KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) is leading the Cost Reduction Alliance, Coral 2.0, an industry-wide effort involving 25 petroleum arrangement contractors (PACs) that aims to inculcate a cost-conscious mindset that will pave the way for a structural change in Malaysia’s upstream business environment.

“This is not a mere cost-cutting exercise. It is about ensuring the robustness and sustainability of our business,” Petronas chairman Tan Sri Sidek Hassan said at the opening ceremony of the 15th Asian Oil, Gas and Petrochemical Engineering Exhibition (OGA 2015) yesterday.

“What we can achieve individually, we can achieve even more as an alliance. The sum will definitely be greater than its parts,” he said.

Sidek described the oil and gas industry as facing a “Tale of Two Cities”, as these are the best of times and yet the worst of times for the industry.

“Our industry output is growing at a rapid pace, thanks to shale revolution that has transformed the US market. The US now produces around nine million barrels per day, an 80% growth from the five million barrels produced in 2008. Global oil demand is expected to increase by 1.1 million barrels per day in 2015,” he said.

However, Sidek said these are also “the worst of times” as crude prices have come down from the highs of US$115 in June last year to the current norm of US$60 plus. Operating costs that shot up during the US$100 per barrel period has not come down as fast as crude prices. Industry estimates puts anticipated layoffs at over 100,000 worldwide during this down cycle.

He pointed out that it might not be possible for the industry to predict the movement of oil price, but it can prepare the industry to “weather the fluctuations” through continuous innovation.

He said the US$16 billion refinery and petrochemical integrated development, or Rapid, in Pengerang is proceeding as planned. He added that the Petronas floating liquefied natural gas (PFLNG 1), slated to operate at Kanowit field offshore Sarawak, shall be on site by 2016. It will also proceed with the regasification terminal 2 (RGT2) in Pengerang after the completion of RGT at Sungai Udang.

OGA 2015 garnered over 2,000 exhibitors from more than 50 countries, with a display of over RM2 billion worth of technology in the oil, gas and petrochemical industries. OGA 2015  is expected to attract 23,000 trade visitors.

This article first appeared in The Edge Financial Daily, on June 3, 2015.