EXCERPTS from an interview with Petroliam Nasional Bhd (Petronas) president and group chief executive officer (CEO) Tan Sri Wan Zulkiflee Wan Ariffin.
Q: What was the first thing that went through your mind when oil prices started to slide?
A: How it was going to impact our financials. That was the first thing on my mind. In fact, our whole leadership team was discussing it and we had to change our plans and budget so many times for the whole group.
One of the major things that we did was to cut RM50 billion in our capital expenditure in the next four years at the time. This was essentially the outcome of our deliberation on how we should react to the falling prices.
Q: What was the hardest call you had to make (as president and CEO of Petronas)?
A: Decisions that involved manpower optimisation. It is because it involved your friends, the people you know, your colleagues.
We also looked at optimising the manpower, we looked at areas where there could be overlaps.
We had to let go of about 2,300 staff members due to overlaps so that we could become more efficient and have simplified processes. Most of them were contract staff but there were also a few hundred permanent staff we had to release.
If you ask me, that was the hardest decision to make. I am guided to do what is best for the organisation. And I am very clear on that in my mind.
But having done that, we also decided not to cut spending on manpower development. One of the threats to any organisation, when times are bad, they will really cut back on talent development.
We said we were not going to do that. We said we were going to maintain our scholarships that we give every year.
We said we will still spend on staff development, but we will look at the efficiency of spending. We want to ensure that every dollar we spend on staff development will give us the return.
Q: Do you think the current workforce is the right manpower size for Petronas?
A: With the current business size, I think this is the right manpower size. However, if our business shrinks or grows, this may change. Our theme this year is pace, collaboration and going digital. We are one of the few oil and gas companies to have appointed a chief digital officer this year to orchestrate the whole digital initiatives in the group and this will continue, and I think it will provide a lot of potential and will improve the bottom line.
Q: How do you manage the expectations of the government, the company, the industry and the people?
A: We have a very open engagement with the government and the shareholders on what our plans are. They know what our plans are, our capital expenditures for the coming years and they have been very supportive and very understanding on what are their expectations of us.
We also have very good engagement with the industry because I think everybody understands what we are facing and what our options are and that there is no one option that can please all.
Q: What will the outlook be for Petronas?
A: We have “tempered optimism” on what the crude oil prices will be and it is important that Petronas is profitable at US$100 (RM419) a barrel of oil or US$80 or even US$50 a barrel. That is our business model to be profitable at different oil prices. Maybe we will do different things, such as if the oil price drops. But what is crucial is to have a robust portfolio.
Q: In Canada, since you are not proceeding with the Pacific NorthWest LNG project on Lelu Island, what are your alternative plans to grow your LNG portfolio?
A: In Canada, we own a lot of reserves, which is only second to our Malaysian portfolio. So we will be in Canada for a long time. The decision we have taken (the negative final investment decision or FID), is just one of the monetisation options of having an LNG at Lelu Island, because we could not make the numbers work there. But other options are still being explored. What I can emphasise is that we will be in Canada for a long, long time because of the large reserves there.
Q: Do you think the worst is over for the industry and for Petronas in particular? And what would be the determinant for you to start into a more aggressive mode?
A: I don’t know whether the worst is over or not but we should ensure that the business is profitable under stretched scenarios. And we are preparing the organisation for that in how we think, how we work and how we prepare our succession of leaders who are comfortable working with uncertainties, which is a very important attribute.
We want our leaders to be comfortable in that kind of environment. If any challenge that is thrown at us and we can manage it, that is the kind of leadership team that Petronas requires. But we have to be prepared for this kind of volatility. We are looking at growing in Mexico, and we have been aggressive there. To support this, we need to have robust talents and leadership that can manage this type of businesses.
Q: What do you think of keeping up with manpower demands, unlike other companies which need a buffer after an oil and gas crisis?
A: We have had a negative FID in Canada, which was a big pullback. But we have not pulled back a dollar from the Rapid project. People forget Rapid is a US$27 billion investment. We just need to be agile. What we have confidence in doing and delivering and we know is going to give us sustainable profits and returns, we continue. Whichever projects we are not sure of, since this is not the time to be unsure, we pull back. On whether we are conservative in the last few years, maybe this is just a perception.
Zarina Zakariah