Petronas continues to review asset portfolios with value driven decision-making
KUALA LUMPUR (Aug 11): Petroliam Nasional Bhd (Petronas) continues to review its asset portfolio periodically, with parameters continuously adapted and set to ensure it delivers value.
Petronas executive vice president and chief executive officer of upstream Mohd Jukris Abdul Wahab explained that Petronas reviews its portfolio from time to time to ensure that it meets certain standards set to create and deliver value.
'We need to make sure that our assets in the portfolio remains authentic. As I said, we have redefined our portfolio characteristics to meet certain standards,' he said during Petronas' media briefing on upstream asset management on Monday.
'Or example, it has to meet oil price at US$50 or less. Anything that doesn't support it enough, the big question mark that we have to answer is do we keep this asset or not?
'And the portfolio also has to deliver certain operational efficiency. Any portfolio review that we are doing today has to be guided by some of these parameters – the value that it delivers and the upside that it still has – all these criteria have to be taken into consideration when we decide what we do with some assets that doesn't meet the price parameters.'
He explained that when certain Petronas assets become outliers, it was time to be honest with priorities. He noted that some of these assets will require an excessive capital requirement in order to function properly.
'That's not the best way to deliver value. It has to employ more capital to deliver more value from the asset,' he said. 'That's not the best way to do business. We have to bring in partners to collaborate with us to make sure that the partners take some risks out of us.
'We have actually slashed our presence in Sudan, for example, and also in Mexico and Afghanistan. This was consciously decided and guided by the parameters that we set ourselves. And if the time comes to do that, we will do it.
'When we take a decision to get up from a certain set, it is not a spontaneous decision. It has been carefully evaluated over the years.'
Jukris also highlighted that Petronas continues to evaluate more potential assets to be added to its portfolio as part of its adjustment exercise.
'We are not going to just leave the portfolio and do nothing. That is not how we sustain our business in the long run. But I must say that we are still aggressive on exploration.
'As we speak, we are doing well in Suriname. We have entered into a joint study agreement in Indonesia, Vietnam, Turkmenistan and Oman. These are some of the work that we are currently doing to make sure that the funnel will always be filled by exploration discoveries. To prepare us for the long run.'
He also underscored their drive towards cost efficiency as crude oil prices currently hover around US$64-US$65 per barrel, with expectations for the prices to remain at this level for quite some time.
'What we have done over the last 50 years may not allow us to be more competitive in the coming years. As far as upstream is concerned, we take a hard look into our operational practises.
'The environment around us is not very kind to us. The tariff imposition affects the supply chain. It affects the way we do business. How do we respond to these external challenges? The only thing that we can do is to respond internally.
'How do we drive ourselves to become more cost efficient? That will be some fundamental change that has to happen in terms of how we do things. This is what we are currently doing now. The focus now is more about doing things differently.
'The focus now for us is to drive the efficiency. Some of the processes that we have been adopting over the years, some of the standards that we have been adopting over the past few years, those have got to be challenged and have got to be rebuilt.'
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