‘RIGHT TIME TO CONSOLIDATE’
Make hard decision to restructure or reform, says MPRC
KUALA LUMPUR firstname.lastname@example.org
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