KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) says the outlook of the oil and gas (O&G) industry will still be challenging next year, bogged down by the unprecedented demand destruction from the Covid-19 pandemic.
Petronas expects a steady outlook for production support, drilling, fabrication and installation of wellhead platforms and subsea facilities as well as decommissioning activities.
However, a modest outlook was expected for fabrication and installation of central processing platforms as well as project support vessels, it said in the annual Petronas Activity Outlook (PAO) for 2021-2023.
The POA offers insights into O&G industry trends, demand outlook and the upcoming activities of Petronas' upstream, gas and new energy and downstream businesses.
Petronas has maintained a prudent view despite the collapse in oil prices and will continue to accelerate the transition towards a low-carbon economy, spurring policy intervention and global collaborations across industries.
Although gas remains a crucial and cleaner source of fuel, diversification into renewable energy was imperative, Petronas president and group chief executive officer Tengku Muhammad Taufik said.
Tengku Taufik said the group had measured steps that demonstrate its stronger commitment to sustainability as it was taking cognisance of the acceleration of the global energy transition, heightened by stakeholder expectations and its vast opportunities.
"Built on Petronas desire to drive a fundamental shift in the way energy is produced, we announced our aspiration to achieve net zero carbon emissions by 2050 as part of our holistic approach to sustainability that balances Environment, Social and Governance considerations across our value chain," he added.
Meanwhile, analysts believe that the sector's down cycle had reached bottom with the worst experienced in April this year, now that Brent crude spot prices were stabilising above US$40 per barrel
Brent spot prices plunged to a low of US$14 per barrel while futures inverted to an abnormal negative price due to lack of storage capacity on April 22, according to AmResearch.
Year-to-date, Brent crude oil prices have averaged US$42 per barrel with spot prices at US$48 per barrel currently.
This was supported by US crude oil inventories declining by 10 per cent to 489 million barrels currently from the all-time high of 541 million barrels in June this year, AmResearch said, expecting 2021 oil price at US$45–US$50 per barrel.
While the sector was moving into recovery cycle, the firm noted that new contract awards to Malaysian operators had halved year-on-year to RM4.6 billion in the first nine months of 2020.
However, orders for the third quarter rebounded 45 per cent quarter-on-quarter (q-o-q) to RM2.4 billion, largely due to Serba Dinamik Holdings Bhd's lumpy civil construction job to build a RM1.5 billion data centre in the United Arab Emirates (UAE).
"Excluding Serba Dinamik's UAE project, the third-quarter orders instead shrank 45 per cent q-o-q to RM895 million.
Even so, we view the slow order flow as the early stage of recovery for the sector which plummeted to a three-year low of only RM569 million contracts in Covid-19-inflicted first quarter of 2020," it added.