Petronas poised for more M&As

 

PETROLIAM Nasional Bhd’s (Petronas) current strong financial reserves will put it in a strong position to be more aggressive in mergers and acquisitions to expand its business internationally and further diversify its investment portfolio, according to Wood MacKenzie, an international company specialising in commercial analysis and insights on the energy industry.

Andrew Milburn-Stone, its vice president for the Indian sub-continent and South-East Asia, said Petronas has been the most active national oil company (NOC) in the last one year in terms of acquiring more assets.

In an interview with Bernama, he said acquisitions in the past had always played an important role in Petronas’ international expansion and these could be seen from its strong presence in Australia, Egypt, Sudan, Indonesia and Myanmar.

Tom Ellacott, Wood MacKenzie’s senior analyst at its London office, said in a telephone interview that the current prices of crude oil of around US$50 a barrel and the likelihood of distressed companies over the horizon as a result of such pricing that could turn into a buyers’ market for cash-rich companies like Petronas.

Petronas, with a net cash reserves estimated at US$25.3 billion this year, could capitalise on such a situation to acquire strategic small- to medium-sized energy companies to expand internationally, he said.

“We have seen smaller companies struggle as they can’t get access to credit for capital-intensive investment programmes. These companies may want to sell and this may provide an opportunity for Petronas,” said Ellacot.

He said the potential new areas of focus for Petronas were likely to be Africa, Australia, Central Asia and South-East Asia.

However, Milburne-Stone said Petronas also had a lot going for it domestically, especially in the upstream sector, with its large exploration portfolio, world-class LNG (liquefied natural gas) facility and emerging deepwater play.

Ellacot said international players still looked at Malaysia as an opportunity to grow their international business and there had been a number of new entrants to the upstream sector of late.

He said Petronas has been a good role model for other NOCs to follow and determine how best to develop their upstream capabilities.

He said the unique arrangement where Petronas was also the regulator of the Malaysian oil and gas industry and in control of a licensing system from among foreign contractors also enabled it to tap sources of revenue from exploration and production activities as well as benefiting from technology transfer through working with these foreign companies.

Ellacott said this had enabled Petronas to have good working relationships with major international oil companies and legacy players like Shell and Exxon-Mobil as well as new entrants like Murphy Oil, Conoco Phillips and Nippon Oil.

He said Petronas had been successful in stimulating activity and establishing strong relationships with key players like Shell and Exxon-Mobil.

Asked about Petronas’ investment in the Australian LNG sector, Ellacott described it as a strategically attractive as it would not only give the national oil company a new potential LNG supply source but also give it its first exposure to the unconventional gas sector.

He expected Petronas to explore further opportunities in the Australian LNG sector.

Asked how the current low prices of crude oil would impact on Petronas, he said Petronas would probably continue to take its long-term view in evaluating any opportunities.

On possible competition from other NOCs and IOCs, Ellacot said Petronas was well-positioned in view of its strong financial position and broad ranging technical capability. — Bernama