Petronas to ramp up downstream game

The firm is committed to both local and international downstream assets

By MARK RAO / Pic By HUSSEIN SHAHARUDDIN

Petroliam Nasional Bhd (Petronas) will focus on bringing projects online and expanding in core markets within the downstream segment as the company reduces its exposure to the challenging upstream business.

Petronas VP for marketing downstream Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir said the firm is committed to both local and international downstream assets, including the US$27 billion (RM113.4 billion) Pengerang Integrated Petroleum Complex (PIPC) in Johor.

“Irrespective of what the outlook will be in the down-stream segment, Petronas is committed to the completion of the Pengerang project — there is no change, or slowing down for the project,” Syed Zainal told The Malaysian Reserve yesterday.

The PIPC represents Petronas’ largest downstream investment in Malaysia, comprising the 300,000 barrels per day capacity Refinery & Petrochemical Integrated Development (Rapid) and six associated facilities.

Notably, Saudi Arabian Oil Co invested US$7 billion in the Rapid project earlier this year.

Refinery start-up for the downstream facility is slated for 2019.

For overseas operation, Syed Zainal said Petronas will continue to maximise operations in its downstream assets, while eyeing opportunities to enter new markets in the lubricant segment.

“In the global lubricant business, the group is already present in 80 countries and is to continue to focus on core mar- kets such as China, India, South-East Asia and the Americas, where we believe the potential growth is,” he said.

“Whatever we do down-stream, we try to synergise with whatever we do upstream, so as a group we are trying to harness the maximum strength of our operations entirely.”

As of last year, Petronas is present in 31 countries in the African continent and 23 countries in Asia Pacific in terms of downstream projects, where the national oil and gas (O&G) company also retained a strong presence in the upstream business.

The company’s direction is in line, as upstream projects are becoming increasingly unprofitable due to the low oil price environment and capital-intensive nature of the business, thus lowering margins.

Share prices of local upstream players also reportedly declined by an average of 67% since June 2014, significantly higher than the 40% global average.

Accordingly, Petronas is to allocate a lower proportion of its capital expenditure to upstream projects from this year up to 2021, while placing more emphasis on down-stream activities up to 2018.

The O&G firm already cut RM29 billion and RM2.2 billion in capital and operating expenditures respectively, for the company’s upstream business last year.

Syed Zainal said this after Petronas announced its three-year partnership with Sepang International Circuit (SIC), an initiative geared towards the development of talents in the motorsports arena and ensuring the sustainability of Malaysia and Asia’s two-wheeled sports scene.

He said the agreement running up to 2020 is part of the company’s goal to increase its visibility in the MotoGP arena, which can potentially translate positively on sales and brand awareness.

“The value and benefits we stand to create from this partnership will far exceed our initial investment,” he said.

He, however, did not divulge the specific amount of the investment.

“We want to create value over the next three years, particularly in markets where we are heading to in our lubricant business.”

Petronas is looking to leverage on the platform to boost its motorcycle lubricant brand Petronas Sprinta, especially in focus markets including Malaysia, India, China and Vietnam.