Malaysia's Petronas to focus on capital buffer amidst energy headwinds

MALAYSIA’S state oil firm Petroliam Nasional will focus on strengthening its capital position to deal with increasing volatility in the energy market and “restrictive” access to financing, its chief executive said on Wednesday (Aug 30).

Petronas, as the company is known, posted a 29 per cent drop in second-quarter profit, in line with other oil majors such as Chevron, Exxon Mobil, Shell, as energy prices fell following Russia’s invasion of Ukraine a year and a half ago.

Petronas chief executive officer Tengku Muhammad Taufik Tengku Aziz said oil and gas prices will continue to remain volatile amid what he called an “uncompromisingly uncertain” macro environment. He expects Brent Crude to trade between US$70 and US$80 per barrel for the rest of the year, lower than Wednesday’s price of around US$86.

“It has become evidently clear that in order to address the headwinds in the near term and the structural changes in the long term, we must have more funds and liquidity available on hand,” he said at a press conference.

The CEO said access to external financing was getting increasingly difficult due to financial institutions prioritising sustainable projects, forcing Petronas to rethink its capital strategy and build its cash reserves for growth.

Petronas – the world’s fourth-biggest LNG exporter – will increase investments in its core business, even as it aims to lower emissions and invests in cleaner energy, he said.

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The company’s profit for the April-June period totalled RM16.4 billion (S$4.78 billion), compared with RM23 billion in the same quarter last year. Revenue fell 13.4 per cent to RM79.9 billion.

Petronas said it will pay a dividend of RM40 billion this year to the Malaysian government, its sole shareholder, compared with RM50 billion last year. REUTERS