Wednesday, 15 April 2015

Petronas Carigali cuts salaries by 20%

Petronas Carigali Sdn Bhd has asked its staff to take a 20% pay cut in view of the challenging market conditions caused by low global oil prices, a source told SunBiz.

According to a memo obtained by SunBiz, Petronas Carigali indicated that a 20% reduction in current salaries would be required effective May 1, 2015.

The company said in the memo that it intends to continue investing to sustain production levels despite the low oil price environment affecting its expenditure and projects feasibility. However, it would be challenging to do so at the current cost structure and as part of its cost optimisation efforts, the company has decided to revise salary rates.

Petronas Carigali is the exploration and production (E&P) subsidiary of Petroliam Nasional Bhd (Petronas). It explores, develops and produces oil and gas in Malaysia via production sharing contracts (PSCs). It is understood that 80% to 90% of the company's cost base is via its partner contractors.

However, Petronas has denied having any salary revision or retrenchment plans for employees of Petronas Carigali.

"In reference to reports that Petronas is to carry out salary cuts and retrenchments to the employees of Petronas Carigali, Petronas would like to clarify that the reports are not true," said Petronas in an email response to queries by SunBiz.

"As far as cost optimisation is concerned, Petronas will make capital expenditure deferments by up to 30% for the next three years as well as reductions in operational expenditure in response to the recent steep decline in oil prices," it said.

It added that the deferments would reflect the change of environment in the global oil and gas industry to ensure its resilience through the low oil price period.

Last month, Petronas warned of a "bad" outlook for 2015, after reporting its first quarterly loss in the fourth quarter of 2014, citing lower global oil prices affecting profitability.

Its dividend contribution to government coffers for the financial year ended Dec 31, 2014 was lower at RM26 billion, compared with RM27 billion a year ago.

For the fourth quarter ended Dec 31, 2014, Petronas incurred a net loss of RM7.28 billion mainly due to assets impairment losses as a result of the steep decline in oil prices.

During the media briefing, then president and group CEO Tan Sri Shamsul Azhar Abbas said the group was still reviewing its plan for the coming two years, with an expectation of oil prices to be in the range of US$50 to US$60 per barrel for at least two years. Its oil price assumption for 2015 is US$55 per barrel.

Shamsul said key oil and gas projects had been deferred until oil prices recover while risk service contracts would only be viable when oil prices stay above US$80 per barrel.

Operating expenditure would be cut by as much as 30%, but assured employees that no retrenchment would be made as manpower could be remobilised to other areas.

Petronas also indicated 10% and 15% capital expenditure cuts for 2015 and 2016 respectively, which works out to RM20 million to RM30 million over the next few years.