Malaysia’s Collaborative Industry Response to Low Oil Price€¦ · Presentation at Oil & Gas UK...
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© 2016 PETROLIAM NASIONAL BERHAD (PETRONAS) All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner. Malaysia’s Collaborative Industry Response to Low Oil Price 15 June 2016 Presentation at Oil & Gas UK Conference 2016 15 June 2016 PETRONAS 1 Cost Reduction Alliance (CORAL) 2.0 Programme
Transcript of Malaysia’s Collaborative Industry Response to Low Oil Price€¦ · Presentation at Oil & Gas UK...
© 2016 PETROLIAM NASIONAL BERHAD (PETRONAS)
All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner.
Malaysia’s Collaborative Industry Response to Low Oil Price
15 June 2016
Presentation at Oil & Gas UK Conference 2016
15 June 2016 PETRONAS 1
Cost Reduction Alliance (CORAL) 2.0 Programme
2
Speaker Introduction – Chairman, CORAL 2.0 Steering Committee
Bacho Pilong
Senior General Manager
PETRONAS
1. Update
PETRONAS15 June 2016
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Proven Economic Resilience • 2015 GDP Growth of 5%• On track with New Economic Model: High income status by year 2020• Private-Public investment ratio: 65:35
A Nation of Wondrous Diversity • Malaysia consists of Peninsular Malaysia, and the states of Sabah and Sarawak
on the island of Borneo.• Population: Approx. 28 million people in a melting pot of races and cultures
• Covering 329,758 square km area - landscape features coastal plains rising to forested hills and mountains, the highest being Mount Kinabalu at 4,095.2 m
• A gastronomical paradise and home to colourful festivals• PETRONAS Twin Towers: recently accorded Asia’s Top 10 Landmarks by Trip Advisor - Traveller’s Choice Awards
Malaysia at a Glance
Provided the Winning Formula to the F1 World Champions of 2014 & 2015
Technology as a Differentiator
Changing the landscape of the LNG industry with PETRONAS Floating Liquefied Natural Gas: PFLNG Satu
Developed multiple award winning ionic mercury removal technology voted as the “Most Important British Innovation of the 21st Century”: HycaPure™
PETRONAS at a Glance
PETRONAS 415 June 2016
5
0
20
40
60
80
100
120
140
’96’94’88’86’80 ’90 ’92 ’98’82
-47%
-58%
-68%
’10’84 ’06 ’08’04 ’12 ’14
-24%
’02
-57%
’00
-70%
Financial crisis
Growth in non-OPEC
supplyGulf War
OPEC 10% quota increase and
Asian financial crisis
Tepid economy, Arab Spring
BRENT CRUDEREAL 2015 US$/BBL
5 Years 7 Years 11 Years 2 Years 12-18 Month
Sharp drops in crude prices and the volatility is not new… there are some lessons learnt from past experiences
CORAL 1.0 Program
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$16.2
$10.5
$5.2 $4.6 $3.8
$(4.5)
$(6.5)
$(9.8)
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Exxon Mobil Total Pet Chev Shell Statoil BP Petrobras
FY2015 Net Profits (Bil USD)
Source: Investor Relations pages of Exxon-Mobil, Total, Petronas, Chevron, Shell, Statoil, BP, Petrobras
58% 18% 56% 76% 80% 44% 51% 20%
xx% = Profit decrease in 2015 v/s 2
PETRONAS
Integrated Oil companies globally have suffered steep decline in their financials as a result of the sharply lower crude oil prices through 2015
15 June 2016
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$4.3
$1.3
$0.8
$(2.0)
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Schlumberger Halliburton Transocean Baker
FY2015 Net Profits (Bil USD)
$11.0 $10.0
$(60.0)
$(90.0)-100.0
-80.0
-60.0
-40.0
-20.0
0.0
20.0
MMHE Uzma Bumi Armada UMW
FY2015 Net Profits (Mil USD)Global
Malaysian
Source: Investor Relations pages of Schlumberger, Halliburton, Transocean, Baker Hughes, MMHE, Uzma, Bumi Armada, UMW O&G
PETRONAS
Service provider companies have struggled thanks to upstream capex spending cuts– Malaysian service providers have suffered as well
In response to the rising costs and declining oil prices, MPM launched an industry-wide program, CORAL 2.0, to shape the industry landscape
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• 25 operators collaboratively driving cost optimization through 11 focus initiatives
• RM 600 million realized Savings in FY 2015, approx. 5% of entire industry spend
• Structured Industry stakeholder engagements to generate ideas & opportunities and to support initiatives
Lower Industry cost base 1
• Efficiency improvement through insights from cross operator benchmarking and leaner operations through increased asset sharing
Achieve world-class efficiency & lean operations through benchmarking & asset sharing
2
• Global innovations being shared across operators resulting in quicker adoption of novel cost optimization technologies
Infuse global innovations through Industry collaboration 3
Ensure competitiveness through an engaged ecosystem
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CORAL PMO team has ensured steady progress through regular governance meetings with Operator CEOs and PETRONAS Leadership
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CAPEX and OPEX
Benchmarking
Joint Sourcing Materials
Joint Sourcing Services
(Logistics)
Late Field Life Optimisation
Logistics Control Tower
Low Cost Drilling
Warehouse Centralization &
Common Stocking
600 MilUSD
As at 31 Dec 2015
Source: CORAL 2.0 Programme Dashboard as at December 2015
Achievements in FY2015 include a series of quick wins in addition to shaping and running the 11 initiatives to…
…. deliver cost savings of USD 600 Million
Technical Standards
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In FY2015, we have started and established 11 nationwide initiatives with a clear view on target end-states and implementation roadmap
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Technology Replication Thrust
<USD 25 M>
CORAL 2.0 Initiatives 2016
Joint Sourcing (Services & Material)<USD 65 M>
Blasting & Painting Programme<USD 7 M>
Industry Mutual Hold Harmless<USD 3 M>
Cost Benchmarking<USD 80 M>
Integrated Logistic Optimisation<USD 110 M>
Low Cost Drilling<USD 110 M>
Late Field Life Optimisation
<USD 75 M>
Asset Enhancement<USD 11 M>
Technical Standards<NA>
FY2016 Saving Target
500 MilUSD
1
2
5
6
3
4
7
8
9
Data, System, &ICT Infrastructure
Sharing<NA>
11
10
NewExistingLegend:
In 2016, CORAL 2.0 Programme has continued to collaborate with Operators & Service Providers to deliver target cost savings of USD 500Mil
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Our engagement with other industry bodies has also generated many ideas on cost optimization
PETRONAS
Technology Replication Thrust (TRT) + Malaysia Petroleum Resources Corporation (MPRC) for
– Asset Integrity
– Operational Excellence
– Decommissioning
Technical Standards + Malaysia O&G Services Council (MOGSC) on fit-for-purpose WHP designs
Logistics Control Tower + Malaysia Shipowners' Association (MASA) to align vessel inspection standards
Serve as scope for Malaysian Independent Design Centre
15 June 2016
The Programme team continues to respond to multiple challenges
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Pace “What’s in it for me?”
Limited Urgency
Cultural mindset
Need for action -Limited “Mission Mode” mentality
This time is no different!
Resistance to share data, insights
“I give more than I take”
Outcomes
National interests
PETRONAS vision
Operators’ plans
Government bodies
Service Provider development
BalanceEngage
Common platform for everyone
Channelize energy
Appeal to personal missions
Trust
Government
Our Return of Experience from running CORAL 2.0 Programme
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Visibility
Cooperation
Alignment
Nation-wide Platform
Collective Industry End-state
Create visibility around cost build-up across entire industry
Enable tracking of cost savings based on consistent definitions
Highlight and eliminate siloed activities and barriers to initiatives together
Harmonise insights gathering from different touchpoints in ecosystem
Put national/ industry interest first
Understand and encourage positive Operators and Service Provider behavioursthrough insights
PETRONAS MPM-led, Industry driven
Active governance mechanism with participative decision making
Guided by end-state view for initiatives based on collective direction
Operators
Service Providers
Final Thoughts
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Adopt mindset of “Lower for Longer”
Collaborative approach through CORAL platform
CORAL has delivered results for Upstream Malaysia
Structural changes to ensure sustainability
Make Malaysia preferred investment destination
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2
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Share, provide feedback and/or find out more on CORAL 2.0 Programme
THE END
PORTAL
PHONE
OFFICE
https://platinum.petronas.com/Pages/CORAL
CORAL 2.0 PMO: 03-2392 0827
CORAL 2.0 War Room, Level 27, Tower 1, PETRONAS Twin Tower, KL
16PETRONAS15 June 2016
15 June 2016 Thank You!
