Petronas on the front foot again
May 3, 2018 | Singapore | OSEA2018 Industry Insights
Malaysian state operator has adjusted its cost base and is now ready to expand its core business, with an emphasis on gas
Malaysia’s national oil and gas company Petronas is looking forward to the future on a healthier footing after rebasing its costs during the latest oil price downturn.
“I think it is the right time for us to come back to growth,” says the company’s upstream chief executive Anuar Taib.
“We are guided by our three-pronged strategy — one is that we must continue to strengthen our cash generators, these are our existing assets, these are the assets that we have in Malaysia.Then we’ve got to go and look at expanding our core business, which is oil and gas… as well as also expanding the integrated business model that we have.”
Much of Petronas’ integrated business is on its home turf and the operator is looking at whether this model can be expanded overseas.
The third prong of this strategy is expanding the company’s business into “adjacencies” or new energy.
Petronas has earmarked around 26 billion ringgit (US$6.64 billion) for capital expenditure in 2018, of which some 3 billion ringgit is intended for exploration.
“Based on lessons learned, we want to have capital discipline,’ says Anuar.
“But the challenge we have seen in the past is that when everybody starts to do a lot of activities about the same time, then you have the whole supply chain being stretched… and that adds costs to the industry.”
The national outfit plans this year to drill between 110 and 120 wells, including “maybe 23 to 25” exploration wells in Malaysia.
“We continue to invest in upstream, even in exploration, throughout the cycle because we know in order for us to provide a reliable [energy] supply for the long term, we have to find new resources to be put into the supply fund,” he says.
Petronas also acts as upstream regulator for the nation’s oil and gas industry, where it welcomes domestic and international partners to share the risk and reward of exploiting the nation’s hydrocarbons. Anuar believes that Malaysia remains competitive and attractive in the global arena for E&P investment. “We think we are. We have been getting quite a good response [with regard to] upstream investment,” he says.
He adds that there are a couple more final investment decisions to be announced following Mubadala Petroleum’s recent move to exploit its Pegaga gas field.
“We have recently awarded an ultra-deepwater exploration block to Exxon [sic] in North Sabah.
ExxonMobil is coming back into exploration — the last time they did exploration in Malaysia was maybe early 2000.”
Anuar adds that when there is the right combination of geology and fiscal terms, together with the competence and consistent approach by Petronas as regulator, then people do invest.
“We continue to award blocks as and when the process matures. Awarding blocks and [resulting] exploration in Malaysia is an ongoing process. Usually we have multi-client seismic acquisition done, we have [the] data room open and we will regularly award blocks as and when we have the opportunity to do so,” he tells Upstream.
Asked to comment on Petronas’ earlier considered sale of a strategic stake worth up to an estimated $1 billion in its gas-rich Block SK316 off Sarawak, East Malaysia, Anuar simply says: “We just stopped the process.”
He declines to say whether this decision means that Petronas will now pursue development on its own of the high carbon dioxide Kasawari field, which has estimated recoverable reserves of 3 trillion cubic feet of gas.
Petronas’ production is currently around 70% gas and 30% oil and its resource base reflects that split.
“In the foreseeable future, Petronas will mainly be a gas company,” says Anuar.
“[However], we have a lot of confidence in whatever we discover that we can go and work towards monetisation.”