Centering around the energy sector
THOSE in the energy sector, specifically in oil and gas (O&G), are given the extra scrutiny when it comes to ESG practice.
Despite the current downturn and uncertainty brought on by Covid-19, oil and gas companies continue to make progress toward a lower-carbon future, in line with the broader energy transition taking place across the entire energy, resources, and industrials sector.
As revenues and returns plunged, oil and gas companies are under increasing pressure from governments, regulatory authorities, activist shareholders and the general public to shift towards a decarbonised future.
And national O&G firm Petroliam Nasional Bhd (Petronas) is doing just that.
In its annual Petronas Activity Outlook (PAO) for 2021-2023, Petronas has maintained a prudent view despite the collapse in oil prices and will continue to accelerate the transition towards a low-carbon economy, spurring policy intervention and global collaborations across industries.
Although gas remains a crucial and cleaner source of fuel, diversification into renewable energy was imperative, commented Petronas president and group chief executive officer Tengku Muhammad Taufik.
“Petronas has measured steps that demonstrate its stronger commitment to sustainability as it was taking cognisance of the acceleration of the global energy transition, heightened by stakeholder expectations and its vast opportunities.
“Built on Petronas desire to
drive a fundamental shift in the way energy is produced, we announced our aspiration to achieve net zero carbon emissions by 2050 as part of our holistic approach to sustainability
that balances environment, social and governance considerations across our value chain,” he added.
While fossil fuel remains core to the global energy mix,
Petronas is redefining its energy offerings by pushing for the increased use of natural gas as a cleaner source of fuel in the energy transition while building capabilities in renewable energy for the security and sustainability of its supply.
Petronas’ acquisition of Amplus Energy Solutions
Pte Ltd (Amplus), a leading distributed solar energy solutions provider and developer across India is to provide the capabilities and expertise for wider offerings in solar energy.
It is also a vehicle to explore opportunities in onshore and offshore wind energy generation for other Southeast Asian countries, with an aspiration to generate 3 GW of renewable energy capacity by 2024.
Progress with floating LNG vessels
Committed to establishing a deep-water LNG hub – LNG being part of their transition towards cleaner energy
– Petronas expended its focus within floating LNG. In fact, Petronas became the first global energy company to produce liquefied natural gas (LNG) from two floating facilities following the first cargo delivery by Petronas Floating LNG DUA (PFLNG DUA) on March 24, 2021.
The cargo was loaded onto the Seri Camar LNG Carrier operated by MISC Bhd for shipment to a Petronas LNG buyer in Thailand, it said in a statement.
Petronas said PFLNG DUA, currently located at Block H
Rotan gas field situated 140 kilometres offshore Sabah, has a production capacity of 1.5 million tonnes of LNG per year and operating at a water depth of 1,300 metres.
It said this milestone confirmed the viability of Petronas’ push in unlocking stranded and deep-water gas fields with floating LNG (FLNG) solutions that are more sustainable and economical compared with conventional solutions.
“Petronas is proud of this significant milestone from our second floating LNG facility. PFLNG DUA’s first cargo demonstrates our commitment to continue our pioneering efforts in providing more sustainable solutions to harness further value from LNG production through technological advancements.
“Similar to our flagship floating facility, PFLNG DUA’s mobility will allow us to unlock even more marginal and stranded gas fields in the future, providing Petronas with new and sustainable sources of LNG to meet the growing demand for cleaner energy,” Petronas’ Muhammad Taufik said.
With PFLNG DUA’s first cargo delivery, the national oil company will continue to extend its leadership in FLNG technologies, having introduced PFLNG SATU, the world’s first operational FLNG, in 2016.
PFLNG SATU also completed the world’s first FLNG relocation when it was deployed to Sabah’s Kebabangan gas field from the Kanowit gas field in Sarawak in March 2019.
Going forward, Petronas has guided that it will be spending RM40 billion to RM45 billion in annual capital expenditure (capex) for the next five years, with the focus still on domestic investments.
Capex for the years ahead
New energy initiatives will see Petronas an almost doubling its allocation of capex – from five to nine per cent – as the group gradually embrace its transition into renewable energy.
While these capex spending will still be lower as compared to pre-Covid levels, analyst Steven Chan from Kenanga Investment Bank Bhd (Kenanga Research) was still slightly encouraged by this, as the increased capex spending could mean the gradual resumption of activities over the coming years.
“Increased capex could mean gradual recovery of activities. While the latest Petronas Activity Outlook did guide a sluggish activity outlook in 2021, bear in mind that the report was drafted when Brent crude oil prices were in the US$40 per per barrel level,” he highlighted in a sector review.
“While we believe there are still some downside risks to oil prices, the increased capex spending from Petronas could be the catalyst to spark a recovery in activities, at least versus 2020 levels.
“Nonetheless, we do not realistically expect activity levels to resume back to pre-Covid levels any time soon.”
In another thematic report, analyst Alex Goh from AmInvestment Bank Bhd (AmInvestment Bank) outlined that O&G players have met the sustainability challenge head-on with substantial long-term commitments and strategic measures, including Petronas becoming the first Asian oil & gas operator to commit to a net-zero emission target by 2050.
“This follows the footsteps of major multinational operators such as Shell, BP, Total, Repsol and Equinor, while Exxon Mobil’s CEO has said that the bellwether company is “supportive” of such policies,” he added.
“The shift towards renewable energy (RE) in Malaysia is already in progress over the past three years with Petronas’ investment in AmPlus, which operates over 600MW of solar capacity in India and Southeast Asia.
“In its “great reset’, the national oil company is looking into the possibility of deploying more low-carbon solutions in the long term, with a project on carbon capture & storage, bio-based products and hydrogen on the horizon.”
Amongst local service providers, Goh saw that only Yinson Holdings Bhd (Yinson) has an operational renewable energy division from its US$30 million investment for a 95 per cent equity stake in Rising Son Energy, which has a 140MW solar farm in Bhadla Solar Park Phase II, Rajasthan, India. Yinson also recently signed an agreement with listed NTPC to develop a 190MW plant in nearby Nokh Solar Park.
“As Uzma Bhd has just secured a 50MW solar project which will only be operational by end-2023, we expect the momentum to gather steam for renewable projects by local O&G providers as gearing concerns are being alleviated by an improving oil price environment.”