KUALA LUMPUR: After two years of low investments in the oil and gas (O&G) sector, Petroliam Nasional Bhd (Petronas) is planning to increase its capital expenditure (capex) this year.
President and group chief executive officer Datuk Tengku Muhammad Taufik Tengku Aziz said the group wants to bring back its annual investments to pre-pandemic levels of between RM40bil and RM50bil.
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“We plan to split the capex 50:50 between domestic and overseas activities. Last year, there was a hiccup in our capex spending due to the Covid-19 pandemic that caused a disruption in the supply chain and prolonged movement restrictions,” he told a press conference on Petronas’ financial year ended Dec 31, 2021 (FY21) performance yesterday.
“There were also some transactions that we wanted to take on, particularly upstream and in gas assets, but the valuations became distorted due to the surge in oil prices and the board wanted to exercise prudence. Some of those deals did not happen because we wanted to make sure we are buying at the right value,” he added.
The national oil company slashed its capex spending by 9% last year to RM30.5bil from RM33.4bil in 2020 – way below its pre-pandemic capex targets of RM40bil to RM50bil.
Tengku Taufik expected Petronas’ capex spending to accelerate in the second and third quarter of this year to keep pace with the industry.
He said the Malaysia Bid Round has earmarked to offer 14 exploration blocks for this year, higher than the 13 offshore blocks offered in 2021.
The surge in global crude oil price has been a boon for Petronas as a major O&G producer. For FY21, Petronas returned to the black with profit after tax (PAT) of RM48.6bil from a net loss of RM21bil in FY20. During FY21, it reported a 39% growth in revenue to RM248bil compared with RM178.74bil recorded a year earlier. It attributed the stellar performance of its bottom line and top line to surging commodity prices driven by the recovery in global energy demand as key economies reopened and travel restrictions eased amid higher Covid-19 vaccination rates around the world.
“Petronas has benefitted from the overall recovery of the O&G sector globally,” said Tengku Taufik.
He pointed out that Petronas had booked an average Brent crude oil of US$70.91 per barrel in 2021, more than 70% higher than US$41.67 per barrel in 2020.
For the fourth quarter ended Dec 31, 2021, Petronas recorded a PAT of RM13.4bil against a loss of RM1.1bil in the same quarter a year earlier, thanks to higher selling prices and lower impairment losses of assets.
Revenue for the quarter increased to RM76.6bil compared with RM44bil in the same corresponding quarter last year.
Tengku Taufik said despite the current surge in global price of crude oil, Petronas expected the price of Brent crude oil to average between US$70 and US$80 a barrel this year. He believed that the global price of crude oil had surged beyond its fundamentals.The price of Brent crude oil jumped to US$105 (RM441) per barrel last week, a few hours after Russian President Vladimir Putin authorised a military operation against Ukraine, which exacerbated the prolonged supply shortage and rising energy prices.
That marked the first time since 2014 that the benchmark-setting price of Brent crude oil had gone above US$100 (RM420) per barrel. Brent oil was last traded at US$101 (RM428.25) per barrel.
Tengku Taufik kept a tight lid on whether Petronas plans to pay out higher dividends.
In FY21, Petronas paid a total of RM25bil in dividend to the government, which was, however, lower than the RM34bil paid in FY20.
Tengku Taufik said, moving forward, Petronas would remain committed with its goal to boost the local O&G sector, while finding a balance in its net-zero emission commitment by 2050.
“Please note that Petronas is not abandoning hydrocarbons. A decarbonised future is not a future entirely absent of hydrocarbons.
“The main challenge is to address emissions,” he said.
Towards this end, he said Petronas would establish two new business units namely the “cleaner energy solution” and “centralised carbon management unit.”
“The new units amplified our efforts in the new energy business,” Tengku Taufik said.
Over the next five years, Petronas has targeted to allocate 20% of its annual capex into new energy and net zero carbon initiatives.
Moving forward, Tengku Taufik expected that the O&G industry to continue to operate in a challenging environment due to market uncertainties and heightened geopolitical risks.
“Amid the challenges, the group will focus on executing our growth plans and sustainability efforts while remaining committed to delivering operational and commercial excellence,” he said.