KUALA LUMPUR (Nov 3): Petronas and Italian energy company Eni are set to combine their upstream assets in Malaysia and Indonesia through a joint venture, and they plan to invest over US$15 billion (RM63 billion) over the next five years to accelerate upstream development.

The joint venture will operate as a financially self-sufficient entity. Dubbed NewCo for now, the joint-venture company will be owned equally by both Petronas and Eni when it is formed in 2026.

“This historic partnership between Petronas and Eni is envisaged to set a new benchmark for more efficient, cost-effective and responsible upstream development,” said Tan Sri Tengku Muhammad Taufik, the president and group chief executive officer of Malaysia’s oil company formally known as Petroliam Nasional Bhd.

The proposed joint venture comes at a time when the global oil market is grappling with a massive supply glut and weakened demand pressuring prices. Brent, the global benchmark for crude oil, has declined more than 13% so far this year.

The binding agreement marks Petronas’ first venture into satellite model strategy that involves creating separate entities that can independently access capital markets to finance their own growth and be suitable for specialised investors.

For Eni, the joint venture with Petronas is the latest move using this strategy following similar ventures, such as with Var Energy in Norway, Azule Energy in Angola and Ithaca Energy in the UK.

NewCo will manage 19 upstream assets comprising 14 in Indonesia and five in Malaysia, according to a separate statement from Eni. The plan is to start with a daily production base of over 300,000 barrels of oil equivalent before ramping output to more than 500,000 barrels in the medium term.