PETRONAS PREPARES FOR LOWER OIL PRICES

Firm practises fiscal discipline, prudent spending and delivering value over volume

FISCAL discipline, prudent spending and delivering value over volume are the three values propagated by Petroliam Nasional Bhd (Petronas) in preparation for oil prices forecast to average at below US$50 (RM211) per barrel.

Executive vice-president and chief executive officer (CEO) for upstream, Datuk Mohd Anuar Taib, said based on these principles, the national oil company would continue to undertake “portfolio high-grading” to ensure its assets had the strategic fit of value for the company to grow.

“Although we still put a lot of effort into production and exploration, it is all driven by how much we can afford and what kind of returns we will get,” he said in an inter- view recently.

For assets seemingly having no strategic fit of value, he said Petronas would work on relinquishment or divestment, as seen in its decision to relinquish Block 1 and 2 in Cuu Long Basin in Vietnam this month.

However, from time to time, Petronas would add new assets to compensate for the depleting resources, he added.

Regular portfolio high-grading Petronas has a presence in 23 countries that are in various phases of upstream operations.

Anuar said the company would continue to review its operations in all the countries, looking at value in the midst of portfolio highgrading, with many key actions to be taken as it looked for growth.

“Portfolio highgrading becomes our norm as we look at profitability and future opportunities and if it (asset) doesn’t meet the required value or doesn’t meet the strategic fit, we will look at ways to either divest or exit.

“At the same time, we also look at our portfolio and the areas that we need to improve, so we would be sustainable in the long run.”

As for fiscal discipline, he pointed out that the company’s continued drive for efficiency had managed to reduce its worldwide average unit production cost for the past three years to US$7 per barrel from US$10 per barrel.

While Petronas continues to expand its presence overseas, Malaysia will remain the most important location.

Anuar said Petronas would focus on gas development in the country to ensure it had longterm sustainable integrated value, whether through liquefied natural gas or the petrochemical business. At the same time, it will also address the need to produce more oil by promoting exploration in deepwater and ultradeepwater areas.

Deepwater: last frontier for oil Even though the cost of production in deepwater and ultradeepwater areas is high, this has been compensated by the significant decline in service charges, such as for deepwater rigs, since the downturn in oil prices began.

“In this business, we always have to put a long-term view. If you don’t explore today and explore it only when the oil price is US$100, it will be too late because it takes about 10 years just to get the development and production to start,” he said.

Nevertheless, every decision that Petronas took would be driven by value and not just volume.

At the same time, we also look at our portfolio and areas that we need to improve, so we would be sustainable in the long run. DATUK MOHD ANUAR TAIB Petronas executive vice-president and CEO for upstream

Steady leadership

Anuar commended president and CEO Tan Sri Wan Zulkiflee Wan Ariffin for guiding the organisation through the tumultuous period.

“I’m very thankful for the kind of leadership that Wan Zulkiflee provided. He encouraged us to look at how we resolve things today and balance it with what we would do in the future,” he said. Bernama