Petronas: Capex cut will affect exploration efforts

KUALA LUMPUR: Petroliam Nasional Bhd's (Petronas) expected cut in capital expenditure will affect its exploration efforts, especially its drilling activities in Southeast Asia, said its vice president for upstream international business Sharbini Suhaili.
"It will have some impact on exploration efforts that we have. We just have to rationalise, look at our portfolio to see which are the exploration projects that we will proceed with and which ones we will delay. We will not drop it, we will just delay for a couple of years because for projects which are already in execution, I don't think we can pull back.
"The budget is still there, we will still continue to explore and look for new reserve. It's just that we have to optimise going forward," he told reporters at a media interview during the International Petroleum Technology Conference yesterday.
He said the group will try to carry out the budget cuts across the board but projects that are already in the execution phase will be taken into consideration.
Commenting on replacement of reserves, he said: "Over the last few years we try to discover more than what we produce but going forward, it is going to be very challenging because the oil and gas industry around the world is getting more competitive and we have to go to more difficult areas to get our reserve."
On the Pacific NorthWest LNG project in British Columbia, Sharbini said the final investment decision has been deferred to the first quarter of 2015 as it is still in discussions with the British Columbia government on several issues including capital allowance, cost of the LNG plant and cost of the pipeline.
He also said that Petronas is still in talks with two to three companies on divesting its stake in the project. To date, it has sold 38% of its equity and is working towards reducing its stake to 50%.
"I have not heard of anybody saying that they want to pull out (from the Canadian project). This is a very good project. If we can get all the various parts of the project lined up, it is a very good project for Canada and the shareholders," he added.
Petronas is also open to divesting its assets in Africa, as part of efforts to upgrade its portfolio. The group has one block in Mauritania currently producing 6,000 barrels per day and some gas assets in Cameroon.
"We are always looking at how we can upgrade our portfolio...we continue to look at opportunities with value growth. We may divest if it has no value," said Sharbini.
He said it will sell its assets if it can get a good price but it will also look at how to add value to its assets and is particularly looking at partners to invest in its LNG plant in Cameroon.
Petronas produces 550,000 barrels of oil per day internationally and maintains its growth target of 1% to 2% production growth per annum.
Sharbini said it will continue to look for value growth and will focus more on oil as 65% to 70% of its portfolio is gas at the moment.
In terms of shale oil, the group signed a US$550 million deal in Argentina this week and is seeking opportunities in Mexico and China.