Southeast Asian NOCs Adapt to Lower Oil Prices

Southeast Asian national oil companies are dealing with uncertainties caused by the current slump in oil prices, with several re-prioritizing their objectives despite rising energy demand.

Southeast Asian national oil companies (NOCs) are adjusting their business operations to deal with the current slump in oil market after years of sustained high price of more than $100 a barrel. The oil price decline – down around 50 percent since last September – has cast a shadow over business growth prospect for these oil producers as they have experienced a sharp fall in revenue.

Regional NOCs – Thailand’s PTT Exploration and Production Pcl (PTTEP), Malaysia’s Petroliam Nasional Berhad (Petronas) and Indonesia’s PT Pertamina EP – have responded to the bearish oil market by trimming capital expenditure (capex) this year, while others such as Vietnam Oil and Gas Group (PetroVietnam) have recently shut down a field as production costs exceeded international oil prices.

Oil price has been on a downtrend since the second half of last year. Global benchmark Brent oil futures have fallen below the $100 a barrel mark in early September to $48.79 a barrel Jan. 26, while U.S. West Texas Intermediate crude prices had broken through the century-mark in late July.

PTTEP Wields the Axe on Expenditure

PTTEP's Five year Investment Plan (2014-2018 vs 2015-2019) Source: PTTEP

Lower oil prices has prompted PTTEP to reduce company expenditure for 2015-2019 by 10.95 percent to $24.295 billion, below the $27.282 billion allocated for 2014-2018. Operating expenditure (opex) bore a larger percentage of the reduction, at 13.51 percent compared to 9.53 percent for capital expenditure (capex), PTTEP said in a Dec. 25 statement.