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Petronas returns to profit on oil, plans clean energy unit

© BloombergPetrona is planning to sanction the Kasawari Phase 2 project in Malaysia this year
Petrona is planning to sanction the Kasawari Phase 2 project in Malaysia this year

Malaysia’s state oil company Petronas swung to profit in the final three months of 2021, due to a smaller impairment loss, higher earnings and elevated crude oil prices.

Petronas posted net income of 13.4 billion ringgit ($3.2 billion) in the December quarter, versus a 1.1 billion ringgit loss a year earlier, the company said in a statement on Tuesday. Revenue climbed 74% to 76.6 billion ringgit.

Full-year profit stood at 48.6 billion ringgit, compared with a loss of 21 billion ringgit in 2020, as the company rode a rally in crude prices that lifted incomes of large oil producers from Russia’s Rosneft PJSC to BP Plc. Brent prices have since moved higher and surged past $105 last week after Russia’s invasion of Ukraine roiled markets from energy to metals and grains.

“As we speak, the numbers are in three digits, $100-$103,” group chief executive Tengku Muhammad Taufik said at a briefing. “This is a bit of a departure of what we believe fundamentals should be.” Oil should be in the $70-$80 range after factoring in investments and the risk of higher supplies from OPEC+, he added.

The company paid 25 billion ringgit in total dividend to the government last year, according to the statement. That compares with a 34 billion ringgit payout in 2020, of which 10 billion ringgit was a special dividend.

Carbon Management

Petronas will set up an entity by the middle of the year to focus on renewable energy, blue and green hydrogen and green mobility, Muhammad Taufik said. That confirms a report by Bloomberg last month saying Petronas plans to launch a new unit in the clean energy business.

It will form a unit to manage carbon storage from its emissions, he said.

Petronas’ capital investments in 2021 dropped 9% to 30.5 billion ringgit as several projects were hurt by prolonged movement restrictions and supply chain snarl-ups, Group Chief Financial Officer Liza Mustapha said. Activities have been picking up from early this year as virus cases ease and countries reopen international borders, she said.

The company expects capex expenditure to return to 40-50 billion ringgit this year, up from 30 billion ringgit spent over the past two years, Muhammad Taufik said.

Petronas, Malaysia’s only Fortune 500 firm, exited its ventures with Lukoil after the sale of its Azerbaijan business, though it has a collaboration with Gazprom, he said. The company evaluates the geopolitical risk at the country level on all of its overseas operations.

“We are not going to be rushing to make a decision,” he said.

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