KUALA LUMPUR: Petroliam Nasional Bhd (Petronas), which has been badly hit by the low oil price, has warned that its cash flow from operations this year is not expected to meet its capital expenditure (capex) and dividend commitments moving forward. "This means that we'll have to persevere through with more austerity measures and will have to draw on our cash reserves," president and group CEO Datuk Wan Zulkiflee Wan Ariffin told a press conference in conjunction with the release of the second-quarter results. He explained this year's cash flow will be less than the committed dividend and planned capex, therefore Petronas needs to utilise its cash reserves, which he said are still at a "very healthy" level. Given that, he stressed the RM26 billion dividend commitments to the government this year will not be affected, as well as capex for on-going projects. Petronas had budgeted RM70 billion in capex for 2015. "Overtime, if necessary, we can go to the external market to raise funds to address any shortfall in our plans," he added. Wan Zulkiflee said the group is looking at ways to address inefficiencies to reduce operation costs as well as "internal opportunities" within the organisation. He opined that efforts to cope with the challenges in the oil and gas sector should also come from industry players. "I strongly urge companies in the Malaysian oil and gas industry to join forces for the greater good in this pervasive low oil price environment. There are ample opportunities in the market for consolidation, leading ultimately to increased cost efficiency and competitiveness across the industry," he said. For one, Petronas-led Cost Reduction Alliance, Coral 2.0, registered cost savings of RM640 million as at end-June he added. Coral 2.0, which involves 25 petroleum arrangement contractors, is an industry-wide effort towards cost discipline. Despite operating cash flow constraints, Wan Zulkiflee said Petronas will continue to implement projects that have been given the final investment decision (FID), such as the Rapid project in Pengerang, Johor and Pacific Northwest liquefied natural gas (LNG) project in Canada. "We're looking at long-term investment. What happen today will not substantially change our outlook for the projects," he said. The Rapid project is expected to be completed by the first quarter of 2019, with commercial operations to begin in the second quarter of 2019. The RM36 billion Pacific Northwest LNG project in Canada, meanwhile, has entered into the final stage, with the fulfilment of one of two conditions, which is the legislated approval of the project development agreement by the British Columbia government. The final approval is due from the Canadian Environmental Assessment Agency. Petronas' net profit plunged 47.45% to RM11.07 billion for the second quarter ended June 30, 2015 compared with the RM21.06 billion it made in the previous corresponding period, due to low oil production. The drop was mitigated by better operational efficiencies, higher Brent price of US$62 per barrel compared with US$54 per barrel in the first quarter and stronger refining margins. For the six-month period, its net earnings also went down 43.57% from RM39.82 billion to RM22.47 billion. Due to prolonged oil price slump, Wan Zulkiflee expects Petronas will only be running 14 oil rigs by the end of 2015, a huge drop compared with 29 last year.