Malaysia’s Petronas is pumping the breaks on its Petronas floating LNG 2 (PFLNG 2) project after the company suffered lower revenue and profit last year due to the low oil price environment.
Image of the PFLNG 1, from Petronas.
Petronas said it is expecting oil prices to remain low in 2016 from the prolonged volatility in oil prices, and that the next two years for the company to be challenging, leaving Petronas to take cost-optimization measures to another level to counter adverse impact to its business.
“These cuts will impact some of our capital projects. At this point, we have taken the decision to re-phase the Petronas floating LNG 2 project, to be commissioned at a later date than originally planned,” Datuk Wan Zulkiflee, Petronas president and CEO said.
Petronas’s PFLNG2 is designed to tap natural gas potential in the Murphy Oil-operated Rotan field, 130km offshore Sabah, Malaysia. It has the capacity of 1.5 MTPA and can operate in 500-1500m water depth.
The project reached a construction milestone in November 2015 with the official keel laying. The company originally planned for the PFLNG 2 project to be commissioned in 2018.
Revenue for Petronas dropped 25% in 2015 to US$59 billion (MYR 248 billion), compared to 2014.
Zulkiflee said that company’s cash flow from operations is unlikely to be able to cover the remaining capex and its RM16 billion (US$3.8 billion) dividend commitments to the government.
As part of Petronas’s cost-optimization measures, additional reductions of $11.9 billion (MYR 50 billion) will be made in its capex and opex over the next four years.
The current environment also led to Petronas to review its business operating model, which will result in a new organization structure that will take effect on 1 April.
Meanwhile, the company’s PGLNG 1 is near completion. Once complete, it will be the world’s first floating LNG facility in operation, and play a significant role in the company’s efforts to unlock gas reserves in Malaysia's remote and stranded fields to help meet growing demand, especially in Malaysia’s remote and stranded fields, Petronas said.
According to Petronas, once operational, PFLNG 1 and PFLNG 2 are expected to change the landscape of the LNG business where the liquefaction, production and offloading processing of LNG, previously only possible at onshore plants, will be carried out hundreds of kilometers away from land and closer to offshore gas sources.
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