Petronas cutting up to RM50b in expenditure?
Published on: Friday, January 22, 2016
Kota Kinabalu: Petroliam Nasional Berhad (Petronas) is reportedly cutting up to RM50 billion in capital expenditure (capex) and operating expenditure (opex) in the next four years in response to the plummeting crude oil prices in the global market.It could not be ascertained, however, how far the company's latest move would affect the State's oil and gas industry.According to an internal memo issued by Petronas President and Group CEO Datuk Wan Zulkilfee Wan Ariffin (pic) early this week, the cut would entail the company deferring some of its projects.
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Reports also indicated that Petronas is reviewing its manpower costs, which industry observers said could result some sizing down of the company's workforce.Petronas had, on Jan 19, confirmed that it had circulated an internal memo on part of its on-going effort to optimise costs to address the impact of the continuous fall in crude oil prices.This follows a Wall Street Journal report on Jan 18 that the national oil company plans to cut spending by up to RM50 billion over the next four years and review its business structures in response to the lower oil prices.However, the oil firm said they were not at liberty to disclose or discuss the contents of the communication with external parties.
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The memo, according to sources, sought to inform all the oil firm's staff on the steps it would be taking amid the uncertainty in the global oil market.Several staff of the oil company here had indicated to the Daily Express for weeks of an imminent retrenchment and that talks of it among colleagues had been making the rounds for months.
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"The memo did not heighten our anxiety, instead it brought us some sort of calming effect and that our leader (Wan Zulkiflee) was being transparent," said a Petronas staff. "Before the memo came out, Brent was hitting US$28 a barrel, and if not for the memo, we would be left guessing what the management is going to do," added the staff. "What the memo did for us was to provide a clear picture of the steps taken by the company…not a sigh of relief but some sort of certainty amid all the uncertainties."In February last year, Petronas already announced it was planning to cut capital spending by 10 per cent and operating expenses by up to 30 per cent in 2015. It also said at the time that it would cut 2016 capital spending by 15 per cent."We have also made a strategic decision to begin a review of Petronas' business operating model for better efficiency in response to the external environment," Wan Zulkiflee said in the memo.Contract jobs in the company's non-core businesses will be affected, he added.Still, Wan Zulkiflee said late last year that Petronas remains committed to its multi-billion dollar projects as the company sticks to its capital expenditure plan of as much as RM350 billion over the next five years.Brent crude oil sunk to a 12-year low amid a global oversupply, delaying US$380 billion worth of investment on 68 major upstream projects, according to industry consultant Wood Mackenzie Ltd.It could not be immediately established how the spending cuts would impact the oil company's operations in Sabah, but according to sources more details will be made known by March.Petronas has now joined the league of other multi-national oil companies which had already announced cutbacks on spending and jobs during the industry's hard times. On New Year's Day, Daily Express revealed that some 50,000 workers in the upstream oil industry nationwide will likely be shown the door as global fuel prices take a plunge.This is despite Sabah, which produces close to half of Malaysia's oil production, having recorded an impressive development in its oil and gas front in recent years.Shell Malaysia, for example, had announced in September last year that it will lay off approximately 1,300 employees from the upstream in stages over the next two years. Stay up-to-date by following Daily Express’s Telegram channel.
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