Creation of Petros to open up local O&G market further, says Moody’s

KUALA LUMPUR: The setting-up of Sarawak’s oil and gas (O&G) firm, Petroleum Sarawak Bhd (Petros), will potentially increase foreign direct investment (FDI) in the sector, said Moody’s Investors Service.

“The creation of Petros will definitely push open the local O&G market further,” said vice-president and senior credit officer of corporate finance Vikas Halan at Moody’s “Inside Asean: Spotlight on Malaysia” roundtable yesterday.

“This is a good thing because by opening the O&G market even further, the potential of attracting higher FDI into the sector is also there.”

Halan said the creation of Petros should not be considered as a threat to Petroliam Nasional Bhd (Petronas).

“There are many countries operating multiple O&G companies, like India and China which have two to three O&G firms each. Having competition is good as it keeps these firms competitive.

“As for the dividend payout to the government, it is too soon to tell but what we have observed in the past is that the government had shown great restraint in 2015 and 2016 when dividend payout fell to RM16 billion from some RM30 billion. If Petronas sees its profits impacted by Petros, I am sure the government will show restraint as well.”

Halan said Petronas has the exclusive rights for exploration in Sarawak under the Petroleum Development Act 1974.

“There has not been any changes to this Act and there is a possibility that Petros will not bite into Petronas’ output. What we expect is that Petronas will be able to keep its upstream activities and profits while Petros is free to explore and keep its profits,” he said.

Sarawak Chief Minister Datuk Patinggi Abang Johari Tun Openg had said Petros would kick off exploration activities in Miri by July.

Meanwhile, Moody’s expects oil prices to move between US$45 (RM176) and US$65 per barrel from now to next year.

It does not expect a slowdown in demand despite growing environmental concerns.

“On the broader global outlook, we expect that the United States to contribute to higher production growth than demand this year and next year,” said Halan.