Oil glut: Malaysia’s Petronas to cut $11.4b in spending
Malaysia’s state-owned oil giant Petronas says it will have to slash as much as $11.4 billion in capital and operating expenses over the next four years if the low oil prices persist.
The company, like all other oil firms globally, has been hit by a slump in oil prices, which fell to their lowest since 2003 on January 18. Prices dropped over 70 per cent in the past 18 months alone as exporters around the world pump out over a million barrels of crude every day in excess of demand. The end of trading sanctions against Iran put further pressure on the price as even more oil is expected to flood world markets.
Petronas’ CEO, according to a Wall Street Journal report, in an internal memo sent to staff said that some domestic and international projects “may become unprofitable.”
The low oil price will also likely intensify the pressure on the government of Malaysia’s Prime Minister Najib Razak. Malaysia is Southeast Asia’s second-biggest oil and natural-gas producer and the world’s second-largest liquefied natural gas exporter. Within Southeast Asia, it is the largest net exporter of oil. But Razak’s fiscal targets are under siege as the oil rout forces a reassessment of public spending plans to keep the Malaysian budget from getting busted.
The 2016 Malaysian budget has been built upon an oil price assumption of $48 per barrel. However, the price is forecast to average $30 throughout this year. For every $1 per barrel drop, Malaysia loses out on$68 million in export income.
The Prime Minister is expected to announce cuts to operating expenditure and revisions in growth forecasts on January 28, a finance ministry official said. This is adding to the pressure Malaysia exporters are facing in the wake of a China slowdown and a weakening yuan.
Malaysia's state-owned oil giant Petronas says it will have to slash as much as $11.4 billion in capital and operating expenses over the next four years if the low oil prices persist. The company, like all other oil firms globally, has been hit by a slump in oil prices, which fell to their lowest since 2003 on January 18. Prices dropped over 70 per cent in the past 18 months alone as exporters around the world pump out over a million barrels of crude every day in excess of demand. The end of trading sanctions against Iran put further pressure...
Malaysia’s state-owned oil giant Petronas says it will have to slash as much as $11.4 billion in capital and operating expenses over the next four years if the low oil prices persist.
The company, like all other oil firms globally, has been hit by a slump in oil prices, which fell to their lowest since 2003 on January 18. Prices dropped over 70 per cent in the past 18 months alone as exporters around the world pump out over a million barrels of crude every day in excess of demand. The end of trading sanctions against Iran put further pressure on the price as even more oil is expected to flood world markets.
Petronas’ CEO, according to a Wall Street Journal report, in an internal memo sent to staff said that some domestic and international projects “may become unprofitable.”
The low oil price will also likely intensify the pressure on the government of Malaysia’s Prime Minister Najib Razak. Malaysia is Southeast Asia’s second-biggest oil and natural-gas producer and the world’s second-largest liquefied natural gas exporter. Within Southeast Asia, it is the largest net exporter of oil. But Razak’s fiscal targets are under siege as the oil rout forces a reassessment of public spending plans to keep the Malaysian budget from getting busted.
The 2016 Malaysian budget has been built upon an oil price assumption of $48 per barrel. However, the price is forecast to average $30 throughout this year. For every $1 per barrel drop, Malaysia loses out on$68 million in export income.
The Prime Minister is expected to announce cuts to operating expenditure and revisions in growth forecasts on January 28, a finance ministry official said. This is adding to the pressure Malaysia exporters are facing in the wake of a China slowdown and a weakening yuan.
