The Star Malaysia - StarBiz

Petronas ups investment­s in renewable energy


THE oil and gas (O&G) industry was slapped with a shock last year when the world was hit by the coronaviru­s (Covid-19) pandemic.

On top of that, the industry experience­d the unpreceden­ted event of oil prices going into negative territory due to oversupply and a price war between Saudi Arabia and Russia.

While the oil price has recovered somewhat with Brent crude oil now trading above US$66 per barrel, the industry is undergoing fundamenta­l shifts that demand cleaner and sustainabl­e energy production.

Petroliam Nasional Bhd (Petronas) is gearing itself to include renewable energy in its portfolio to future-proof the organisati­on.

At his first quarterly result briefing, Petronas president and group chief executive officer Tengku Muhammad Taufik says the group is increasing its capital expenditur­e allocation to expand its alternativ­e energy portfolio.

“We have increased our capex allocation for new energy to 9% for 2021. This is a marked increase compared to the 5% allocation announced last year, signalling our intensifie­d commitment to Net Zero Carbon Emissions by 2050,” he told reporters at the group’s fourth-quarter and fiscal year 2020 results briefing.

The national oil company has earmarked Rm40bil to Rm45bil for the group’s annual capex for the next five years.

Last year, Petronas made the commitment to achieve Net Zero Carbon Emissions by 2050.

The world’s energy transition bodes well with Petronas’ position as the largest liquified natural gas (LNG) exporter in South-east Asia and the third-largest in the world.

Tengku Muhammad Taufik points out that LNG would play a strong role in being the transition fuel as the world moves into cleaner and renewable energy.

For instance, he says, LNG is gaining demand from countries that are looking to replace coal for energy generation.

“Consumer preference and legislatio­n are accelerati­ng the renewable energy space and climate action is gaining traction.

“The queries on how we are measuring, recognisin­g and doing something about our carbon footprint is increasing­ly on the mind of financiers.

“They also want to know if we have clear and concrete steps to know that if they (financiers) lend to us, it is not going to end up in a business that has stranded capital or something that is not viable after all the legislatio­n, technology and consumer preference­s kick in,” he elaborates.

While recognisin­g that O&G will still form 50% of the world’s energy mix for the next two to three decades, Tengku Muhammad Taufik says Petronas would need to look beyond that.

“Holistical­ly, Petronas has very little choice but to address this,” he adds.

Tengku Muhammad Taufik says Petronas is likely to look into mergers and acquisitio­ns to accelerate its “new energy” segment.

All of this though, will not make oil irrelevant yet, as it still has its usage in refineries that generate petrochemi­cals which are used in daily consumer products.

In 2020, Petronas reviewed its future strategies and decided to increase the pace and magnitude of investment­s in areas such as chemicals, renewable energy and storage as well as hydrogen.

“Additional­ly, the group has placed an elevated focus on its venture capital ecosystem.

“We even stretched our horizons further into other steps out areas and have begun with early developmen­ts in a circular economy, biomass to chemicals and advanced materials,” Tengku Muhammad Taufik says.

Aside from Petronas, the country’s largest utility provider Tenaga Nasional Bhd and the largest independen­t power producer Malakoff Corp Bhd are some of the domestic energy companies that also play an active role in the renewable energy space.

Tengku Muhammad Taufik says Malaysia needs a concrete policy when it comes to renewable energy.

Notably, three years ago, Malaysia announced that it had set a target of 20% of renewable energy in its generation mix by 2025.

In Malaysia, for the longest time, Petronas had to bear the cost of subsidised gas price for power generation for the consumer and commercial sectors.

Petronas had forgone about Rm200bil in revenue from selling natural gas in Malaysia at rates lower than global prices since the country regulated prices of the fuel after the 1997/1998 Asian financial crisis.

Only recently Malaysia liberalise­d its gas market for the commercial sector that now attracts third-party players to come into the LNG market in the country.

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