O&G: Increasing oil pricesbut muted outlook

While there is a general consensus that crude oil prices will be on the uptrend in 2018, outlook prospects of the local oil and gas (O& G) industry will continue to be muted due to observed significant capital expenditure (capex) reductions from Petronas, increasing proportion of renewable sources for electricity generation and a growing adoption of fuel efficient electric vehicles.

In 2018, analyst AmInvestment Bank Bhd (AmInvestment Bank) has guided that they would be raising their project of crude oil prices by US$ 5 per barrel to US$ 55 to US$ 60 per barrel following the increased optimism post- continuation of OPEC’s production quota.

Simi larly, Pet ronas is projecting an average of US$ 55 to US$ 60 per barrel while the EIA is forecasting US$ 57 per barrel for 2018.

“Oil at US$100 a barrel is a thing of the past,” said Petronas in its Petronas Activity Outlook 2018 to 2020 report which added that Petronas would continue adopting lower prices for the long term until there is restored confidence that the current uptrend of oil prices is sustainable.

The Petronas report went on to detail that their transparency on their shrinking capex which saw contract awards plunging 68 per cent q- o- q in 3Q17 to RM689 million, is aimed to help consolidate the local O& G industry – especially those in the upstream exploration segment.

“We need to reshape the Malaysian O& G ecosystem so that the companies that operate here will be more efficient, with the size and economies of scale that will also make them more resilient and competitive globally,” said Petronas’ president and group chief executive officer Wan Zulkiflee Wan Ariffin in the report.

Locally however, the Liquefied Natural Gas ( LNG) and Oil and Gas (O& G) industry will continue to be the biggest contributors to the growth and business sustainability of our Bintulu Ports Holdings Bhd ( Bintulu Ports).

Its group chief executive officer (CEO) Dato Mohd Medan Abdullah reaffirmed the group’s mission would be to continue to service the local O& G scene with a focus on LNG – the group’s main bulk of cargo handling.

“The group is always ready and has the capacity and capabilities to respond to any increase in offshore oil and gas activities, especially when such activities ramp up due to better oil prices.

“The increased production capacity to 29.3 million tonnes per annum at Petronas LNG Complex will have a positive impact on the port throughput and we will continue to discuss with Petronas to explore other services that may be provided at the port,” he said during a previous interview with The Borneo Post.

On October 4, 2017, Petronas celebrated its 10,000th cargo delivered to Japan from the Bintulu LNG Complex.

While it is clear that Bintulu Port is on track to become a toptier LNG port within the globe alongside growing demand for LNG, Wan Zulkif lee warned that there would be a possibility of industry stagnation if LNG prices do not encourage the necessary investments to sustain the business.

“Today, players are cancelling and delaying projects in tandem with the LNG prices. Without sufficient investments, both buyers and sel lers face an uncertain future in terms of business sustainability and energy security,” he said in a statement during the LNG Producer- Consumer Conference 2017 in Tokyo, Japan.

Nevertheless, he added that the current market dynamics had stimulated internal efficiency improvements that had provided Petronas with better agility as an integrated end-to- end LNG player to accelerate growth once the industry is on an upturn.

With deeper resource pools, Wan Zulkiflee guided that Petronas would be able to invest in people, technology and innovation to provide energy solutions that go beyond just selling and delivering LNG.

“Through these investments, we aspire to help create a more sustainable LNG market that is able to fuel the world’s economies,” he said.