KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) expects the path towards sustained oil demand recovery to remain fragile and uncertain next year, as the emergence of new Covid-19 variants could potentially hamper growth.
In light of this, the national oil company said the smart approach would be to strengthen efforts collectively and be ready to face the oil price volatility.
“As the world economic activities resume, the global economy is staging its most robust post-recession rebound with speedy recovery across countries and sectors.
“A pervasive rollout of vaccines in 2021 provided support to the recovery of road transport fuels amid a pent-up demand for travelling,” Petronas said in its annual activity outlook from 2022 to 2024, which was released yesterday.
It pointed out that the aviation sector, for example, is only expected to return to pre-pandemic levels by 2024.
“The path towards sustained oil demand recovery remains fragile and uncertain due to the emergence of new Covid-19 variants that trigger fresh waves of lockdowns.
“While most industry players are optimistic with the economic recovery, they still remain cautious.”
In the same report, Petronas group procurement vice-president Freida Amat said the accelerated energy transition will also pose further challenges to the traditional oil and gas (O&G) business. “Thus, the industry must be innovative and remain competitive in the course of doing business, to ensure projects and production remain feasible in the uncertain economic climate. Immediate reforms along the value chain have become increasingly important, focusing on greater operational efficiencies and higher productivity.”
In the same report, Petronas group procurement vice-president Freida Amat said the accelerated energy transition will also pose further challenges to the traditional oil and gas (O&G) business.
“Thus, the industry must be innovative and remain competitive in the course of doing business, to ensure projects and production remain feasible in the uncertain economic climate. Immediate reforms along the value chain have become increasingly important, focusing on greater operational efficiencies and higher productivity.”
She emphasised that Petronas is collaborating with industry players in pursuit of maximising existing assets for better efficiency and cost optimisation.
“The O&G services and equipment industry can capitalise on new opportunities which have emerged from changes introduced in the way we operate, whether it is rethinking how we do projects or leveraging on the rapid advancements of technology in the form of artificial intelligence, machine learning, robotics and Internet of Things.
“Globally, we have seen companies forming collaborations to accelerate technology uptake and create an array of new revenue streams while sharing the resources and investments.”
Freida said it is Petronas’ aspiration to achieve net zero carbon emissions by 2050.
She said the company has taken steps to realise the aspiration towards the energy transition and to embrace a low-carbon energy future by accelerating its “stepping out” strategy into renewables, such as solar and hydrogen businesses.
“The O&G gas industry and its players must collaborate in moving forward together, embedding environmental, social and governance as part of our industry’s DNA,” she said.
Freida also emphasised on the need to intensify the adoption and capitalisation of digital transformation and technology advancement.
“We must continue to remain focused on technological advancements, digitalisation of processes, as well as harmonisation of standards for equipment and services.
“Leveraging on technology and digital solutions to optimise cost while securing bottom line and performance had become more significant and vital.”
Amid the accelerating energy transition, Petronas pointed out that gas and renewables would play a bigger role in meeting global energy needs.
“Gas is more resilient than oil as growing share of electric vehicles, rising demand for sustainable fuels and increasing efficiency of the transport sector would erode the consumption of oil.
“While gas is cleaner than oil, the challenges come in the form of methane leakages from operations and pipelines targeted by policymakers, following more stringent emission goals set at the 2021 United Nations climate change conference.”
On the home front, Petronas said the 12th Malaysia Plan had come at an opportune time as the nation recovers from the Covid-19 pandemic.
“Setting the strategic direction for Malaysia’s development from 2021 to 2025, it aims to address current issues with strategic directions to achieve a sustainable economy focusing on rejuvenating economic growth, ensuring prosperity is distributed more fairly and equitably, as well as maintaining environmental sustainability.”
Meanwhile, Kenanga Research, in a report yesterday, expected global oil demand to revert to pre-pandemic levels in 2022.
“Global oil demand and supply are expected to stabilise at over 100 million barrels per day in 2022, close to pre-pandemic levels.
“Nonetheless, while aggressive stock draws over the past couple of months had helped lifted oil prices, going into 2022, we expect that growth in production from Opec+ (a grouping of the Organisation of the Petroleum Exporting Countries), US tight oil and from other non-Opec countries will outpace the slowing growth in global oil consumptions, especially in light of renewed concerns about Covid-19 variants.”
The research house is maintaining its 2022 average Brent crude price assumption of US$65 (RM272) per barrel.
“Further Covid-19 impact remains as the largest uncertainty towards the recovery of global oil consumption, especially given the recent emergence of the Omicron variant.“But, as vaccination rates increase, coupled with improved Covid-19 management, our base-case is that the impact from the Omicron variant should be mild and shortlived.”
Meanwhile, Hong Leong Investment Bank Research is maintaining its Brent crude oil price forecast at between US$70 (RM292) and US$75 (RM314) per barrel for 2022.
“We expect the Omicron variant to affect the demand for jet fuel in the near term due to travel restrictions, even though the world has come a long way and is better equipped to manage Covid-19 and its related challenges.
“Meanwhile, in the local space, we expect Petronas’ capital expenditure spending to be maintained at between RM40bil and RM45bil annually over the next five years, with progressive increase in allocation towards renewable energy initiatives,” the research house said.