KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) does not see the current high crude oil prices as “very sustainable, and it can go up as quickly as it can come down”, according to the national oil company’s chief financial officer Liza Mustapha.
“There are many factors that are affecting the high oil prices. We need to stick to things that we can control because oil prices are something you can’t control.
“But we can control our efficiency, and commercial and operational excellence. Those are the things that we focus on,” she told MIDF group managing director Datuk Charon Mokhzani during an “MIDF Conversations” online programme.
Regarding the energy transition trend to renewable sources like wind and solar, Liza pointed out that in late 2020, Petronas had announced its aspiration to achieve net-zero carbon emissions by 2050.
Petronas had stated that with the target set for 2050, it will continue to intensify its efforts toward reducing Scope 1 and Scope 2 Green House Gas (GHG) emissions from its assets by delivering continuous improvements in operational excellence, and by deploying innovative operations and technologies.
The company will also pursue new avenues of revenue creation via investments in nature-based solutions, as well as establishing greater accessibility to cleaner energy solutions.
MIDF group managing director Datuk Charon Mokhzani.
Liza said to achieve its 2050 aspiration, the company is setting aside funds which it “did not have to previously”.
“For normal operations, we will have to factor in decarbonisation costs.
“We have to talk about having a material amount of our revenue coming not from traditional sources, which is predominantly hydrocarbon-based oil and gas (O&G), and how we can make our portfolio more resilient and not be so susceptible to oil price changes,” she said.
“We need to have a target, whereby quite a sizeable chunk of our revenue in the next five or six years is going to be coming from something which is not directly O&G.
“So, we talked about specialty chemicals – we got to go there in a material way as opposed to commoditised chemicals where we are predominantly at today,” she added.
Liza noted that “business as usual needs extra allocation, even for the same level of production because of decarbonisation costs” and post-Covid-19, the company is looking at around 10% of its capital allocated into non-traditional spaces such as specialty chemicals and solar energy.
“We are also on the lookout for other projects. Not that easy to come by, though.
“There’s such a disparate difference between the returns you earn from O&G, and the returns you earn from solar,” she said.
Regarding capital expenditure (capex), Liza pointed out that in 2022, Petronas expects to nearly double capex to close to RM60bil (from RM30bil in 2021) due to a combination of ongoing and new projects.
“In 2021, there was some rationalisation because of the oil prices.
“So, it was an affordability decision, because of Covid-19, projects also got deferred and delayed.
“So, there’s a lot of catching up that’s happening this year,” she said, adding that in the first quarter of 2022, capex had risen to RM7bil (compared with RM6bil a year earlier).
Liza also pointed out that Petronas Chemicals Group Bhd’s (PetChem) proposed RM10.5bil acquisition of Perstorp Holding AB, announced in May 2022, was a key platform for PetChem’s step-out strategy into the specialty chemicals industry.
PetChem had stated that the acquisition marked the creation of a significant specialty chemicals portfolio, while enhancing its overall earnings.
This follows the acquisition of BRB Group in 2019, a leading global independent producer and formulator of silicones, lube oil additives and chemicals.
PetChem managing director and chief executive officer Mohd Yusri Mohamed Yusof had noted that Perstorp would add up to 2.3 million tonnes per annum to PetChem’s production capacity and immediately contribute about 28% incremental revenue to it based on the 2021 results, as well as support PetChem’s medium-term goal of establishing 30% revenue generated from non-traditional businesses by 2030.
Mohd Yusri had pointed out that the Perstorp acquistion would enable PetChem to participate in attractive end-markets such as paints and coatings, construction, automotive, personal care and animal nutrition that share a robust growth outlook.
With seven manufacturing sites and three research and development centres worldwide, Perstorp is present in 26 countries including the United States, Europe and Asia Pacific.
It has 1,500 employees and serves more than 2,600 customers globally with its 130 product offerings within 30 product groups.
Liza pointed out that “business as usual” in the O&G industry required continuously high capex.
“If you don’t keep investing, let’s say something like you drill a well which is supposed to last you for 10 years and the well has a production rate, you keep having to invest, just to keep the same production rate or else it will decline. The volumes do not become economical,” she said.