Petronas to cut capex next year

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is looking to cut its capital expenditure (capex) for new projects next year by 15% to 20% due to low oil prices, said its president and CEO Tan Sri Shamsul Azhar Abbas.
He said the RM300 billion capex planned for 2011 till 2015 or RM60 billion per year, was made based on assumption of oil price at US$80 per barrel.
"We need to channel income as capex. We have to be disciplined in our cash management and adhere strictly to our dividend policy," he told reporters at the announcement of its third quarter results last Friday.
"If global oil prices remained between US$70 and US$75 per barrel next year, we plan to reduce dividend and tax to the government to RM17 billion, each, while oil and gas royalty reduced to RM9 billion."
He said maintaining the current level of dividend would have significant impact on its growth.
However, it is maintaining its dividend contribution of RM29 billion to the government this year as well as RM26 billion tax and RM13 billion royalty.
Shamsul Azhar said the group will need a substantial amount of capex to replenish domestic reserves and pursue international opportunities in order to sustain growth next year.
"We need to preserve cash for growth and capex. If 2015 oil price is at US$75, there's not much we can afford," he said.
He said it will not proceed with contracts to award new marginal oil fields unless oil prices are above US$80 per barrel while projects in Pengerang that have not received the final investment decision (FID) will be affected.
On its investment in the Pacific Northwest LNG project in Canada, he said it is three-quarters completed and is now negotiating with bidders of related contracts and hopes to conclude within the next couple of weeks.
He said the current target was to obtain the FID for the Canada project by year-end but this would depend on the outcome of a meeting with the Canadian premier.
For the third quarter ended Sept 30, 2014 (Q3), net profit fell 12% to RM15.07 billion from RM17.19 billion a year ago while revenue fell 1% to RM80.37 billion from RM81.41 billion a year ago.
Executive vice-president and group CFO Datuk George Ratilal attributed the weaker performance to lower crude prices.
For the nine months ended Sept 30, 2014, net profit rose 4% to RM54.89 billion from RM52.82 billion a year ago while revenue rose 7% to RM249.78 billion from RM232.51 billion a year ago.
Ratilal attributed the better performance to higher production volume, higher liquefied natural gas sales volume and a favourable exchange rate.
On its fourth quarter outlook, he said the current oil price slump would remain due to the ample supply of oil and slow global energy demand, with Petronas Q4 results projected to be lower than Q3.