etroliam Nasional Bhd or Petronas, the Malaysian national oil giant, may be forced to implement further cost cutting and savings that could impact the mega projects it is pushing across the border with Singapore and in the heartlands of Canada amid setbacks in Ireland.
Petronas is already facing an uphill battle in its Canadian venture in the Pacific NorthWest liquefied natural gas project in British Columbia, where the US$29 billion project has come under attack from aboriginal groups.
The Malaysian company is still waiting for approval from environmental regulators, while the Lax Kw’alaams First Nation Band rejected an offer of US$766 million on the basis that the project’s terminal site would endanger precious salmon habitats.
In Johor, the US$16 billion RAPID refining and petrochemical complex within the Pengerang Integrated Complex (PIC), of which the start-up has already been delayed for the third time since its launch in 2012, currently pushed to the middle of 2019.
The slide in oil prices, which started over the past year and with no sign of relief this year, forced Petronas to review and re-bid some of its engineering, procurement and construction contracts (EPC).
Petronas CEO Wan Zulkifli said earlier in May that the company was on a cost-cutting move — which impacted RAPID — and has slowed down some of its petrochemical projects.
Now, questions abound as to whether the mega projects will face further cuts, that will mean delays and resizing, while the Pacific NorthWest deal depends entirely on the Canadian authorities political will to approve the project.
In May this year, Petronas announced that the RAPID complex will cost RM89 billion to be developed, compared with its original price tag of RM97 billion.
The PIC has been envisioned as the next regional downstream oil and gas industrial hub.
With the persistent woes in the industry, it is not impossible that the project cost may be further lowered under Petronas new cost cutting move.
In Canada, Petronas may end up selling more shares in the project, in order to boost its international revenue.
Petronas’ subsidiary PSE Seven Heads failed to discover commercial quantities of gas in Midleton well offshore Ireland, according to partner Landsdowne Oil & Gas.
PSE Seven Heads, a subsidiary of Petronas’ PSE Kinsale Energy it acquired in 20019, reached target depth in the well in the Celtic Sea at 3393ft true vertical depth below sea level, reported the oedigital.com industry portal.
The Midleton prospect, about 20km northeast of the Kinsale Head field, had been estimated to contain 330 Bcf gas initially in place, according to Landsdowne, which seen its share price tank since the announcment.
Kinsale Energy has been producing natural gas from its facilities off the Old Head of Kinsale since 1978.
Kinsale Energy also operates Kinsale Head, Ballycotton and Seven Heads gas fields in the Celtic Sea and a natural gas storage field (Southwest Kinsale).
Yesterday, CEO Zulkilfi said cost savin0gs reached 600 million ringgit in the first half of 2015, and that oil prices will likely remain low for the rest of the year.
Petronas reported its first quarterly loss in five years at the end of last year, but returned in the black in January-March.
In February, the firm said it would cut capital expenditure by 15 percent this year to cope with lower oil prices, and its dividend to the government by around 10 percent.
Petronas has set the price factor for Malaysian Crude Oil (MCO) for August at $3.90 per barrel, down $1.10 from the previous month, a source with direct knowledge of the matter said on Friday.
Petronas introduced a new official selling price (OSP) for its crude based on a basket of Malaysian crude oil grades Labuan, Miri Light and Kikeh effective January 2014.
Profit was lower at RM11.1 billion this quarter or 47% down from the corresponding quarter last year, while revenue declined 7% quarter on quarter and the local giant oil producer digs deep into its reserves to honor its commitments to the Malaysian government.
Petronas, Malaysia’s only Fortune 500 company, on Friday said cash from operations will cover not capital expenses and will not permit it to pay its committed dividends for 2015.
This, the company said, is forcing it to draw on reserves and further cost savings, a situation that is unprecedented for the company.
US light crude oil fell 29 cents to US$41.94 and Brent was down 28 cents to US$48.94 yesterday.
