Petronas to cut US$11.4bn in expenses

MALAYSIAN state-owned oil company Petronas plans to cut RM50bn (US$11.4bn) worth of capital and operating expenditures over the next four years, according an internal memo obtained by The Wall Street Journal and Reuters.

Petronas has confirmed the internal communication about optimising costs was genuine. However requests by The Chemical Engineer for further details have not received response.

According to the memo, Datuk Wan Zulkiflee Wan Ariffin, CEO of Petronas said, “We will go through another round of CAPEX (capital expenditure) and OPEX (operating expenditure) review to target cuts up to RM50bn over the next four years. This means that we are going to have to defer some of our projects.”

After the memo had been released, Wan Zulkiflee said in another communication to employees, “This review will result in a change to our existing organisation structure, the details of which I hope to be able to share with you in March. At this time, we have yet to determine how the review and structure change will affect our workforce.”

Petronas operates with a workforce of approximately 51,000 employees, and is currently committed to a CAPEX budget of RM350bn over the next five years. The company previously announced spending cuts after oil prices began to fall in 2014, but avoided cutting jobs.

The plans are a response to falling oil prices which have sat bellow US$40bbl since December, and are currently under US$29bbl at the time of publication. Oil companies are seeing a dip in earnings, and scaling back projects that could see further loss in profits.

Industry specialist Wood Mackenzie reported 68 major new projects worth up to US$380bn had already been shelved by the global oil industry. From individual country data sent to The Chemical Engineer, deferred projects in Malaysia, to date, have been in the liquid natural gas (LNG) sector. Any confirmation by Petronas on project deferral would increase the industry projection.