Hornbill Unleashed

August 25, 2016

End to Petronas-Sarawak controversy ?

Filed under: Politics — Hornbill Unleashed @ 7:02 AM

Top management : (from left) Petronas executive vice-president & Group CFO Datuk George Ratilal, Wan Zulkiflee, chairman Tan Sri Mohd Sidek Hassan, executive vice-president & CEO downstream Md Arif Mahmood and executive vice-president & CEO upstream Datuk Mohd Anuar Taib at the press conference of the national oil company’s Q2 resultsPetroliam Nasional Bhd (Petronas), embroiled in a controversy with the Sarawak Government over the issue of non-Sarawakians working in the state’s oil and gas industry, believes that the issue will be resolved amicably with all parties able to work something out.

Petronas chief executive officer and president Datuk Wan Zulkiflee Wan Ariffin said the company’s leadership team has been in continuous engagement with the relevant authorities over the matter.

“We’re very hopeful and we’re confident that this will be resolved soon, taking into account the interests of all parties and stakeholders,” he said at a media briefing to announce the company’s second quarter ended June 30 financial results.

The Sarawak Government had on Aug 7 issued a moratorium on all new applications for work permits of Petronas personnel from outside Sarawak. It was reported that the state government’s decision was prompted by complaints from Sarawakian Petronas officers whose services were terminated or who were retrenched.

Petronas has considerable investments in the state, with a total cumulative investment of over RM300bil in upstream, midstream and downstream projects and activities.

According to a StarBiz report from last November, there were 26 oil and 34 gas producing fields. A further 206 discovered fields have yet to be monetised.

The national oil company has three midstream facilities – a liquefied natural gas (LNG) complex in Bintulu; the Petronas Train 9 project; and the floating LNG facility, while for downstream activities, it has the Asean Bintulu fertiliser plant producing 600,000 tonnes per annum of urea, making it Asia’s largest granular urea plant, and 400,000 tonnes per annum of ammonia.

Meanwhile, Wan Zulkiflee pointed out that the projects that have been planned for this year would go ahead despite the low oil-price environment. He also said that the RM60bil Refinery and Petrochemical Integrated Development project in Pengerang, Johor, remains on-track and has achieved a 40% completion rate.

The LNG Train 9 is undergoing commissioning and the floating LNG 1 at the Kanowit gas field, 180km offshore Sarawak, is in the pre-commissioning stage.

“All these are still going on. So, whatever we had planned for this year, nothing has changed with regards to projects,” Wan Zulkiflee said.

However, he was unable to give a clearer projection on what would happen to the LNG project in western Canada undertaken by subsidiary Pacific NorthWest LNG.

Wan Zulkiflee said the company, together with its project partners, were still awaiting a final decision by Canadian authorities, before making a final investment decision.

Petronas has sunk US$12bil into the project. The company bought Calgary, Alberta-based Progress Energy Resources Corp in December 2012 for US$5bil that gave it shale gas properties in neighbouring north-eastern British Columbia.

Since then, Petronas has sold equity interests in Progress Energy and its LNG assets to four partners, namely, Japan Petroleum Exploration Co Ltd (10%), Petroleum Brunei (3%), Indian Oil Corp Ltd (10%), and China Petrochemical Corp (15%).

“Until we get a final decision, we will not be able to decide.

“When we have it, we will take a total review of the project, and we will see what are the implications of the cost and schedule of the project.

“We will also revisit in terms of market conditions before a final decision is made,” he said, adding that the decision would be taken together with all the partners involved in the project.

In terms of a timeframe, Wan Zulkiflee said they anticipated September or October this year (for the final decision from Canadian authorities).

The western Canadian LNG project has stalled after the environmental review of the project was stopped in March, as the environmental regulator wanted more information.

In June, the regulator said a review of the project had resumed, starting the clock on a final three-month extension granted by the Ottawa Government led by Prime Minister Justin Trudeau, whose climate-change priorities stance has caused some concern over the project’s viability.

There have even been rumblings that Petronas and partners, who have waited three years for a permit, could pull out of the project.

“We have huge oil reserves there – we have 24 proven oil reserves in Canada, and this is about over 20% compared to the reserves we have in Malaysia.

“Once the decision is out and the conditions have been made clear to us, we will decide together with our partners.

“We’ve to wait until all the variables are clear before making the decision,” Wan Zulkiflee added.

He said that impairments done by the company were done every quarter based on a review of oil prices and asset value.

“I believe the balance for this quarter was a big chunk.

“There might be smaller impairments going forward, unless there is a very good change in the oil price, but that is doubtful,” he said.


FINTAN NG and P ARUNA


 

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