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Tuesday, August 27, 2013

Downtrend in crude oil prices a big concern for Petronas (STAR)

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) will review costs of projects, delay or differ the implementation of some of them if the need arises.

Petronas president/group chief executive officer Tan Sri Shamsul Azhar Abbas told a media briefing following the release of the company’s second-quarter financial results ended June 30, that cost remained a major concern, especially in light of the downtrend in crude oil prices.

“We’re in the process of reviewing the costs of some of our projects, and if there’s a need for us to differ some of the projects in order to contain costs, then we would do it,” he said.

Shamsul said cost reviews were not new. “We would not embark on projects that at the end of the day would not be feasible because of high costs,” he added.

Shamsul said upstream costs continued to be a worry, with oil and gas infrastructure facilities as well as support services rates rising.

“These costs are creeping up, which is not good as far as our projects are concerned,” he said, adding that the bulk of the expenditure would be for upstream activities, which comprised 65% of the company’s total portfolio.

Meanwhile, Shamsul said the final investment decision on the RM60bil Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor, would only be made in March as reported.

“We would scrap the project if the numbers are not right. I think it would be silly of us to proceed with the project if there’s no economic return, which is also in line with the Government’s policy,” he said.

However, Shamsul said the scrapping of the Rapid project would have to take into consideration the agreements that have been signed with foreign investors.

“We’ve signed four heads of agreements, which we’re in the process of negotiating into shareholders’ agreements by year-end,” he pointed out.

Already bearish on oil prices since the beginning of the year, Shamsul said based on prices from US$100 to US$110 per barrel, the company should be able to declare a profit before tax of RM91bil to RM92bil for the financial year ending Dec 31.

On another note, executive vice-president for finance Datuk George Ratilal said the dividend paid by the company to the Government continued to be a matter under discussion. Petronas would be paying RM27bil this year compared with RM30bil last year.

“There’s nothing definitive, but we’re beginning to see progress. Let’s keep it at that for the time being,” he said....

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