PETRONAS: NOCs expand globally with increasing autonomy, financial strength

Posted on 15 May 2013

By Joanne Liou, associate editor

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Dato’ Wee Yiaw Hin, PETRONAS executive vice president of exploration and production, described the transformation of the company since its inception in 1974 to a Fortune 500 company with increasing global assets, at the 2013 OTC in Houston on 6 May.

National oil companies (NOCs) continue to assume an increasingly meaningful role in the oil and gas industry, a role that may not have been expected just a couple of decades ago, Dato’ Wee Yiaw Hin, PETRONAS executive vice president of exploration and production, said at the 2013 OTC in Houston on 6 May.NOCs learned from the IOCs to take a more meaningful role in management of their own assets – in the development and operations of their own assets,” he stated. Further, with increasing strategy and operational autonomy, the capacity that they’ve acquired and their financial strength, NOCs are pushing expansion outside their home countries and across the globe, he added.

NOCs hold approximately 80% of the global reserves and production, according to Dato’ Wee, and the percentage of reserves is “expected to grow as (NOCs) expand and others find more globally.” Drawing upon PETRONAS’ transformation, he explained that when the company formed in 1974, its main role was to act as a local regulator and manager of domestic research. Throughout the 1980s to 1990s, “PETRONAS started to build a lot of integrated upstream and downstream and gas projects successfully,” he noted. The company entered the international market in the ‘90s, and by 2012, Fortune Magazine ranked PETRONAS 68 and 12 in revenue and profit, respectively, in its annual listing of Fortune Global 500 Top Companies.

Operating in 55 countries, “PETRONAS is now a fully global and integrated oil and gas company,” Dato’ Wee said.

Crediting the company’s success to strategic and operational autonomy, Dato’ Wee noted that its growth has been unencumbered by governmental bureaucracy and restrictions, and PETRONAS embodies the principles of an incorporated company. “We will comply in terms of strong corporate governance, an independent board and management system,” he said. “We believe that this business model is something we can work with now, globally and in Malaysia. We should be able to stand on our own and be treated in the same way we treat the IOCs.”

PETRONAS’ daily production of 2 million bbl is set to grow by approximately 2.5% a year over the next five years via a focus on three areas: an aggressive EOR program, innovative risk service contracts for marginal and difficult fields, and aggressive exploration to grow domestic reserves and HPHT and deepwater plays, Dato’ Wee explained.

One significant difference between NOCs and IOCs continues to be the fact that NOCs often have a broader role to play in supporting the economic growth of its home country. Growth at PETRONAS, for example, has led to a 10-fold increase in economic activity in Malaysia, Dato’ Wee said. He also encouraged international service contractors to establish a presence in Malaysia, noting the continued need for more capability and technology. “We encourage the transport of technology and capability to our industry through a partnership or JV with a local service contractor,” he said. International service contractors are also encouraged to invest in Malaysia through manufacturing plants and engineering and service centers. “Today, we have 90 active PSCs in Malaysia, and we have some 30 IOCs participating and operating in Malaysia. If you can bring technology and capability, you can be competitive and you can perform; we welcome you to be successful with us.”

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