JUNE 2013

www.petronas.com
Petronas Cover.indd 2-3 28/5/13 4:11 PM
5
Clockwise fromright:
Angsi A platform, ofshore
Terengganu, Malaysia;
Central Utility facilities
in Kertih, Terengganu,
Malaysia; MegaMethanol
plant, Sabah
CONTENTS
MALAYSIA AND PETRONAS A SHARED FUTURE
Finding a balance is critical to Malaysias energy future
EXPLORATION THE KEY TO A
SUSTAINABLE ENERGY FUTURE
PETRONAS meets the challenge of declining reserves
PETRONAS: FINANCING THE ENERGY FUTURE
As a state company and a successful multinational,
PETRONAS has a special role in Malaysia
GOLDEN AGE FOR GAS
PETRONAS is poised to be a signicant player
in the gas landscape of the next two decades
FORGING THE LINKS IN THE PETRONAS VALUE CHAIN
Balance, foresight and tough decision-making
drive PETRONAS downstream business
4.
10.
16.
21.
24.
For more information
please contact
Petroliam Nasional Berhad
(Company No. 20076-K)
Registered Ofce:
Tower 1
PETRONAS Twin Towers
Kuala Lumpur City Centre
50088 Kuala Lumpur
Malaysia
Tel: +603 2051 5000
Fax: +603 2026 5050
www.petronas.com
6 7
MALAYSIA
Left: Dulang
B platform,
ofshore
Terengganu,
Malaysia
MALAYSIA
MALAYSIA AND
PETRONAS
A SHARED FUTURE
Finding a balance is
critical to Malaysias
energy future
W
ith the fortunes of Ma-
laysia and PETRONAS so
tightly bound together,
the past few years have
been a decisive and dening period for
one of Southeast Asias largest oil pro-
ducing nations and its state-run energy
multinational.
Addressing the complex matrix of
strategic, economic and sustainability
issues at a time when energy security has
become a dening part of public policy is
a tough balancing act.
For PETRONAS Group Chief Executive
Ofcer Tan Sri Shamsul Azhar Abbas the
challenges of recent years coming as
they do against the backdrop of dwin-
dling domestic oil supplies have been a
test of the companys core values.
Since the inception of PETRONAS, its
mandate has always been to safeguard
and add value to the hydrocarbon
resources of the nation. This continues
to be the guiding principles of the exist-
ence of our company, Tan Sri Shamsul
Azhar Abbas.
At the same time, we were incorpo-
rated as a business entity; one that is able
to drive its strategies, operations and
business decisions based on commercial
merit, he continued.
Malaysias oil production registered its
highest output at about 650,000 barrels
per day almost two decades ago. Since
then, its output, with the exception of
intermittent upticks, has sufered from
natural decline.
This is exactly where the challenge lies.
And in the past few years, PETRONAS has
been aggressive in tackling this challenge,
Falling supply,
rising demand
Tan Sri Shamsul Azhar Abbas says that
falling supply, coupled with the rising
consumption typical of one of the ASEAN
regions most dynamic economies, has re-
quired concerted action from PETRONAS.
For Malaysia, the foremost energy
challenge lies in meeting rising demand,
in view of increasing population and
economic expansion, whilst at the same
time domestic production continues
to experience natural decline, Tan Sri
Shamsul Azhar Abbas said.
In this accord, we have undertaken
8 9
MALAYSIA
insights from its Canadian experience.
As I earlier mentioned, we will
continue to invest in quality resources
internationally and Progress Energy ts
this prole, said Tan Sri Shamsul Azhar
Abbas. Through Progress, PETRONAS
now owns the largest acreage in the
Canadian Montney, which gives us a very
much needed second lease of life.
The opportunity, he said, provides sig-
nicant business merits and is mutually
benecial to PETRONAS as well as to the
Canadian government and its people.
Despite the possible initial miscon-
ception, the Canadian Government
concurred that PETRONAS has always
operated, rst and foremost, as a com-
mercial entity.
In fact, we have enhanced this
further through a transformation pro-
gramme which we have undertaken
over the past three years.
He said this included PETRONAS el-
evating its corporate governance stand-
ing in line with global best practice, even
though the company is not obliged to
do this. Even so, he added, securing ap-
proval in Canada was only the rst step.
The real work starts now, he said.
Beyond the C$5.3billion investment
in acquiring Progress, we will also be
investing in the Pacic Northwest LNG
complex.
The total investment will provide
greater monetization value to the
molecule compared to the currently
depressed gas prices in North America.
It will also provide the impetus for eco-
nomic growth in the community.
The end of easy oil
While PETRONAS exploration, acquisi-
tion and investment all come within the
context of its dwindling reserves, keeping
the oil owing at its current rate has
shown the company to be versatile and
exible in adversity.
We have to accept that the days of
easy oil is over, says Tan Sri Shamsul
Azhar Abbas. Most Malaysian elds are
already mature and the notion of abun-
dant untapped reserves is a concept of
the past.
This is not an unexpected scenario
for us; we have anticipated this inevitable
decline. We have to accept the fact that
the reserves available today require more
cost to develop be they marginal or
deepwater, or both.
Even with huge investments made,
there are massive risks involved in mon-
etising these difcult reserves.
He said that based on the aggressive
initiatives put in place, PETRONAS has
successfully reversed the trend of decline
with an increased recovery factor.
Whereas the international standards
of decline in existing elds are at about
8-9 per cent annually, we have kept ours
to at a minimal 2-3 per cent of annual
decline, he said.
As a result, we are able to maintain
our current crude production level at
around 480,000 barrels per day. A lot
of efort have been put in to retain this
average; otherwise the decline would be
much worse.
Since 2011, PETRONAS has also in-
troduced Risk Service Contracts (RSCs),
awarding clusters of elds that are mar-
ginal and uneconomical to be developed
on a stand-alone basis.
The idea is that, while PETRONAS re-
mains the project owner, the contractors
provide the upfront exploration capital,
he said. Once these elds become com-
mercially viable, we will then start paying
remuneration fees based on perfor-
mance and services rendered.
Above: PETRONAS President and Group Chief
Executive Ofcer, Tan Sri Shamsul Azhar Abbas
MALAYSIA
aggressive eforts to augment both
domestic exploration and production to
stem and reverse this decline, he said.
At the same time, we have con-
structed the countrys rst regasication
terminal (RGT) in Melaka to receive LNG
imports. This will allow Malaysia to have
an open access system, in which domes-
tic users can secure their own LNG and
use our facility at a fee to regasify gas.
Despite this, he said, eforts in secur-
ing supply alone will not be sufcient if
demand remains unabated.
The natural gas price in Malaysia is
currently one of the lowest in the world
and subsidies distort transparency and
efciency. It is vital to ensure that do-
mestic demand arises from competitive
industries and users which are able to
compete at global market energy prices.
He said that while PETRONAS would
continue to play a leading role, securing
energy security would require a concert-
ed efort from key stakeholders such as
the government, industries and users.
Balancing options
Other options open to PETRONAS
to ensure supply and safeguard energy
security such as investing in complex
technology to increase production of
oil and gas from marginal elds and
deepwater ofshore areas and becoming
an aggressive player on the international
scene have been no less challenging.
There were some misconceptions
earlier, that we wanted to focus solely on
rejuvenating our production within do-
mestic waters, but this is not true, says
Tan Sri Shamsul Azhar Abbas.
Moving forward, we will be focus-
ing on the quality of our assets and high
grading our international portfolio. The
focus will be on geology now, not just
geography. It is pointless to be present in
more than 30 countries globally, if they
do not contribute actively to our bottom
line, he said.
We have embarked on a portfolio-
rationalising exercise to high-grade our
portfolio with quality assets. We have
exited from four countries (Timor Leste,
Ethiopia, Equatorial Guinea, and Paki-
stan) while at the same time investing
in countries such as Canada, Australia
and Brazil.
Enforcing market discipline has been a
key action point with PETRONAS, which
has instituted a Portfolio Investment
Decision Framework (PIDF) to support
this intent.
This ensures clarity and discipline in
continuously reviewing our portfolio,
he said.
PETRONAS growth strategy is under-
pinned by the rationale of meeting the
long-term energy requirements of its
key customers, while adding value via
integration, according to Tan Sri Shamsul
Azhar Abbas.
An example of this is our unconven-
tional play in Canada, he said. By having
a fully integrated unconventional play
from upstream shale to LNG marketing,
we will not only add value to Canadian
resources, but also provide long term and
secure supply to key customers in Asia.
Canadian shale play
Late last year, PETRONAS only just
gained control of Canadas Progress En-
ergy Resources Corp in a C$5.3billion deal
that looked set to founder after a ery
national debate in Canada about foreign
control of energy resources.
With the companys increased focus on
North American shale reserves, PETRO-
NAS has been able to draw some valuable
Above: Angsi platform, ofshore Terengganu, Malaysia
10 11
MALAYSIA
The rst RSC (Berantai) has already
delivered its rst production and the oth-
ers are progressing as planned. In 2012
alone, PETRONAS signed nine Produc-
tion Sharing Contracts (PSCs).
I am encouraged that our eforts from
the last few years have started to bear
fruit and this, in turn, has brought a lot
more excitement to Malaysias oil and
gas industry.
New technology the
key to the future
The role of new technology in the
utilisation of existing oil elds and the dis-
covery of new ones, therefore, is crucial.
PETRONAS is making conscious eforts
to focus on pursuing value driven and
sustainable growth, says Tan Sri Shamsul
Azhar Abbas. Our exploration and pro-
duction business will continue to focus on
reversing our production decline, and this
includes intensifying our asset integrity
eforts, infrastructure maintenance, and
reservoir management.
These works, which address our
ageing assets and facilities, are capital
intensive.
In addition, the main focus is also in
development and deployment of tech-
nologies to increase PETRONAS reserves
and enhance the productivity as well
as recovery of each eld. Enhanced Oil
Recovery (EOR) and high CO2 manage-
ment have been identied as the focus
technologies in this regard.
We aspire to position these tech-
nologies as the value proposition in our
partnerships and international operations
in the future, he said.
Aligned with this focus, in September
2011, we established the E&P Technology
Centre (EPTC) that focuses on the de-
velopment and deployment of EOR and
high CO2 management technologies,
says Tan Sri Shamsul Azhar Abbas. We
want EPTC to be the one-stop centre in
our efort to institutionalise these core
capabilities within the group.
He said the integration of research and
development, eld development plan-
ning and deployment in the monetisation
of EOR and high CO2 gas elds leverage
on technical collaborations and the shar-
ing of resources with other Production
Sharing Contractors undertaking similar
eforts in Malaysia.
In this regard, we have existing PSCs
executed for EOR with ExxonMobil and
Shell, to which we have seen some
progress, he said. EOR and marginal oil
elds are expected to make up approxi-
mately 20 per cent of Malaysias total
crude oil petroleum resources.
In 2012 alone, PETRONAS made 24
discoveries (22 within Malaysia and two
internationally), as compared with 19
discoveries in 2011.
So we are very encouraged as the
prospects are there, he says. Things are
looking bright; we just have to continue
with what we have been doing over the
last few years.
the pre-Front End Engineering Design
(pre-FEED) stage of scoping pipeline,
liquefaction and export facilities to liq-
uefy and export natural gas produced in
northeastern British Columbia.
Construction is anticipated to begin
by early 2015, to catch the earliest LNG
shipments to customers in late 2018.
On April 29, 2013, Japan Petroleum
Exploration Co. Ltd. (JAPEX) acquired a
10 per cent interest in the project, and
has agreed to buy a 10 per cent share of
the LNG produced for a minimum of 20
years for domestic use in Japan.
With GLNG Australia and Progress
Energy in Canada in our portfolio, we
are also expanding into the uncharted
waters of oating LNG vessels. This is
one example where the advancement
of technology has made it economi-
cally feasible to monetise stranded gas in
small and scattered conventional elds,
he says. PETRONAS does not wish to fall
behind and already has two oating LNG
projects on the way.
FLNG 1, with capacity of 1.2 MTPA
will undergo construction stage soon
and aims to be the rst of its kind in the
world when it commissions in at the end
of 2015. FLNG 2 will be slightly larger
in terms of capacity, at 1.5 MTPA and is
aimed to come onstream a year later.
With all this in place, we aim to retain
our current position as one of the major
LNG players in the world, he said.
PETRONAS and
corporate responsibility
PETRONAS may be posting record
growth, but it also pays a large share of
tax to the government.
While many have asked whether this
relationship, and the way that it pays divi-
dends to the government, will change,
Tan Sri Shamsul Azhar Abbas says PET-
RONAS has a duty to its major stakehold-
ers, the people of Malaysia.
For the year 2012, PETRONAS has
paid around RM38bn in taxes and
RM28bn in dividends to the Malaysian
government. We dont foresee this
relationship changing. As good corporate
citizens, we will continue to pay taxes in
all our countries of operation.
Moving forward, we feel the strong
need to nd a balance between dividend
payments and funding for growth. We
believe a dividend payout of approxi-
mately 30 per cent of net prot is an ap-
propriate level to provide this balance.
LNG shapes the future
The cornerstone of PETRONAS gas
future, meanwhile, is likely to be LNG a
business it has successfully operated in
since 1983. As at June 2011 Malaysia was
the 12th largest gas producer and the sec-
ond largest LNG exporter in the world.
The PETRONAS LNG Complex in
Bintulu has an existing capacity of 25.7
million tonnes per annum (MTPA), and
we have just reached Final Investment
Decision (FID) to add an additional 3.6
MPTA to this facility, says Tan Sri Sham-
sul Azhar Abbas.
We are not slowing down. Through
Progress Energy, we have ventured into
Private sector
involvement
in the oil
and gas
space in
Malaysia has
seen healthy
growth in
the past few
years
MALAYSIA
Right:
Erb West
platform,
Sabah
13 12
EXPLORATION & PRODUCTION
Left: Load
out of the
Gumusut Kakap
semi-oating
production
system, Malaysias
second deepwater
facility and the
regions largest
ultra deepwater
semi-FPS
EXPLORATION & PRODUCTION
A
s energy sector exploration and production costs
continue to climb, PETRONAS has been engaged in
a delicate balancing act to keep oil owing. Faced on
one hand with the need to preserve cash for future
investment, the oil giant also requires new and expensive tech-
nology to extract reserves from domestic elds that have been
stressed since the 1980s.
The pursuit of upstream activities in unconventional plays
such as deepwater, enhanced oil recovery (EOR), CO2 manage-
ment and shale gas are capital-intensive undertakings.
Having assumed his current role at a time when Malaysia has
been facing the reality of declining production, Executive Vice
President, Exploration and Production, Dato Wee Yiaw Hin,
must not only oversee the management of hydrocarbon deple-
tion but, in some cases, reverse the decline.
The challenge for PETRONAS is ensuring that its investments
continue to be met with robust returns. So far, PETRONAS lat-
est initiatives have rewarded the risks.
Maximising recovery
Based on government studies, Malaysias production is falling
at a rate of 1-2 per cent annually (this compares with a current
global average of 6-7 per cent according to the International
Energy Agency [IEA]). To reverse the decline, says Dato Wee
Yiaw Hin, PETRONAS has launched successful projects that have
increased production by approximately three per cent annually.
To achieve this objective, we are committed to ensuring the
successful execution of strategies that were put in place when I
joined the company in 2010, says Dato Wee Yiaw Hin, adding
that PETRONAS has intensied its focus on sweating assets and
maximising recovery through diligent reservoir management
and pursuing EOR potential.
Among notable achievements in this area are our ongoing
collaboration with ExxonMobil to implement EOR techniques at
Tapis and Guntong elds, ofshore Peninsular Malaysia and the
signing of Baram Delta Ofshore (BDO) and North Sabah EOR
Production Sharing Contracts (PSC) with Shell, he said.
PETRONAS second strategy has been to drive solutions that
monetise marginal elds and stranded gas.
To date, we have seen new solutions proposed by the niche
players that we have partnered with, such as Early Production
System (EPS) and Extended Well Testing (EWT), which expedite
production as well as help manage the subsurface uncertainties
from these small and marginal elds, says Dato Wee Yiaw Hin.
To support future growth, PETRONAS has been aggressively
EXPLORATION THE
KEY TO A SUSTAINABLE
ENERGY FUTURE
PETRONAS meets
the challenge of
declining reserves
14 15
EXPLORATION & PRODUCTION
In Malaysia, we have already seen the Dulang Water Alternat-
ing Gas (WAG) Pilot completed in 2007 and it is still producing
even now. We are also anticipating the rst fullscale EOR from
Tapis WAG to come onstream by end of 2013.
In the future, our combined eforts in implementing EOR
techniques in suitable oil elds ofshore Malaysia is expected to
increase the current recovery factor from about 36 per cent to
more than 50 per cent.
This will contribute approximately between 20 per cent and
30 per cent of future oil production.
New contracting systems
PETRONAS has already been one of the pioneers of the PSC
licensing model and is now embarking on a new contracting
scheme for marginal elds known as the Risk Service Contract
(RSC) aimed at attracting niche players with the right capabilities
and technologies.
Malaysia has had more than three decades of exploitation of
the hydrocarbon resources managed under PETRONAS, Dato
Wee Yiaw Hin said. Petroleum, being a nite resource, brings us
to a stage where there is no more low-hanging fruit.
There are many challenges in a domestic oil and gas land-
scape where new discoveries are smaller and have challeng-
ing hydrocarbon characteristics; discovered reserves become
increasingly tougher to monetise, he said.
PETRONAS eforts to sustain national oil and gas production,
to attract the right players, to boost participation of local com-
panies, to create spin ofs and to attract foreign direct invest-
ment, he said, must persist.
Since the introduction of PSC in 1976, amid a changing
business environment, PETRONAS continues to make en-
hancements that attract investors to undertake exploration and
production activities, Dato Wee Yiaw Hin said, adding that the
RSC initiative is expected to add to the suite of arrangements
available to PETRONAS to attract new talent.
In addition to the introduction of the RSCs back in 2011,
PETRONAS also recently introduced the progressive volume-
based partner sharing contract (PVB PSC) back in 2012, as part
of our eforts to continuously attract investors to undertake E&P
activities in areas where reserves become increasingly tougher
to monetise, he said.
The PVB PSC was specically designed to provide incentives
to contractors to improve oil recovery and increase production
from mature oil elds. So far, PETRONAS has awarded three
RSCs, one of which has commenced production, while the
other two are in the development phase.
PETRONAS will continue to explore new solutions, develop-
ing new terms under PSC as well as new types of service con-
tract, as need arises, Dato Wee Yiaw Hin said. These diferent
Above: Angsi platform
EXPLORATION & PRODUCTION
exploring its matured basins and testing new play types.
We continue to actively explore new geological plays such
as deepwater and High Pressure High Temperature (HPHT)
where we believe signicant discoveries are yet to be made,
says Dato Wee Yiaw Hin.
Since we started to rejuvenate exploration and production in
Malaysia, we have witnessed signicant exploration successes in
the country indicating that our exploration strategies are work-
ing well for us.
Deepwater and
Enhanced Oil Recovery
For PETRONAS, the move into deepwater and EOR have been
natural steps in monetising its resources and maximising value
while sustaining and growing production.
Our rationale for developing expertise in deepwater and EOR
is due to the readily available opportunities in Malaysia, Dato
Wee Yiaw Hin said. This expertise contributes positively to
PETRONAS and the nation.
While deepwater and EOR are risky and technology-intensive
disciplines that require skilled players to unlock their potential,
PETRONAS is committed to developing and harnessing these
capabilities to compete globally.
PETRONAS also aims to venture into unconventional plays
such as shale gas and coal seam gas, says Dato Wee Yiaw Hin.
Through the Canadian joint venture in North Montney areas
with Progress Energy Resources Corporation, we believe that
we can acquire expertise in basin study, reservoir modelling and
specialised t-for-purpose technology in hydraulic fracturing
and completions.
He said that capitalising on the North Montney Joint Venture
(NMJV) will allow PETRONAS to gather best practice in operat-
ing these types of elds, improving its capability as an efective
exploration and production company into the future.
Currently, we are focusing on progressing the Santos GLNG
Project in Australia to further improve upstream activities
especially in the areas of drilling and completion through our
knowledge-transfer process, he said.
Underpinning the future of Malaysias energy security and
PETRONAS continued viability, however, are innovative and
ambitious EOR developments to reverse declining production.
EOR is technology and investment intensive, Dato Wee
Yiaw Hin said. PETRONAS has executed one EOR PSC with
ExxonMobil and two EOR PSCs with Shell and the progress of
these projects has proceeded in line with expectations.
Over the past two years, we have already seen three pro-
jects in implementation, aimed at delivering over 200MMstb.
He said PETRONAS remains committed and optimistic about its
EOR plan.
Above: Executive Vice
President, Exploration
and Production, Dato
Wee Yiaw Hin
17 16
EXPLORATION & PRODUCTION
arrangements will exist in parallel to sustain efective explora-
tion and exploitation of Malaysias petroleum resources.
Attracting new players
Even though PETRONAS must operate within the context of
dwindling reserves, Malaysia continues to be highly relevant as
an investment destination in the upstream oil and gas sector.
PETRONAS has refocused on domestic exploration and
production, not only because it ts with its responsibilities as a
national oil company, but also because there are still substantial
amount of hydrocarbon resources left untapped in the country.
Despite Malaysias maturing hydrocarbon basins, there
remains huge potential in new exploration plays which are still
under-explored, Dato Wee Yiaw Hin
said. There are also signicant remaining
resources in mature, small and techni-
cally more complex elds.
He said these mature basins and tech-
nically complex elds also provide op-
portunities for capable upstream inves-
tors or product and service providers to
partner with PETRONAS, overcoming the
challenges and monetising the results.
We believe that continuous collabo-
rations between PETRONAS, our PSC
partners and service companies, will
be instrumental for efective resource
development, he said. With a stable
scal environment, upstream tax incen-
tives, established infrastructure, and the
ready availability of locally-based service
companies that support upstream activi-
ties, we believe that Malaysias upstream
industry remains an attractive invest-
ment destination.
According to a report by Wood Mac-
kenzie, Malaysias domestic discoveries
were ranked among the top three largest discoveries in South-
east Asia in 2012.
PETRONAS and Malaysia
PETRONAS is a major contributor to Malaysias national in-
come, with the gas and oil sectors accounting for 20 per cent
of national GDP. Under the governments Economic Trans-
formation Programme (ETP), plans for the oil, gas and energy
sectors have been in alignment with PETRONAS strategic
initiatives.
We will always work closely with the government to ensure
that the oil and gas industry sector remains vital to the growth
of the nations economy, Dato Wee Yiaw Hin said.
As a business entity, PETRONAS has a primary responsibility
to develop and add value to our national resource while con-
tributing to the well-being of the people and the nation.
PETRONAS has championed some of the ETP Entry Point
Projects which are aimed at overcoming the projected decline
in domestic oil and gas production, capturing value from
mature elds through enhanced oil recovery, driving innovative
solutions for extracting value from small and stranded oil and
gas elds, and intensifying exploration eforts for future growth.
This is an exciting time for the company as it enters new
frontiers for growth, Dato Wee Yiaw Hin said. The transfor-
mation journey is in progress, our strategies are set and we are
progressing well, with around three per cent compound annual
growth rate in our total production.
At the same time, PETRONAS exploration and production
capability and track record of successful onshore and ofshore
developments in oil and gas have earned us reputable operator-
ship in 162 ventures across 23 countries in the world, he said.
Frontier exploration
With the maturing of the Malaysian basin, PETRONAS must
now seek hydrocarbons in more technically and commercially
challenging regions. In Malaysia, this
means tapping underexplored areas such
as ultra-deepwater and onshore Sabah
and Sarawak.
In order to retain investment at-
tractiveness, PETRONAS is assuming the
enabling role as the resource owner
and manager, engaging capable play-
ers or pursuing diferent partnership
arrangements to ensure the efective
monetisation of resources, Dato Wee
Yiaw Hin said.
New incentives and commercial terms
are being ofered by PETRONAS to at-
tract investments and promote upstream
activities. These include the promotion
of blocks with attractive prospects and
a range of PETRONAS-led eforts to
reduce risk.
The Malaysian government also
recently approved incentives under the
Petroleum Income Tax Act (PITA) which
seeks to attract exploration and devel-
opment activity in Malaysia.
The tax incentives on qualifying exploration expenditure,
in particular, is aimed at enhancing a contractors risk-taking
attitude, which could encourage higher levels of exploration
activity, he said.
PETRONAS and the future
According to Dato Wee Yiaw Hin, exploration will continue to
be critical to PETRONAS going forward.
The more important point is where and how we will ex-
plore, he said.
As the search for hydrocarbon becomes more challeng-
ing, exploration will need to look at hydrocarbon targets that
are more subtle, for example, in deeper waters, more complex
reservoirs and in higher subsurface pressure and temperatures.
He said that going forward PETRONAS must continue to
identify new exploration opportunities in existing as well as
new basins.
Technology will be a key enabler as we explore in more
challenging environments, both in terms of subsurface imaging,
as well as operational and development efciency. Accordingly,
cost, technology application and basin knowledge will also be
instrumental to successful exploration, he concluded.
Petroleum,
being a nite
resource,
brings us to a
stage where
there is no
more low-
hanging fruit
EXPLORATION & PRODUCTION
Right:
Angsi A,
ofshore
Terengganu,
Malaysia
18 19
ENERGY FINANCE
Left: Angsi
platformofshore
Terengganu,
Malaysia
ENERGY FINANCE
A
mong the worlds oil majors,
PETRONAS occupies a unique
position. Both a state-owned
entity and a full-edged
commercial body, PETRONAS success
has been due to its ability to strike a
balance between sustainably developing
the resources of the nation and running
a commercial enterprise that maximises
returns to its shareholders and com-
petes globally.
Funding for substantial capital projects
in Malaysia, both downstream and
upstream, fall largely on the shoulders of
PETRONAS.
As the custodian, the government has
pretty much entrusted PETRONAS with
the responsibility of allocating resources
(which includes capital funding) for this
purpose, explained Executive Vice Presi-
dent of Finance, Datuk George Ratilal.
With a proven track record in Malaysia,
PETRONAS launched a strategic globali-
sation programme in the early 1990s to
boost the countrys crude oil and gas re-
serves and add value to its core business.
For large capital-intensive undertak-
ings, the company has access to the
global capital markets, but more recently
it has been encouraging local participa-
tion from the private sector in Malaysia.
PSC: a tried
and tested formula
The funding of exploration, develop-
ment and production of hydrocarbon in
Malaysia are undertaken by production
sharing contractors under the Production
Sharing Contract (PSC) model which has
been in existence in PETRONAS for more
than 35 years.
In a way the PSC model is like public
private partnership, where PETRONAS
carries the public responsibility, so to
speak, and the PSC contractors carry the
private interest, Datuk George said.
The private investors, which consist
of both large and small corporations in
the energy space (which also include our
very own PETRONAS Carigali), undertake
the risks of exploration and development,
but share the rewards of production
together with PETRONAS.
With PETRONAS operating as a com-
mercial entity, the capital required for
these projects is set aside out of prots
based on long-term plans.
In addition, PETRONAS is able to
supplement its capex funding through
funding from traditional sources, such
as the international debt markets. Bor-
rowing is less difcult by a rated entity
which operates as a multinational oil and
gas company as opposed to standalone
project companies, he said.
PETRONAS recently introduced a vari-
ation to its time-honoured PSC Risk
Service Contract (RSC) which is aimed
at attracting oil and gas players to de-
velop and produce marginal elds.
Under this model, contractors will
provide the upfront capex, similar to PSC.
However, the contractors will be paid
fees (which includes capex recovery)
based on their performance, Datuk
George said. This is an example, where
terms of participation in upstream are
structured to entice participants as part-
ners for new activities.
Despite the variety of nancial instru-
ments open to PETRONAS, Datuk George
said that the categories of innovation in
nancing are likely to expand further.
As resources become harder and
more costly to nd, innovative solu-
tions will need to be explored for future
PETRONAS:
FINANCING THE
ENERGY FUTURE
As a state company
and a successful
multinational,
PETRONAS has a special
role in Malaysia
20 21
ENERGY FINANCE
likely to be largely nanced on balance
sheet supplemented with corporate debt
from the bond market.
PETRONAS' issuer ratings are all
within the 'A' category and as such is
able to borrow at relatively attractive
rates, he said.
As far as the downstream projects are
concerned, in particular those where
PETRONAS has multiple partners such
as the RAPID project, nancing is set to
be a mix of on balance sheet and project
nancing depending on the agreements
with the energy giants partners.
Strong partners are essential, as are
strong contractors, to provide con-
dence to project nance providers,
Datuk George said.
Understanding risk classes within
the project is also important as cer-
tain infrastructure sub-classes within a
larger project, such as RAPID, can ofer
reserves gives us an advantage. We are
not too highly dependent on project -
nancing for upstream projects especially
if such projects are located in Malaysia,
he said.
Outside of Malaysia, partnerships are
sought to reduce risk levels and bring
about partnership funding.
The place of
the private sector
As Ive already mentioned, PETRO-
NAS is largely responsible for the energy
requirements of Malaysia, Datuk George
said. Although its owned by the Malay-
sian Government with government repre-
sentations at the board level, PETRONAS
operates as a commercial entity and there
is no representation of the government in
the management of PETRONAS.
Over the coming decades,
most countries in the Asia-
Pacic region will see a surge
in the demand for energy
themselves for nancing by the broader
capital markets.
The Malaysian banking and capital
markets today are strong and fairly ma-
ture and ofer a good variety of nancing
opportunities which we can use for our
lower risk downstream projects. So far,
they have been able to keep up with the
economic growth of the region, he said.
While challenges remain, not least
among them Basel III the global regu-
latory standard on bank capital adequacy
and market liquidity risk due to come
into efect this year Datuk George says
PETRONAS remains in a strong position.
Basel III will certainly have an impact
on project nancing, he said, adding
that several banks have already reduced
allocation of capital-to-project nancing,
with some ceasing this activity.
For PETRONAS, a varied portfolio
of assets and a high retention of cash
Above: Executive Vice
President of Finance,
Datuk George Ratilal
ENERGY FINANCE
fund requirements, he said. However,
given the nature and risk prole of the
upstream business, such solutions would
mostly be conned to variations of the
PSC, for the moment.
The cost of renewal
Over the coming decades, largely as
a result of economic growth, most coun-
tries in the Asia-Pacic region will see a
surge in the demand for energy.
Whatever the energy source or in-
novation, PETRONAS will still need to
upgrade and expand its existing energy
infrastructure. The challenges ahead for
PETRONAS are formidable, but the oil
giant is committed to keeping pace with
growth in Malaysia and the region.
PETRONAS has many fronts to deal
with, from upgrading existing infra-
structure, such as ofshore pipelines
regards to standalone upstream infra-
structure projects, which are high-risk
and as such are not good candidates for
conventional project nancing, he added.
In this regard, PETRONAS already
conservative nancial policy of cash
retention has worked well for it. For the
year ended 2012, the groups cash bal-
ance stood at about US$45bn, after set-
ting aside C$5.3billion for the acquisition
of Progress Energy.
The cash reserves we have accu-
mulated over the years have enabled
us to carry out some of these large
infrastructure projects without the need
to be overly dependent on external
funding, Datuk George said. Although
a non-listed entity, PETRONAS has been
able to keep a strong balance sheet that
is required of a large multinational of
similar scale.
Upstream infrastructure projects are
and downstream plants many of them
decades old that are aimed at sustaining
current performance to growing the
business through projects with sig-
nicant infrastructure like regasication
terminals, oating LNG facilities and the
large-scale rening and petrochemical
complex in Pengerang, RAPID, to name a
few, Datuk George said.
As technology and innovations change
so, too, does the nancial landscape.
Since 2008, the need for banks to keep
a more conservative capital base has af-
fected the capacity of funding providers
to outlay on large infrastructure projects.
This is especially so in the space
of project nance where allocations
for project nance as an asset class is
increasingly being downsized, Datuk
George said.
The funding challenge for oil and
gas companies are even more so, with
Above: Strong partnerships are essential to provide
condence to project nance providers
23 22
THE FUTURE OF GAS
GOLDEN AGE FOR GAS
PETRONAS is poised to be a signicant player
in the gas landscape of the next two decades
A
bundant, geographically difused and environmental-
ly benecial compared with other fossil fuels, gas has
the potential to be a game-changer for the energy-
hungry economies of the Asia-Pacic region.
Increasingly competitive in practically all end-use sectors, it
ofers a cheaper power alternative for the emerging economies
of India, China and the Middle East where energy demand is
growing exponentially.
Globally, the estimates of existing reserves are staggering.
Conventional recoverable resources are equivalent to more
than 120 years of current global consumption, while total re-
coverable resources could sustain the level of todays produc-
tion for more than 250 years. All major regions have recovera-
ble resources equal to at least 75 years of current consumption.
Unconventional gas now makes up about 60 per cent of mar-
keted production in the United States. Coalbed methane (CBM)
development is growing in Australia, while projects in China,
India and Indonesia are in the early stages of development.
According to Executive Vice President for Gas and Power,
Datuk Anuar Ahmad, PETRONAS is poised to be a signicant
player in the gas landscape of the next two decades.
Fuelling the future
Gas, with abundant supply, easily accessible either from
pipeline or LNG, and cleaner than other fossil fuels is bound to
play a bigger role in meeting ever-increasing energy needs,
Datuk Anuar Ahmad said.
The big economies of the world such as China, Japan and
Korea will continue to be consumers. Emerging economies
such as India and Indonesia will also join the big league in the
near future.
Left: Gas
transmission
operations in
Segamat, Johor
ENERGY FINANCE
PETRONAS also does not need to seek
government approval, nor government
funding for its operations, he added.
Meanwhile, the private sector involve-
ment in the oil and gas space in Malaysia
has seen healthy growth in the past few
years, due in large part to continued in-
vestments by PETRONAS and its partners
in upstream.
Sustained investments have enabled
local companies in the private sector to
invest in support services for a range of
activities in the sector, Datuk George
said. Some of these companies have
grown to provide regional services and
are of a scale large enough to undertake
sizeable investments in upstream support
services such as rigs and upscale barges.
Because of the rapid growth and
scaling-up of some of these players,
PETRONAS has recently opened up ex-
ploration, development and production
activities to the local private sector under
the RSCs, allowing local companies to
team up with foreign oil and gas play-
ers to bid and undertake projects in the
upstream sector.
The role of renewables
With energy companies now decades
into what some analysts regard as a
century-long transition to clean energy,
PETRONAS plans to nance the energy
of the future are now key considerations.
Wastage reduction, clean energy sup-
ply and other energy efcient options
are not only an increasing component
of current operations but also part of the
implementation of new projects.
These options are particularly ap-
parent in our downstream operations,
Datuk George said. For example, waste
heat recovery technology is used at
renery and petrochemical complexes as
a source of power generation within the
complexes themselves.
The RAPID project has similar consid-
erations taken into account when plan-
ning the overall complex, he said.
In terms of renewable energy, PETRO-
NAS has already made some signicant
investments. PETRONAS implemented its
rst solar PV project at Suria KLCC, which
at 9,000 sqm and with the capacity of
685kW peak, is the largest installation on
a shopping mall rooftop. It is also pres-
ently embarking on a solar power plant
project in Gebeng, Kuantan, targeted for
operations by end of this year.
Other similar projects are also on the
drawing board. We have a dedicated
technology team that keeps abreast in
the latest technology innovation while
at the same time, conducts research
and invests in future technology that is
heading towards cleaner energy such as
carbon capture and storage, as well as
the utilisation of CO2 in valuable chemi-
cals, he said, adding that the team has
already been responsible for ling close
to 300 patents for various technologies
in numerous countries.
As part of this, and in pursuit of be-
coming a high-income nation by 2020,
Malaysia has embarked on an Economic
Transformation Programme (ETP) which
is private-sector led and government
facilitated.
Under the scheme, the ETP has identi-
ed certain sectors that will be the focus
for change and the catalysts for growth.
The oil and gas sector is obviously
an important sector as it contributes
some 20 percent of national GDP, Datuk
George said.
So far, 12 Entry Point Projects (EPP)
have been identied under four thrusts.
The total cumulative funds that will be
invested between 2010-20 are estimated
to be in excess of RM200bn with 99 per
cent of the investments required coming
from the private sector PETRONAS
and other independent private sector
participants.
The Malaysian government has grant-
ed various incentives and provided solid
assistance particularly for the develop-
ment of upstream small elds, he said.
Many of these incentives enhance
project returns and facilitate easier access
to nancing from the capital markets and
bank nancing, as in the case of partici-
pation by local private sector partners in
RSC projects, Datuk George said.
The ETP, in a way, is a commitment by
the Government to provide and facilitate
necessary support and services. This
gives assurance to foreign investors to
further invest in this sector.
The road ahead
Oil price volatility has made for difcult
conditions throughout the industry and,
while PETRONAS has not been spared by
this, the company remains structurally
robust with ample reserves for any future
business opportunities.
Production from its many domestic
discoveries is expected to bear fruit in
the fourth quarter of nancial year 2013
and, with its oating Liquied Natural
Gas (FLNG) expected to be completed in
2015 the rst of its kind in the world
it will pave the way for further moneti-
sation of small and stranded gas elds
throughout Malaysia and elsewhere.
Despite the challenging global energy
landscape, PETRONAS last year managed
to sustain its revenue and earnings, a
measure of the seriousness with which it
takes its role of charting and funding the
future of energy in Malaysia.
While renewables and clean energy
eforts are key considerations, the teams
focus is in line with PETRONAS overall
business strategies and is balanced against
commercial considerations, he said.
With respect to nancing, we do not
treat such projects diferently from our
other projects. Economic viability is still
the underlying driver before embarking
on a project. However, PETRONAS still
supports initiatives for development of
non-conventional and alternative energy
projects via our technology R&D fund.
Financing the future
In Malaysia, energy policy and govern-
ment strategy are meshing to create
fertile ground for the nancing of future
energy projects.
In Malaysia,
energy
policy and
government
strategy are
meshing to
create fertile
ground for
the nancing
of future
energy
projects
24 25
THE FUTURE OF GAS
He said that within little more than a decade, Asia Pacic will
become the worlds biggest gas demand centre and PETRONAS
will be ideally placed to tap into the boom.
In terms of LNG supply, Australia will overtake Qatar as the
biggest exporter if all the announced projects are success-
fully implemented, he said. East Africa, with signicant recent
discoveries, has the potential to be another major supplier. In
Europe, Russia will continue to be a major supplier.
The LNG boom
PETRONAS, with its policies of promoting self reliance, plays
an important role in the Malaysian economy. However, the
countrys growing importance as an LNG hub means that it is
likely to play an increasingly signicant role, not just domesti-
cally, but across the region.
PETRONAS has been exporting LNG since the early 80s.
Today PETRONAS is one of the top suppliers of LNG in the Far
East market, Datuk Anuar said. We want to remain relevant and
continue to be an important supplier.
To protect its position, PETRONAS has embarked on a num-
ber of important projects.
In Malaysia, we are constructing another train at our Bintulu
Complex. We have started on a oating LNG project and we
plan to sanction the second oating LNG plant before the end
of the year, Datuk Anuar said.
In Australia, our GLNG joint venture is progressing well. In
Canada, we have acquired Progress Energy and with this, we
plan to construct an LNG plant in British Columbia.
Besides LNG, PETRONAS has also developed an onshore gas
pipeline network to serve the domestic market and Singapore.
To supplement declining domestic production, PETRONAS
has commissioned an LNG import and regasication terminal.
Another terminal is being planned. To encourage other market-
ers in the domestic market, we are allowing third-party access
to our facilities, he said.
The role for gas
The past two decades have been characterised by the de-
velopment and diversication of gas markets worldwide, but to
what extent has the prole of gas in the fuel mix changed?
Gas due to its low carbon emission and abundant sup-
ply is becoming the fuel of choice for many countries and
PETRONAS is constantly calibrating its commitment to the fuel
to reect these new realities.
According to the International Energy Agency, gass share
of primary energy mix will increase to about a fth in 2020 and
almost a quarter in 2035. The bulk of the increase will be for
the power sector, Datuk Anuar said. Eforts are being made to
increase its use in the transportation sector.
Despite the fact that the exploitation of unconventional
gas has made the availability of gas more evenly distributed
geographically, physical and geopolitical constraints mean that
supply through pipelines is not always feasible.
LNG, therefore, is likely to be at the heart of this evolution.
We can expect LNG to play a bigger role in meeting the de-
mand for gas, Datuk Anuar said. Today LNG contributes about
10 per cent of requirements. In 2035, it is anticipated that the
contribution will increase to about 14 per cent.
In the meantime, the growing importance of gas as a base
fuel in Asia powering everything from transportation to
electrication is reshaping the way that gas is marketed at a
fundamental level.
Costs will be key
Developing new projects that can deliver gas at an afordable
and reliable rate will be a key challenge for PETRONAS in an
environment where costs have been rising inexorably.
How PETRONAS delivers on its pledge to ensure Malaysias
future energy security will require tough decisions and delicate
strategic balances.
The prolonged strength in oil prices has encouraged heavy
investments in oil and gas industry. This has led to an upward
pressure on costs, Datuk Anuar said. In the past year, costs
have risen by about 10 per cent.
In Australia, where several projects are ongoing, construction
costs there have spiralled and are about three times higher than
in the US. A number of projects proponents have experienced
signicant cost overruns.
Plant expansion, browneld projects and those near demand
centres, where supply costs will be lower, will be able to com-
pete better, Datuk Anuar said.
The unconventional gas boom
In a relatively short time, unconventional gas has altered the
North American energy landscape; it is no longer dependent
on gas imports. The LNG once destined for US shores must
now nd new markets.
PETRONAS, meanwhile, is poised to take advantage of this
boom. PETRONAS wants to continue to be a signicant player,
especially in the Asia-Pacic region, Datuk Anuar said. The
abundant unconventional gas in North America certainly pro-
vides us with the opportunity to acquire competitive gas assets.
As part of this thrust, PETRONAS last year acquired Progress
Energy of Canada at a cost of C$5.3bn. This acquisition ena-
bles PETRONAS to plan an LNG plant in Western Canada for
export of LNG to the Asia-Pacic region. With this resource,
we will be able to meet our customers desire to secure their
LNG requirements at competitive prices.
The role for gas-red plants
Gas is becoming increasingly important in Asia as a fuel for
electrication, and PETRONAS here is also in a position to ben-
et from this growth.
The bulk of the gas demand globally will be for power
generation and this trend is also applicable to the Asian region,
Datuk Anuar said. As a result of this, demand for gas in this
region will continue to remain strong.
In 2010, Asia accounted for about 12 per cent of world gas
demand. By 2035, its share will be 22 per cent. PETRONAS, with
new LNG projects being planned and implemented, is denitely
in a position to take advantage of this situation.
Malaysias proximity to Singapore, which also plans to be-
come a major LNG hub, ofers obvious synergies.
If Singapore succeeds as an LNG hub, our import termi-
nals can be modied and utilised for trading activities by third
parties, said Datuk Anuar. Currently, there are already parties
planning to construct terminals for trading in Malaysia.
THE FUTURE OF GAS
Right: Executive
Vice President for
Gas and Power,
Datuk Anuar Ahmad;
Below: Gas
processing plant,
Kertih Terengganu
26 27
DOWNSTREAM
logistics and transportation, he said. We also have Technology
and Engineering division which amongst others, manages some
of the major projects undertaken by the Group, undertakes se-
lected procurement for projects and provides technical services
to Operating Units in PETRONAS.
Room to expand
PETRONAS, meanwhile, has embarked on an expansion pro-
gramme of selective growth in its downstream business.
At the moment, the big piece we have on our plate is the
Renery and Petrochemical Integrated Development (RAPID)
project in Pengerang, Southern Johor, Malaysia and that is a
huge piece for us, Datuk Wan Zulkiee said.
It is a US$20 billion investment and a lot of efort has been
put into that. he added.
Southern Johor was chosen as the location for the project
due to its proximity to deepwater port facilities and regional
demand centres. The location enables easy transport of nished
products to the market.
The complex covers an area of 2,000 hectares, includes a
300,000 barrels per day (bpd) crude oil renery and aims to
produce nine million tonnes of petroleum products and 4.5 mil-
lion tonnes of petrochemicals per year.
The other expansion area is the ammonia and urea plant
which we are building in Sabah and that is the second big
project that we have currently, said Datuk Wan Zulkiee.
There are also small projects, essentially plant improvements
and we are also looking at the viability of expanding our base
oil productions.
PETRONAS Downstream Business is aggressively growing its
lubricants business.
That is a global business with a global presence, he said.
We are in the process of completing an acquisition of a lubri-
cants company in China and that is the other growth leg for
downstream.
Challenges ahead
PETRONAS, while expanding, is also rationalising and consoli-
dating its business.
The whole idea is to have a portfolio of quality assets. That is
very important for Downstream Business, Datuk Wan Zulkiee
said. What we are looking at are assets that give us superior
Left:
Megamethanol
plant, Sabah
DOWNSTREAM
P
ulling together PETRONAS downstream opera-
tions that add value to the oil and gas business is a
challenging undertaking. With products as diverse as
lubricants and petrochemicals to retail operations,
downstream operations must make each dollar work hard to
add to the value chain.
Tasked with extracting value from these seemingly dispa-
rate products, PETRONAS's Chief Operating Ofcer (COO)
and Executive Vice President of Downstream Business, Datuk
Wan Zulkiee Wan Arifn says that Downstream Business is a
margin business.
In terms of revenue, downstream accounts for as much
as 54 per cent, Datuk Wan Zulkiee said. But this is a margin
business, so unlike Exploration and Production (E&P) or Gas and
Power (G&P) business, our returns are very small."
In terms of contribution to the group, our bottom line would
be approximately 11 per cent, he said.
Downstream business
PETRONAS Downstream Business has three strands, Datuk
Wan Zulkiee explains. Firstly, the Malaysian national oil group
operates four reneries for its petroleum products with a total
rening capacity of approximately 500,000 barrels per day.
In addition to the rening business, this strand also acts as a
system balancer through its trading of crude and petroleum
products in the global market.
The second part of Downstream Business is marketing. The
petroleum products from these reneries are marketed through
its network of service stations in Malaysia and South Africa, In
addition, the Business also has service stations in some coun-
tries in the sub Saharan Africa region as well as in Sudan.
The third strand is petrochemicals. With feedstock from the
Peninsular Gas Utilisation pipeline, PETRONAS is positioning
Malaysia as a regional petrochemical hub, establishing two Inte-
grated Petrochemical Complexes (IPCs) with the latest logistics
and infrastructure capabilities.
We have put all the business of the petrochemicals into one
listed company and that is PETRONAS Chemicals Group, Datuk
Wan Zulkiee said.
In his role as Chief Operating Ofcer, Datuk Wan Zulkiee
also oversees group operational excellence.
This is a staf function that oversees the operational excel-
lence of the plants which include the operational safety of our
FORGING THE LINKS
IN THE PETRONAS
VALUE CHAIN
Balance, foresight and
tough decision-making
drive PETRONAS
downstream business
Left: Executive
Vice President of
DownstreamBusiness
and Chief Operating
Ofcer at PETRONAS,
Datuk Wan Zulkiee
Wan Arifn
28
DOWNSTREAM
returns or at least at par with our competitors.
PETRONAS is engaged in one of the worlds most competitive
industries and, as a consequence, is constantly looking at the
performance of the assets in its portfolio.
The retail business overseas is challenging, Datuk Wan
Zulkiee said. He said in places where the environment is too
difcult, PETRONAS has not shied away from taking tough
decisions.
Over the years we have divested our retail businesses in
Thailand and we are also divesting our retail business in Indone-
sia, he said. "We continuously ensure the quality of our assets
through an active portfolio management.
Seeking synergies
For PETRONAS to extract the maximum benets, it must keep
adding value throughout the value chain.
In Malaysia, our E&P colleagues supply the gas feedstock
and we monetise the gas as we add value to the gas with our
ethylene crackers and keep adding value further downstream,
Datuk Wan Zulkiee said.
Over 20 years, PETRONAS Kertih IPC and the Gebeng IPC
have grown to become home to more than 20 petrochemical
plants. The complexes are supported by the synergies from the
infrastructure facilities comprising the Centralised Utility Facili-
ties (CUF) and the ports in Kertih and Kuantan.
In the petrochemical business, every cent counts, Datuk
Wan Zulkiee said. It is a margin business, so by having these
integrated complexes we can extract a lot of synergies.
What we mean by integrated complexes is that the product
of one plant becomes the feedstock of the next plant, he said.
And since it is just across the fence, we have a lot of savings in
terms of logistics.
For example, when we go out to our service providers, we
can really control our costs because we have economies of
scale. It is also good in terms of manpower optimisation.
We have a lot of shared services for our procurement and
we have centralised our nance and human resources and all of
these very important backroom operations. These are the kind
of synergies we have.
While much of this is nothing new for PETRONAS, constant
development of these synergies allows it to build on what it
already has.
A lot of the complexes are very much integrated and we are
replicating this model in Johor as well, he said. The big RAPID
project relies a lot on integration and, in this sense, integrating
the renery with petrochemicals. Overall the complex will be
very well optimised, well synergised.
The advantage of space
In a region as densely populated as Asia, Malaysia has the
benet of land; the ability to site major projects away from large
population centres, positioning the country as a regional hub
for the petrochemical industry.
We have a lot of real estate that Singapore is lacking now,
Datuk Wan Zulkiee said. But we do not see ourselves as being
in competition with Singapore as we have many areas in which
we can work together and complement each other. "
Our big project in Johor is just a few kilometres across from
Singapores complexes and there are many product streams
that may have the opportunity to move from one place to
another.
This will be a strong oil and petrochemical hub once it is all
developed for Singapore as well as Southern Johor, he said.
We are able to complement each other in terms of service
providers as there are a lot of synergies and we will realise more
synergies when we are in operations, he said. Things we do
not even see today, I am sure there will be a lot more opportu-
nities to work together once we start operations.
Sustainable growth
Sustainability is not just key for the downstream business but
for PETRONAS as a whole. According to Datuk Wan Zulkiee,
the sustainability framework is driving shareholder value, not
just for the present but decades ahead.
When we talk about the environment, what we are look-
ing at is a baseline for our water consumption across all of our
operations, he said. We have also been baselining our CO2
emissions."
We have an energy loss management system to optimise
our energy consumption and over the past few years we have
pulled all these together into one sustainability framework.
While sustainability initiatives can be expensive in the short-
term, the rewards are likely to be greater in the future.
We are very cautious in terms of what we spend, Datuk Wan
Zulkiee said. But the cost-benet is always an element we
evaluate.
In the long term, all of this will bring benets to the business
if we invest in energy optimisation and power consumption.
When you look at the total cost over the long-term, it makes
sense to invest.
Downstream and the future
Keeping a vibrant downstream business requires constant in-
novation; testing new products and above all, penetrating new
markets.
With much depending on its products, Datuk Wan Zulkiee
says the pursuit of quality and excellence is crucial to keeping
downstream a vital part of the PETRONAS story.
We go into those markets that give us the best value, he
said. At the moment, we have our lubricants in more than 50
countries. We market more of our petroleum products in the
sub Saharan African markets, while for petrochemicals prod-
ucts, we focus on China and ASEAN countries."
Despite PETRONAS global reach, some of its best markets
going forward are likely to be closer to home.
I am very bullish about ASEAN, Datuk Wan Zulkiee said.
The total population of ASEAN is around half of China, and I
think it is a lot easier for us to do business in ASEAN countries
because of the cultural familiarities and because of its proximity.
ASEAN for us is a big market, he said.
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