PETRONAS POISED FOR MORE INTERNATIONAL EXPANSION TO FURTHER DIVERSIFY

By Yong Soo Heong & Tengku Noor Shamsiah

KUALA LUMPUR, Dec 4 (Bernama) -- 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, Malaysia's national petroleum company, 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
(US$1=RM3.60) 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 on 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.

Asked about 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.

On the overall future prospects of Petronas, Milburn-Stone said there was
still a lot of opportunities for growth and expansion.
-- BERNAMA