11 hours ago
Petronas hedging 20-30% of oil price exposure to manage market volatility
KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) has begun hedging 20%–30% of its oil price exposure to manage market volatility, said CFO Liza Mustapha.
She said the hedging is a limited but useful insurance policy during the current fluctuations in oil prices.
'It has proven to be quite useful over the last couple of months when oil prices fluctuate,' she said at a panel session in Energy Asia 2025 today.
Liza explained the hedging is meant to ensure that the projects Petronas has taken to final investment decision are able to proceed without interruption.
She said Petronas' strong balance sheet has also helped the national energy company to weather market volatility. 'We carry quite a lot of cash as opposed to liability. We're in a net cash position. So it makes sure that the project is able to continue, despite the big fluctuations.'
However, Liza acknowledged that some structural changes in the market require more significant adjustments. 'Think back in 2016, we went through a huge capex cut. But hopefully, those are really, really periodic nuances of events.'
On investment strategy, Liza said Petronas' plans are never based on the prevailing oil price as they are always anchored on the fundamental price. 'Going forward, as our portfolio changes, the oil price may or may not become a more prominent factor.'
On carbon capture and storage (CCS), Liza said Petronas sees long-term potential but only if the technology is integrated within broader value chains. 'The Kasawari CCS project in Sarawak only makes sense economically if it's part of a full system from upstream through LNG to monetisation. CCS as a standalone won't fly.'
Petronas is currently piloting CCS at the depleted Kasawari gas field, which holds an estimated 13,000 million tonnes of CO₂ storage capacity which is more than twice Malaysia's total annual emissions.
'If we can make Kasawari work with our LNG infrastructure, then CCS could become a topline business going forward,' Liza said.
She added that there many fields in Malaysia which are tied to carbon dioxide content, which, without CCS, would have just been left untapped. 'What can you do with all these depleted fields? Actually bring CCS across to Malaysia as a business.'
However, Liza pointed to a disconnect between capital availability and investment uptake despite growing interest in clean technologies.
'People say there's money out there, but those trying to secure funding often feel otherwise. We need clearer alignment between project risk, investor appetite and project ownership. Investors need to know exactly what they're buying into.'
