ID :
394421
Thu, 01/21/2016 - 09:50
Auther :
Shortlink :
https://oananews.org//node/394421
The shortlink copeid
O&G, Energy Companies Pin Hopes On Recalibrated Budget 2016
By Jailani Hassan
LABUAN (Malaysia), Jan 21 (Bernama) -- Oil and gas (o&g) and energy companies in the country are banking on the recalibrated Budget 2016 to work in their favour to help the industry evolve.
The industry players hope that the budget revision would bring shine back to the industry as they are buckling up for another rough year, Yussof Mohammad, Business Council chairman of the Brunei-Indonesia-Malaysia-the Philippines East ASEAN Growth Area (BIMP-EAGA) said.
He said as oil prices were expected to remain low for much longer, companies involved in the o&g and energy industry would continue to face a lot of pressure and this would be prevalent in exploration and production activities, as well as in drilling and oil-field services.
"Companies that aggressively adjust their business models, lower their break-even costs, instill the necessary capital discipline, and develop innovative ways of working with suppliers and partners will even thrive if they execute comprehensive retrenchments,” he told Bernama.
Prime Minister Najib Razak will present the recalibrated Budget 2016 on Jan 28 due to the slumping oil price and global economic downturn.
Yussof, who is also Labuan Malaysia Malay Chamber of Commerce president, said the industry, especially the international o&g and energy companies, had already cut over 1,000 jobs since late last year.
He said contract workers also bore the brunt, with their yearly contracts not renewed, as their employers were not awarded a single contract job since September last year.
“Futures markets are currently suggesting only modest increases in prices in 2016 and 2017. The oil price decline has had a notable impact on investment in oil and gas extraction,” he added.
There are more than 80 o&g and energy companies currently operating in the duty-free Labuan.
Yussof said sluggish prices and uncertainty about the recovery limits of exploration and production activities would lead to spending cuts and lower volumes.
“These cuts will in turn lead to lower revenue for drilling and oil field services companies, which will face persistent equipment overcapacity and need to minimise capital expenditures just to operate near break-even cost levels.
“That means the o&g and energy sector will need to cut capital expenditures further, probably to the tune of 20 to 30 per cent,” he said, referring to an international o&g player’s analysis.
He said there is a need for a drastic change in the industry playbook to ensure that the players would continue to stay afloat in view of the sector's future outlook.
--BERNAMA