The global oil and gas industry has been “quite slow” in taking up gas investments over the last decade, so the market could see shortages in the next few years, said Petroliam Nasional Bhd (Petronas).
The national energy firm sees it as the transition energy source to “fuel the recovery post Covid-19” even after the recent upswing in prices in Europe and other key markets.
“In the next two three years, we [expect to see] 25-28 million tonnes per annum short of LNG (liquefied natural gas),” said Petronas president and group chief executive officer Tengku Muhammad Taufik. “We just have not stepped up as an industry to take on more gas.”
On Malaysia’s prospects, Petronas expects an uptick in demand for both piped gas and LNG in the region post-pandemic.
“In Malaysia as well, we will see an increase in gas consumption, especially from the power sector. We are also positioning ourselves to offer solutions through carbon-neutral LNG. We have delivered to Shikoku Electric [since August 2021], and we are going to supply to Hiroshima Gas Co Ltd in China,” said Petronas executive vice-president and CEO of Gas and New Energy, Adnan Zainol Abidin.
FY21 capex lowest in over a decade, sees rebound in 1H22
Petronas, whose portfolio is 70 percent gas and is the fifth largest gas exporter in the world, expects its capital investments to rebound after two years of lower-than-expected spending amid supply chain disruptions, Covid-19 impact on human capital and movement controls, and forgone merger and acquisition transactions.
Petronas spent RM30.5 billion for capital investments in the financial year ended 31 December 2021 (FY21), which fell short of its initial guidance of RM39 billion-RM40 billion.
The latest full-year capex was also 8.68 percent lower from the RM33.4 billion it spent in FY20, making it the two lowest capex allocations by the company in more than a decade.
In those two years, Petronas recorded 15,092 Covid-19 cases across 210 clusters, with 64 deaths.
“We had to work in a very different way. We had to commandeer how to respond to [the pandemic],” said Muhammad Taufik.
“There were also some transactions that we wanted to take on, particularly to support both upstream and gas, where the valuations became distorted [sic], and the board wanted to exercise prudence; some of those M&As did not happen because we wanted to make sure we are buying at the right value,” he said.
Of the total FY21 capex, the national energy firm said 48 percent was allocated for the upstream segment, 23 percent on gas and new energy, 16 percent on downstream, with the balance for corporate and others.
“We expect in 1Q and 2Q this year, there will be a catch-up [of capex spend],” said Muhammad Taufik.
The group added that its five-year capital allocation will include 20 percent for step-out activities, which include new energy and zero-carbon initiatives.
“Notwithstanding prolonged movement restrictions and supply chain challenges, we expect to increase spending. Petronas is committed to strengthen core business and pursue growth,” he added.
Petronas is also seeking to establish a new independent entity that will focus on clean energy solutions by mid-2022, covering renewable energy, hydrogen and green mobility.
In addition, the group will set up a centralised carbon management unit to accelerate the group’s decarbonisation efforts. This will mainly manage carbon storage portfolio from emissions across its operations, with plans to establish a regional carbon storage hub as a new revenue generator in the long run, it added.
