National oil company Petronas is still reeling from the effects of the oil-price slump. As part of measures to cut costs and remain profitable, it is learnt Petronas has abruptly ended or plans to end the contracts of 14 of its 18 oil rigs within a year. This could save the company billions of ringgit a year as it recuperates and plans its rebound.
Analysts say the decision to cease operations on its rigs is not unusual. In the United States, rig counts have dropped significantly to 876 from close to 2,000 a year ago.
“Petronas has halted, at least for now, activities that cost more than a certain level. These will be reviewed when oil prices stabilise. We don’t know at what level but a more stable price at any point will allow the board to make better decisions,” says Public Investment Bank analyst Mabel Tan.
Analysts have pegged Petronas’ breakeven point for oil production at around US$45 per barrel, and prices over the last six months have been hovering at around US$55 – too close for comfort. - Focus Malaysia