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Meanwhile, 11 non-OPEC countries – Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan – made commitments to cut production by 1.8 million bpd among them. Following the deal, the international benchmark Brent crude prices have somewhat improved, starting the year at US$56.82 per barrel before retracting to US$44.82 on June 21, and rebounding to US$64.69 on Dec 11 following the decision by OPEC and its non-member alliance on Nov 30 to extend production cuts for the entire 2018. Brent crude peaked above US$60 per barrel for the first time in more than two years on Oct 28. Although the price is still far below its high of US$115 per barrel in 2014, Malaysia’s oil and gas industry players is adapting to the new low oil price environment by becoming more cost effective. Malaysia Petroleum Resources Corporation (MPRC) President and Chief Executive Officer Datuk Shahrol Halmi said that since the tumbling of the oil price two years ago, global oil companies had swiftly responded by scaling down their exploration and development activities and sought ways to become more cost effective. He said the reduction of projects in the upstream sector resulted in excess capacity in the oil and gas services and equipment (OGSE) industry which in turn contributed to reduction in cash flows for these players. “For the most part, Malaysia’s stronger players have responded quickly to solve the mismatch between cash flows and debt obligations,” he told Bernama. He said these companies’ swift actions to increase their cost efficiency and competitiveness resulted in favourable financial results this year when global oil prices stabilised around the US$60 per barrel level. Petronas Executive Vice-President and Chief Executive Officer (Upstream) Datuk Mohd Anuar Taib said oil and gas industry players have remained prudent in planning, judicious in spending and innovative for the future. “I’m extremely positive because I’ve seen a lot of great work people do in this kind of environment. “A lot of efforts are being put in making sure that even though we are looking at cost reduction, major maintenance and assets integrity efforts continued to be done. This is innovation in term of methods,” he said. However, he said the industry still lacked consolidation among its player to build a more resilient entity to withstand the global headwinds. “I’ve not seen enough realisation of consolidation among the players. We do need to get the service industry to consolidate that they can also look for opportunities to reduce cost among themselves so that all of us can actually maintained a resilient base for the industry,” he said. According to MPRC, there are currently over 3,000 licensed oil and gas companies, of which, over 2,000 are active. Meanwhile, among the highlights of the local oil and gas scene this year was the collaboration between Petronas and Saudi Arabia Oil Company (Saudi Aramco) involving a share purchase agreement worth RM31 billion during the visit of Saudi Arabia’s King Salman Abdulaziz Al Saud to Malaysia from Feb 26-March 1. The agreement would see Saudi Aramco acquiring a 50 per cent ownership in the Petronas Refinery and Petrochemical Integrated Development refinery project and cracker assets. The company will also supply up to 70 per cent of the crude feedstock for the refinery needs. During the year, Petronas also shocked the global oil and gas industry when it scrapped a proposed US$29 billion liquefied natural gas (LNG) terminal project in western Canada in July, citing market conditions made the project “economically unviable”. The national oil company too has relinquished its rights to develop Vietnam’s Blocks 01 and 02 oilfield as part of its portfolio high-grading which put emphasis on high-value creation assets. On the local LNG scene, Petronas’ subsidiary, Malaysia LNG Sdn Bhd (MLNG), signed a Heads of Agreement with Japan’s JERA Co Inc. to supply up to 2.5 million tonnes of LNG annually for three years starting April next year. MLNG has also signed a 10-year LNG supply agreement with Hokkaido Electric Power Company to deliver up to 130,000 tonnes of LNG annually. Petronas also made its first LNG delivery to Thailand under a long-term Sale and Purchase Agreement which would see Petronas LNG delivering up to 1.2 million tonnes per annum (MTPA) of LNG to Thailand’s PTT Public Company Ltd for a period of 15 years. Malaysia’s LNG sector also achieved another landmark with the commercial operations of Petronas state-of-the-art LNG Train 9 plant in January. Petronas said the facility would boost the production capacity of the Petronas LNG Complex by 3.6 MTPA to approximately 30 MTPA and strengthen the company’s position as a leading player in the global LNG business. Another milestone achieved is the successful loading of first cargo of Petronas’s first floating liquefied natural gas (LNG) facility, PFLNG SATU, at the Kanowit gas field, offshore Bintulu, Sarawak. On the upstream business, Petronas has lined up nine explorations block to be awarded in December with US oil major ExxonMobil widely expected to pick up deepwater acreage offshore Sabah, the company’s first foray outside Peninsular Malaysia. Currently, Malaysia has 26 petroleum arrangement contractors, in which among them, operating 349 offshore platforms, four onshore crude terminals, seven onshore gas terminals and two onshore crude and gas terminals. Shahrol said local downstream players have also thrived in the new oil price environment due to renewed emphasis on petrochemicals. “The timing of the Pengerang Integrated Complex project is extremely fortuitous and has provided excellent opportunities for local OGSE players,” he said. On the financial side, things were looking brighter as Petronas’ pre-tax profit for the third quarter ended Sept 30, 2017 rose to RM21.5 billion from RM15.2 billion in the same period last year on the back of a 14 per cent increase in revenue to RM53.7 billion. For the nine-month period, Petronas’ revenue increased by 15 per cent to RM161.8 billion, mainly due to the impact of higher average realised prices and the impact of foreign exchange rate. Another oil major, which has a downstream presence in Malaysia, Petron Malaysia Refining & Marketing Bhd, also more than doubled its pre-tax profit for the third quarter ended Sept 30, 2017 to RM137.92 million from RM60.77 million in the same period last year. Petron’s revenue rose to RM2.56 billion from RM1.82 billion previously. For the nine-month period, Petron’s pre-tax profit also increased more than two times to RM403.97 million from RM170.21 million in the same period last year, while revenue surged to RM7.53 billion from RM5.31 billion previously. Globally, Shell’s after-tax profit in the nine-month tripled to US$9.49 billion from US$3.16 billion in the same period last year while revenue increased to US$219.75 billion from US$168.82 billion previously. Another oil major, BP (formerly known as British Petroleum), recorded a profit of US$3.36 billion in the third quarter of 2017 from a loss of US$382 million in the same period last year. Going forward, MPRC and Petronas are forecasting oil prices to remain within the US$50 and US$60 per barrel range as the market continued to rebalance its supply-demand equilibrium. According to the Petronas Activity Outlook 2017-2019 report, oil prices trading between US$50 and US$60 per barrel are the new normal, while prices above US$100 per barrel are ‘a thing of the past’. The report also forecasts the country’s oil and gas production to fall slightly over the next three to five years to around 1.7 million barrels of oil equivalent per day (mboe/d), down from a peak of 1.8 mboe/d in 2016. In the subsequent report for 2018-2020, Petronas said global oil demand for next year is expected to grow 1.4 million bpd from 98 million bpd currently with 57 per cent of the demand growth, contributed by the Asia Pacific region mainly from China and India. The report also highlighted challenges from US shale producers, which have improved their ability to reduce breakeven cost from their collaboration with service providers, especially with the deployment of innovative technology which have sustained the level of tight oil drilling activities in the US. According to the US Energy Information Administration, US crude oil production is expected to increase 0.7 million bpd, or eight per cent to 9.9 million bpd in 2018 from 9.2 million bpd in 2017. The energy agency also predicted global oil production to reach 100.89 million bpd by the fourth quarter of next year from 98.46 million bpd projected in the fourth quarter of this year. Shahrol said the global oil industry was transitioning from a cartel-controlled pricing scheme to a more market-driven pricing dynamic. “We believe that the equilibrium price is between US$50 and US$60 per barrel, barring any extraordinary geopolitical developments,” he added.