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Petronas head calls for oil & gas industry to maintain cost discipline, improve efficiency

THE president of Malaysia's national oil company (NOC) Petronas, in noting some RM11.5 billion (S$3.9 million) of savings achieved from an industry alliance, argued for the oil and gas (O&G) industry to maintain cost discipline and continue its drive to improve efficiency.

Wan Zulkiflee Wan Ariffin, who is concurrently group CEO of the NOC, said that the savings were made possible by the Coral 2.0 cost reduction industry alliance, adding that it is "a testament of close collaboration between Petronas and its industry partners".

Petronas launched the Coral 2.0 initiative in 2015, about one year after a collapse in oil prices sparked off the start of a prolonged O&G industry downturn.

But with oil prices regaining some ground last year and holding up above US$60 since the start of this year, Mr Wan Zul, as the Petronas president is often known in the industry, now raised concerns over a "premature exuberance" that would negate the efforts so far to bring costs down to more sustainable levels.

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He is concerned over the potential threat of costs running ahead of improvements in fundamentals. To begin with, the health of oil prices still hinges on several variables, including a rebalancing in the world's energy mix. US shale has already taken some shine off conventional O&G, and renewables look set to gain a larger share of pie in the long run.

Mr Wan Zul pointed out that the "fragile" recovery of the O&G industry can be disrupted by one too many variables.

That said, he remains optimistic over the long-term outlook for the O&G industry. Citing a Petronas projection, he noted that O&G is still expected to contribute 45-51 per cent of the world's energy mix till 2036.

With energy demand in 2036 projected to exceed 2016 levels, what may emerge as a more pressing concern is that an "under-investment" in conventional O&G in this prolonged downturn may lead to "insufficient supply" in the decades to come, he said.

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