Oil Plunges, Petronas May Cut More



Malaysia’s Petroliam Nasional Bhd (Petronas) may put more emphasis on cutting extra workforce or downsizing its exploration division even further, in the wake
of continued Brent Crude Oil price drop on the international market place.
“The company may eventually reduce its overhead, targeting departments that are rendered redundant following the current cost-cutting exercise,” said a source.
Expats, sectors linked to explorations and contract workers may face the axe in the long run.
Petronas will keep its focus on Pengerang, with Refinery and Petrochemical Integrated Development (RAPID) assured of not suffering another delay since it is at the center of its investment in the massive multi-billion dollar project in the southern state of Johor.
The oil and gas giant has already allocated the capex for the RAPID project, which is headed by Petronas Refinery and Petrochemical Corporation Sdn Bhd’s (PRPC) chief executive officer Juniwati Rahmat Hussin.
Petronas is developing a refinery and RAPID and other associated facilities in Pengerang, Southern Johor, Malaysia, through a project called Pengerang Integrated Complex (PIC).
Launched in May 2012, PIC is part of the larger Pengerang Integrated Petroleum Complex (PIPC) proposed by the Johor State Government.
Total investment for the PIPC project is approximately RM97 billion ($27bn), of which the RAPID project was allocated RM57 billion ($16bn) and the associated facilities require RM40 billion ($11bn). But in May this year, Petronas decided to cut the cost of the project by RM8 billion, as part of its cost-cutting exercise.
As for the Canada project, there is the possibility the company will accept some delays in its implementation, but the company might be forced to renegotiate its offer to the Lax Kw’alaams Band in northern British Columbia which spurned the C$1.
15 billion package offered by Petronas.
The Aboriginal community unanimously voted against the $30 billion project.
The group is concerned that the project will harm the environment. The rejection is a new obstacle to plans to export liquefied natural gas from North America to Asian markets, Canadian media reported.
Hard hit by the oil price crash, Petronas last week said cash from operations would not cover capital expenditure or its dividend requirements this year.
This will force Petronas to draw from its reserves, activate more austerity measures, and possibly the option of raising additional funds externally, the company said.
Net profit at Petronas, Malaysia’s only Fortune 500 company, plunged 47% in the second quarter of 2015, at US$11.1 billion ringgit compared to US$21.06 billion ringgit for the same period last year.
The company also saw revenue tumble 28% to RM61.30 billion ringgit in the same quarter, even though the decrease was partially offset by favorable U.S. dollar strength against the ringgit.
The outlook for Petronas’ results in the coming third quarter looks to be depressed, given the additional price pressure on crude oil. Just last week, prices of WTI crude for September delivery fell to six year lows.