PETRONAS : Age Of Huge Margins From Oil Is Over - Future In Clean Energy!

According to the New Straits Times, Tengku Tan Sri Muhammad Taufik, President and CEO of Petroliam Nasional Bhd (Petronas), has stated that the age of huge profit margins in oil refining is likely finished. He stressed that Petronas' financial performance in 2023 will be worse than the previous year due to problems in the oil and gas industry and increased investments in clean energy.

Taufik stated that the industry's profitability has switched from double-digit margins to single-digit margins in the previous six months, and the operating environment has become more complex. The "golden age" of the refining sector began in 2004, with higher profits due to increased worldwide demand and refining capacity shortages. However, profits have deteriorated over time as a result of increasing capacity from new facilities and higher expenses linked with record oil prices.

Despite these difficulties, Taufik stated that Petronas will continue to engage in both traditional hydrocarbon businesses and new renewable energy endeavours. The business intends to invest RM50 billion to RM60 billion in yearly capital expenditure (capex), with a large share committed to renewable energy, including speciality products. However, Petronas' traditional oil and gas enterprises will continue to get around 70% of the capex.

Petronas reported a net profit of RM23.8 billion in the first quarter of FY2023, a 2% increase over the same quarter in FY2022. Revenue for the same period was RM90.4 billion, a 16% rise driven mostly by higher sales volumes and favourable foreign exchange effects. Lower average realised prices for major products, on the other hand, somewhat offset revenue growth.

Petronas reported RM25.5 billion in cash flows from operating activities (CFFO) for the quarter, down from RM27.9 billion in the previous quarter. The company's capital expenditures (Capex) totaled RM10.5 billion, with upstream and gas projects contributing significantly. Domestic capital expenditure surged by 44% year on year, owing mostly to investments in the Petronas Nearshore Floating LNG Project in Sabah and the Kasawari Gas Field Development in Sarawak. Petronas' total assets increased to RM713.6 billion as of March 31, 2023.