Uncertainty lies ahead for energy industry, Petronas says

It will continue to deliver operational excellence, growth strategies


PETROLIAM Nasional Bhd (Petronas) foresees greater uncertainty shaping the energy industry in 2020 as the dual impact of a Covid-19-driven demand slowdown and the impact of the oversupply in the oil market continues to unfold.

The national oil company will seek to raise operational efficiency and manage cost including capital expenditure (capex) as demand-supply factors weigh on its financials.

Its president and group CEO Tengku Muhammad Taufik Tengku Aziz (picture), in its 2019 annual report, stated that the outlook for the energy industry remains bearish, given the ongoing geopolitical uncertainties, prolonged trade tensions and near-term demand disruptions due to the Covid-19 health crisis.

Its board expects the financial performance for 2020 to be affected by these factors. Petronas will, however, continue to deliver operational excellence and growth strategies, he added.

“Amid slumps in prices and demand caused by the Covid-19 pandemic as well as oversupply in the market, Petronas will continuously re-evaluate our capex as part of ongoing efforts to strengthen our resiliency in facing the greater uncertainty of the global markets moving forward,” he said.

Petronas made a net profit of RM40.5 billion for the financial year 2019, 27% year-on-year (YoY) lower due to lower crude oil prices and substantial impairments of its assets.

The Fortune 500 company’s earnings fell 68% YoY to RM4.5 billion in the first quarter ended March 31, 2020 (1Q20), primarily due to net impairment on assets and lower revenue recorded.

Net profit excluding impairment, however, stood at RM9.2 billion, a 35% YoY decrease from RM14.1 billion compared to 1Q19. Petronas faces the same pressures industry peers like the Royal Dutch Shell plc which has lowered its dividend rate as earnings fell due to weaker market conditions caused by the Covid-19 pandemic.

Petronas’ former president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin in the same report, stated in this period of uncertainty, Petronas has taken early measures to safeguard the wellbeing of its people through the implementation of several proactive steps to manage the risk of exposure and reduce the risk of transmission of the virus.

“In terms of our businesses, we are ensuring that our operations continue to run safely and efficiently across the value chain,” he said.

Petronas will monitor external events and strengthen its resiliency as well as future-proof the organisation to preserve its long-term sustainability.

“Our focus will be on the elements that are within our control which include strengthening our financial position, driving further efficiencies and cost optimisation efforts across the group,” he noted.

Petronas aims to sustain the momentum in the execution of strategies with the objective to future-proof the company.