KUALA LUMPUR — February 21, 2017: Petronas, the Malaysian national oil corporation, will record a lower revenue for 2016 from RM248 billion the previous year owing to the plunge in crude oil prices when it reports its financial results in March.
This is based on crude oil prices declining to an average of US$43 (US$1 = RM4.45) per barrel for 2016 against $54 a year earlier.
However, Petronas President and Chief Executive Officer Datuk Wan Zulkiflee Wan Ariffin said he was encouraged that other profit margins for the company increased, including that of earnings before interest, depreciation and amortisation as well as profit after tax.
He attributed Petronas’s comparatively good showing despite the tough operating environment to strategic cost-cutting responses, or Project Cactus, which was launched when prices tumbled to a historical low of $27 in February last year.
“Project Cactus led to operational efficiency and enabled us to cut our controllable costs by 14 per cent,” Wan Zulkiflee told a media briefing today.
Petronas also saved hundreds of millions of ringgit by cutting manpower by 2,300 last year to 51,000 currently, of whom about 11,000 were foreign workers.
“We cannot promise there will be no retrenchments this year but it will be focused on non-performers, as was the case in 2016.
“But the bigger prize from Project Cactus is that we have cut down on a lot of duplication and achieved higher accountability,” he said.
Petronas’s operations would premise on a conservative crude oil price of $45 per barrel for this year, said Wan Zulkiflee.
Petronas will also keep to its commitment of paying out a dividend of RM13 billion to the government from RM16 billion previously.
He noted that Petronas was only one of several oil majors whose credit rating was not downgraded by Standard & Poor’s or Moody’s which was a real saviour as otherwise it would have to pay more when raising bonds.
“We cleaned up our books a lot in terms of impairment, whereby we allocated RM20 billion for impairment in 2015 and RM13 billion in 2016,” he said.
Turning to its projects, Wan Zulkiflee said there has been no delay at the Refinery and Petrochemical Integrated Development Project at Pengerang in Johor and that it was 54 per cent completed as at end 2016.
He also said that Petronas emerged among the winning bidders at Mexico’s first competitive deepwater oil auction and was in arrangements to study two oil fields in Iran and commissioned the ninth liquefied natural gas train in
Looking ahead, Wan Zulkiflee anticipates 2017 to be a better year for the oil and gas industry but not necessary for service providers and vendors, citing the oversupply of vessels and fabrication yards.
There would also be a slight improvement by steps taken by the Organisation of Petroleum Exporting Countries and other oil producers to control supply and lift prices.
Malaysia has committed to reduce output by three per cent to 20,000 barrels per day as a gesture of its camarederie with OPEC and other producers.
Crude oil prices are currently hovering at $55 per barrel.
Turning to the proposed billion LNG project in western Canada in which it has a 62 per cent equity, Wan Zulkiflee said that Petronas, together with other joint-venture partners, was looking at ways to reduce cost.
Wan Zulkiflee also shrugged off a news report that said Petronas was considering to sell 49 per cent in the SK316 offshore gas block in Sarawak to raise cash.
He said Petronas had a cash balance of RM130 billion and thus there was no need to sell to get money. — Bernama