This article first appeared in The Edge Malaysia Weekly on June 9, 2025 - June 15, 2025

Petroliam Nasional Bhd (Petronas) last week announced that it is cutting 10% of its workforce — affecting some 5,000 employees — and freezing promotions as part of a restructuring effort so that the national oil firm will be nimble enough in the face of challenges on multi-fronts, from low oil prices and rising production costs to demand uncertainties and stringent carbon emission requirements.

Moreover, the federal government and Sarawak are still in negotiations over the development rights for the state’s hydrocarbon resources.

Five times more positions are affected than the 1,000 jobs trimmed in March 2016, when the industry slipped into a severe downturn.

The writing is on the wall — challenging times ahead for the oil and gas (O&G) sector not just in the near term but in the longer run.

The good days may be numbered for the local vendors in the O&G industry if they fall short on efficiency. In short, being a local player will not guarantee you lucrative contracts. Each must find ways to survive in increasingly rough waters.

There is also no escaping the question of whether Malaysia’s revenue sources are diversified enough should oil prices weaken more than expected. After all, Petronas’ dividend and tax payments have enabled the federal government to spend beyond its means.

While Petronas is streamlining to become leaner and nimbler to accumulate benefits for the long haul, regardless of oil price volatility, it would have had more capital for investment if there was less demand on it for dividends.

Reducing dependence on oil revenues has been a mission of the past and current governments.

Since the government has no intention to reintroduce goods and services tax, will the planned expansion of sales and service tax help replenish its coffers fast as Petronas tightens ship?

This newspaper might sound like a broken record, but we still raise the question — does the federal government have the political will to continue implementing austerity measures that would possibly upset voters? It is unfortunate that past governments had kicked the can down the road.

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