Petronas wants leaner industry as challenges remain a concern

Economies of scale will be the general approach to support sustainability, says the O&G company

By MARK RAO / Pic By TMR File

Petroliam Nasional Bhd (Petronas) is urging oil and gas (O&G) players to adopt economies of scale, consolidate and reduce operating costs, as well as embrace digitalisation.

The state-owned energy company wants O&G services and equipment (OGSE) companies to plan their resources and strategies accordingly.

Petronas VP of group procurement Samsudin Miskon (picture) said it is vital for the industry players to understand key trends in the market amid uncertain operating conditions.

“Petronas’ efforts to counter this uncertainty include pushing for transparency of information, which would help rebalance market activities,” Samsudin said in Petronas’ Three-year Activity Outlook Report 2018-2020 released yesterday.

The energy company said this is part of the larger effort to establish Malaysia as an OGSE hub under the 11th Malaysia Plan.

“This will positively impact supporting ecosystems like investment and financing, which are crucial in promoting a thriving OGSE sector.”

OGSE companies depend on Petronas for contracts, but the recent crude oil price crash had forced the biggest company in Malaysia, based on profit, to cut spending and realign its business. The decision had left many OGSE players in a quagmire. But consolidation in the local O&G firms has been slow despite the calls by Petronas.

The company said economies of scale will be the general approach to support sustainability in the OGSE industry, and this can be achieved via integrated work scopes and longer contracting tenures.

Local players are further required to retain the right mix of technology and talent to remain competitive.

In the upstream segment, Petronas and its petroleum arrangement contractors will continue to mature potential development projects within its portfolio, on both technical and commercial fronts, to achieve the desired production level.

The company is predicting an average production of 1.7 million barrels per day, over the next five years, with modest outlooks for floating offshore facilities, structural installation of floatovers, central processing platforms and hydraulic workover units projects.

Petronas said the downstream segment can anticipate a substantial increase in turnaround activity to cater for the Pengerang Integrated Complex in Southern Johor.

With an investment cost of US$27 billion (RM109.62 billion) and to occupy 6,242 acres (2,526ha) of land, the largest downstream project in Malaysia is poised for to start in 2019, with turnaround activities to stream in from 2022 onwards.

Petronas has predicted oil prices to trade between US$50 and US$60 per barrel in the near to middle term.