Reimagineering Malaysia’s Oil & Gas Industry

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Conservative estimates suggest that in the wake of oil prices crashing in late 2014, the Malaysian oil and gas services and equipment (OGSE) sector contracted by at least 11%. Analysis of overall financials for the OGSE sector by the Malaysian Petroleum Resource Corp, an agency under the Prime Minister’s Department, reveal that revenue for 2015 fell by 11%, while profits contracted by a severe 52.3%. Including companies such as MISC, Sapura Energy, Dialog, Scomi, Bumi Armada, the numbers for 2016 are not available yet, but a glance over the financial reports released for the bigger players indicate that while sector revenue will probably be down for the year, profits maybe be up, after aggressive cost-cutting that included a tide of retrenchments.

So what is in store in 2017 and beyond?

If we go by the health of Petroliam Nasional Berhad, better known as Petronas, the word seems to be “cautiously optimistic”. The guardian and bellwether of Malaysia’s Oil & Gas sector, Petronas is one of the few major integrated state oil companies that is holding up fairly well during the current on-going oil crises. Petrobras is engulfed in debt, as is PDVSA, while Pertamina appears to be struggling with corruption and clarity of its long term investment direction while select Russian entities battle being used as political tools. Full year 2016 revenue for Petronas fell by 17.3% from lower sales coupled with weak crude prices but profit was up by a whopping 28% to RM16.95 billion (US$3.82 billion), just slightly behind Shell’s own profit for 2016. For 2017, Petronas projects better times ahead, promising no more staff redundancies and bolstering defences by pegging its 2017 capex expenditure at US$45/b, while it prepares to focus on natural gas – both at home in Sarawak and Sabah, and abroad in its Canadian LNG export project, and the recent go-ahead given to its massive US$27 billion RAPID refinery and petrochemicals project…

 

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