‘RIGHT TIME TO CON­SOL­I­DATE’

Make hard de­ci­sion to re­struc­ture or re­form, says MPRC

New Straits Times - - Business -

ZARINA ZAKARIAH

KUALA LUMPUR zari­naz@me­di­aprima.com.my

WITH crude oil prices at a rel­a­tively plateau level, the time is right for oil and gas play­ers to col­lab­o­rate or con­sol­i­date, said Malaysia Petroleum Re­sources

Corp (MPRC) se­nior vice-pres­i­dent Syed Azlan Syed Ibrahim.

“Although we fore­see 2017 will not be far off than 2016, I do not think it will be worse. This is the op­por­tu­nity for play­ers to make the hard de­ci­sion to re­struc­ture or re­form. That time is now.

“They need to do it now so that when the mar­ket goes back up they will be ready,” he said after the MPRC busi­ness sem­i­nar, here, on Fri­day.

Crude oil prices, which fell from a peak of US$115 (RM509.45) per bar­rel in June 2014 to un­der US$35 at the end of Fe­bru­ary last year, saw many pro­duc­tion shar­ing con­tract firms grap­pling with op­er­a­tion costs to stay afloat and main­tain their rev­enue or re­duce their losses.

To­wards the end of last year, there was a grad­ual in­crease in crude oil prices – hov­er­ing be­tween US$45 and US$50.

Brent oil prices set­tled at US$50.80 per bar­rel on Fri­day.

The in­crease was mainly at­trib­uted to an agree­ment by Or­gan­i­sa­tion of the Petroleum Ex­port­ing Coun­tries (Opec) and other non-Opec pro­duc­ers to cut out­put.

How­ever, mar­ket re­mains un­sure as to whether the pro­duc­tion cut re­mains ob­served.

“How­ever, bar­ring sig­nif­i­cant new de­vel­op­ments, we ex­pect oil prices to re­main un­der down­ward pres­sure in the com­ing years,” said Syed Azlan after his ses­sion on “Weath­er­ing the Storm: How did Malaysia Oil & Gas Ser­vices and Equip­ment Com­pa­nies Per­form?”.

He said many play­ers were hes­i­tant to make the call for con­sol­i­da­tion as they were still un­sure of the prices and the vis­i­bil­ity of the in­dus­try as a whole.

“Petro­liam Na­sional Bhd’s call to be more trans­par­ent and en­gage lo­cal play­ers is timely. Maybe then, the play­ers can make their de­ci­sion on whether to stay in the game, move on, or col­lab­o­rate.

“There used to be many jobs, but now there are more play­ers than jobs in the in­dus­try.

“Com­pa­nies can look to di­ver­sify and find dif­fer­ent rev­enue streams or com­bine with other en­ti­ties. Oil and gas play­ers should con­sider of­fer­ing in­te­grated ser­vices rather than sep­a­rate ser­vices,” said Syed Azlan.

The sharp de­cline in oil prices — with 2015 be­ing the first full year of low oil prices — re­flects over­sup­ply, slower-than-ex­pected de­mand growth around the world and Opec’s change in pro­duc­tion stance.

This pe­riod also saw the world’s top pro­duc­ers – the United States, Rus­sia and Saudi Ara­bia – in­creas­ing pro­duc­tion to raise their re­spec­tive share of the mar­ket.

Yet, in spite of its size, Opec failed to as­sert con­trol over the oil mar­kets. This led to a pro­duc­tion sur­plus of 2.3 mil­lion bar­rels per day in the fourth quar­ter of 2015.

Syed Azlan said the big­ger and more so­phis­ti­cated lo­cal play­ers are, the more com­pet­i­tive they would be re­gion­ally and in­ter­na­tion­ally.

“This can only hap­pen if they ei­ther col­lab­o­rate or con­sol­i­date and bring their costs down. With col­lab­o­ra­tion, they stand to of­fer more at­trac­tive in­te­grated ser­vices re­gion­ally or glob­ally, pro­vid­ing a more com­pet­i­tive,” he said.

Syed Azlan Syed Ibrahim

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