Petronas sees oil demand recovery to remain fragile

by ASILA JALIL / pic by MUHD AMIN NAHARUL

PETROLIAM Nasional Bhd (Petronas) expects the recovery path for oil demand to remain fragile and uncertain due to the emergence of the new Covid-19 variant.

In its Activity Outlook for 2022 until 2024, the national oil company stated economic activities have picked up helped by the rollout of vaccines this year which supported a recovery in demand of road transport fuels amid pent-up travelling demand.

However, the demand from the aviation sector is only expected to return to the pre-pandemic level by 2024.

“The path towards sustained oil demand recovery remains fragile and uncertain due to Omicron that triggers fresh waves of lock-downs.

“While most industry players are optimistic with the economic recovery, they remain cautious. Thus, the smarter approach would be to strengthen efforts collectively and be ready to face the oil price volatility,” it stated in the report.

It noted the energy crisis that unfolded this year has led to a surge in the prices of liquefied natural gas (LNG) to a record high.

The LNG spot prices are expected to experience volatility in the coming years due to the weather pattern and potential policy change which will alter the demand-supply dynamics.

“This underscores the need for continuous investments in the energy sector to ensure a reliable and sustainable supply of energy in an equitable manner,” it said.

Petronas noted gas and renewable energy will play a bigger role in meeting global energy needs. Gas is more resilient than oil as the world sees a growing share of electric vehicles and rising demand for sustainable fuels.

It said increasing the efficiency of the transport sector would erode the consumption of oil.

“In moving towards a low-carbon nation which will address the energy trilemma, the industry will need to brace and act towards supporting the 12th Malaysia Plan.

“It is imperative to re-look the business model and mindset shift as energy transition is accelerating players to fast-track and step-out. Petronas will continue to focus on maximising value by leveraging the group’s integrated value chain to capture new opportunities and mitigate the impact of market uncertainties,” it said.

Petronas is also poised to be a competitive green hydrogen solutions provider. It is projected that the demand for hydrogen will increase by almost eight-fold to 550 million tonnes per year compared to 70 million tonnes in 2020.

Petronas expects domestic hydrogen projects to commence operation from 2024 onwards starting with blue hydrogen and subsequently green hydrogen production, while it continues to expand its supply capacity globally to serve its targeted markets.

“Petronas venture into the hydrogen business is anchored on its passion to bring cleaner energy to the world to create a sustainable future. Petronas possesses ready capability and facilities to produce blue hydrogen. This builds upon our experience in the petrochemical industry and as a world-renowned reliable LNG supplier,” it said.

Petronas also sees crude oil prices to range between US$50 and US$60 per barrel between 2022 and 2024.

It remains prudent and will continue to adopt a lower-for-longer approach for its crude oil expectations until the firm is confident the current price uptrend is sustainable.

“If oil prices recover for a sustainable period, we expect a higher number of greenfield and brownfield projects to become commercially viable, provided we keep costs at a competitive level. Activities for the oil and gas services and equipment sector may increase accordingly,” said Petronas.