Malaysia’s state-owned energy company Petroliam Nasional Bhd (Petronas) may reduce its domestic capital expenditure (capex) in 2020 if oil prices continue to decline, analysts said. The company previously said it would proceed with its planned domestic capex of MYR26 billion ($5.9 billion) to MYR28 billion ($6.4 billion) in 2020 despite the oil price collapse.
However, the persistent drop in Brent and WTI futures may jeopardize Petronas’ plans to maintain its domestic capex, according to analysts at Hong Leong Investment Bank Bhd (HLIB). On Wednesday front-month Brent was traded at $20.37/barrel, while WTI was at $13.78/barrel. These prices compare to Petronas’ 2020 oil price assumption of $47/barrel.
Schroders head of commodities Mark Lacey said despite significant cuts in capex, the oil and gas industry are facing a risk of bankruptcy. Lacey noted that during the 2015 oil price crash, 80 oil and gas companies went into liquidation. The current situation is far worse than five years ago, he added.
According to him, a lot of oil producers were starting to shut-in production. The shut-ins were gradual in March, but they are now accelerating, and many of them will be permanent. He expected many fields would potentially not restart even if prices rebound to $60-$65/barrel.
