and refining margins were at record lows at end-2019.
The supply and demand dynamics are less distorted in India and some Asean markets, where Fitch expects low crude prices to support downstream profitability.