Malaysia’s Petronas to cut spending, sees output cuts

26-May-2020 Intellasia | ArgusMedia | 6:02 AM Print This Post

Malaysian state-owned oil company Petronas will cut capital expenditure (capex) by 21pc and operating costs by 12pc this year to help weather a collapse in energy demand brought on by the Covid-19 pandemic.

The cuts come after Petronas invested just 8.5bn ringgit ($1.95bn) of its 50bn ringgit full-year capital budget in the January-March quarter. Most of the capex cuts will be made overseas, but the company said constraints in its supply chain resulting from the pandemic will hinder some of its domestic projects.

Net upstream output rose by 1pc from a year earlier to 1.84mn b/d of oil equivalent (boe/d) in the first quarter. Crude and condensate volumes climbed by 7.7pc to about 813,000 b/d, largely on gains in Brazil. But the company said it expects a “downward production trend” in the months ahead as Malaysia cuts oil output under its commitment to Opec and the pandemic erodes demand and disrupts operations.

Five domestic upstream projects started producing in the first quarter, including two new fields in peninsular Malaysia and three reworked fields in Sarawak, adding 11,000 boe/d of new output.

Downstream production rose by 14pc from the previous year to 813,000 b/d after Petronas and joint-venture partner Saudi Arabia’s state-owned Saudi Aramco completed their 300,000 Pengerang refinery in Malaysia’s Johor state late last year. It has been shut since 15 March because of a fire at its diesel hydrotreater. Petronas said refining profit margins will remain weak over the next several months as slumping demand leaves such oil products as diesel, gasoline and naphtha in oversupply.

With oil and products prices dragged down in the first quarter, resulting in lower price realisations and write-downs of crude and products inventories, the company’s profit slid by 68pc to 4.52bn ringgit. Write-downs led to a 1.2bn ringgit loss in the firm’s downstream segment.


Category: Malaysia

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