Petronas forecasts positive but cautious outlook for oil price recovery

Malaysia’s state energy company Petronas said on Tuesday it expects a positive outlook in the next three years for the company, buoyed by a recovery in crude oil prices, partial relaxation of stringent Covid-19 protocols and an increase in plug and abandonment projects for planned retirement of oil and gas wells.

But the national oil company cautioned in its Activity Outlook report for 2022-24 that it anticipates recovery in oil demand from the impact of the pandemic to remain fragile in the next few years. 

The industry is optimistic about economic recovery but needs to be ready to face oil price volatility, Petronas said in the report.

While an accelerated energy transition will create further challenges to the traditional oil and gas business, players must be innovative and remain cost-competitive to ensure projects and production remain feasible in the uncertain economic climate for the sustainability of the industry, said Freida Amat, Vice President of Group Procurement at Petronas.

“Petronas foresees a positive outlook for drilling rigs activity and a steady outlook for fabrication of fixed structures and subsea facilities, supply of linepipes, underwater services, as well as decommissioning activities. However, a modest outlook is expected for installation of floatover barges,” she said in a statement issued in conjunction with the release of the report.

The annual report provides insights into industry trends, demand outlook and the upcoming activities of the company’s upstream, gas and new energy and downstream businesses.

Petronas said the information in the latest report has been calculated based on when a specific activity begins and not by contract award. “The outlook for 2022 to 2024 is based on full-year utilisation. Actual numbers may vary based on campaign durations and/or optimisation, project deferment and cancellation, etc. Actual numbers are based on data as of October 2021,” it said in the report.

Global oil prices saw a volatile November due to the new Omicron variant but have largely recovered from the pandemic lows and are up about 50 percent this year, supported by improved demand and OPEC+ supply cuts.

Petronas also said it was targeting domestic hydrogen production from 2024, starting with blue hydrogen – which uses natural gas as a feedstock, and then moving to green hydrogen, which uses water.

Highlighting hydrogen as the fuel of the future, Petronas pointed out that by 2050, hydrogen production is expected to account for 10 percent of natural gas use and 25 percent of renewable additions, with the most rapid adoption of low-carbon hydrogen taking place in developed economies such as Europe, Japan and South Korea.

According to industry experts, hydrogen is forecast to contribute up to 18 percent of the global energy mix by 2050, eliminating six giga tonnes of CO₂ annually and requiring a total investment of US $11 trillion.

“With much emphasis on decarbonisation goals, global hydrogen demand is forecasted to accelerate around 2030 driven by policy, technology, market competitiveness and cost reduction. Prior to 2030, demand for clean hydrogen is expected to increase steadily as industries start to decarbonise their existing operations by switching to clean hydrogen,” Petronas said in the report.  

“The versatility of hydrogen as fuel, heat source and feedstock allow for the demand to further grow and be used in many other sectors such as transport, industries and power generation,” it added.