Petroliam Nasional Bhd (Petronas), Malaysia’s state-owned oil and gas giant, is turning to its overseas portfolio to lower production costs and address declining profitability amid a more volatile global energy landscape.
According to Mohd Jukris Abdul Wahab, Chief Executive Officer of Petronas’ upstream division, the company aims to reduce its oil production break-even price to US$50 (RM212.37) per barrel, a significant drop from the US$60 to US$70 range recorded over the past five years. The upstream division encompasses the exploration, development and extraction of oil and gas.
In pursuit of this goal, Petronas will prioritise increasing output from lower-cost international assets, particularly in countries where it already maintains a presence, such as Canada, Suriname, Brazil, Turkmenistan and several Southeast Asian markets. However, the company remains open to entering new geographies if they present strategic growth opportunities.
“We want to reshape the entire portfolio,” Jukris said during an interview held on 13 June at the Petronas Twin Towers in Kuala Lumpur. “We are preparing ourselves, moving into a more volatile environment in the future.”
The shift in focus comes as Petronas contends with weakening crude oil prices since their 2022 highs, which have adversely impacted its earnings and resulted in a reduction in dividend payouts. Earlier this month, the company announced plans to cut approximately 10% of its workforce as part of broader cost-efficiency measures.
Although oil prices saw a modest rebound following geopolitical tensions in the Middle East, the long-term supply-demand dynamics remain uncertain. Jukris emphasised that international capital investments must deliver “healthy returns”, particularly given the elevated geopolitical and operational risks in some of Petronas’ operating regions.
The company’s financial performance remains crucial for Malaysia’s fiscal health. Petronas has committed to pay RM32 billion (US$7.5 billion) in dividends to the government in 2024, down from RM50 billion in 2022. Since its establishment in 1974, the company has contributed RM1.4 trillion to the national economy through dividends, taxes and cash payments.
Looking ahead, Petronas is targeting an increase in the net present value (NPV) contribution of its international upstream assets to approximately 60% over the next five to 10 years, up from the current range of 40% to 50%. Jukris, who began his tenure with Petronas in 1990, said sustaining production levels will require the development of new fields as existing domestic assets mature.
Presently, Petronas produces roughly two million barrels of oil equivalent per day within Malaysia, and about 700,000 barrels per day from its international operations.
Despite this overseas push, Jukris remains confident in the longevity of Malaysia’s hydrocarbon reserves. Continued investor interest and recent discoveries suggest there is still untapped potential, including off the coast of Peninsular Malaysia.
“For the last 10, 15 years, we’ve been saying that our reserves will last only 15 years,” he said. “So today, we will also last another 15, 20 years.”
