Petronas’ new CEO Tengku Mohammad Taufik Tengku Aziz during his first major media engagement said that the company is currently facing a challenging situation in the oil and gas industry. The CEO noted that Petronas was not spared from such a period, which he called a “great reset.” Petronas’ swung into an MYR21-billion ($5.06 billion) loss after tax in the April-June quarter from the MYR14.7-billion profit after tax a year earlier.
This is Petronas’ first quarterly loss in five years, and the dismal performance was mostly attributed to MYR20.8 billion ($5.01 billion) in net impairment losses on assets and lower revenue. Revenue for the quarter declined 42% year-on-year to MYR34 billion ($8.19 billion) due to lower average realised prices and sales volume.
Major oil and gas firms are also facing similar challenges. BP posted a $6.7 billion loss in the April-June quarter and had its dividend payout slashed. ExxonMobil reported a $1.1 billion loss in the same period, while Shell’s profit plunged 82% from a year earlier. Saudi Aramco, the world’s largest oil company, said profit had fallen by almost 75% and is reportedly suspending diversification plans to meet its pledged dividend payout.
The coronavirus pandemic has sharply slowed down economic activity and hence, demand for crude oil. The gap between oil supply and demand has significantly pushed down prices, with Tengku Taufik saying oil prices of $80-$100/barrel are long gone. Petronas expects oil prices to hover around $55-$60/barrel over the long-term due to the current market dynamics.
Against such backdrops, the state-owned company is taking measures to optimise costs, including cutting its capital and operating expenditures by 21% and 12%, respectively, by the end of this year. As part of the cost-optimisation measures, Petronas is considering cutting salaries, but it assured that it would not reduce the number of its employees.
Petronas is also eyeing other sectors, including renewable energy, as future revenue generators. The company expects renewable energy to make up 24% of energy demand in 2040, increasing from 10% in 2010. The growing demand for renewable energy is expected to decrease oil and gas share in the global energy mix from 53% in 2018 to 47% in 2040. Petronas plans to expand its renewable energy capacity by ten folds to 3GW in four years.
