Malaysia’s national oil and gas company Petronas is planning this year to launch a new energy transition entity and will also establish a carbon management unit, but both in parallel with growing its traditional hydrocarbons business.

Petronas revealed ambitious plans on Tuesday to scale up its new energy business, with the establishment of a new independent entity that will “focus fully” on cleaner energy solutions that will capture opportunities in the energy transition alongside its core portfolio.

This new entity, that will be launched “sometime in the middle of the year” and is yet to be officially named, will have three main offerings: renewables, hydrogen and green mobility.

“The ambition is for this entity to become eventually uncompromisingly free to solve customers’ needs for clean energy solutions and support the shared global aspiration for a lower carbon future,” said Petronas chief executive Tengku Muhammad Taufik.

Petronas is also setting up a centralised carbon management unit, which will focus on accelerating the company’s decarbonisation efforts across its entire integrated value chain by managing what is likely to be a carbon storage portfolio for emissions produced from its operations.

This unit will also potentially establish a regional storage hub for carbon emissions as a revenue generator.

“With the launch of our new entity in mid-2022 and the set-up of our Carbon Management Unit, it is envisaged that Petronas will evolve into an energy ‘superstore’ that will provide customers with a suite of energy and solutions that powers businesses and fuels progress in a just and sustainable manner,” he said.

“Petronas must take bold, decisive actions now or risk missing out on this very narrow window of opportunity to navigate the energy transition successfully.”

However, Tengku Muhammad Taufik stressed that oil, natural gas and liquefied natural gas will remain key pillars of the company’s future business operations.

“I want to emphasise that Petronas is not abandoning hydrocarbons even as we take a phased shift to integrate more renewables and lower carbon solutions, as well as specialty [sic] chemicals, into our portfolio.”

The company is already making inroads into lower carbon solutions. One such initiative involves a joint feasibility study with Japan’s Sumitomo Corporation and Tokyo Gas for the production of carbon-neutral methane.

The study will explore the concept of methanation by reacting green hydrogen produced from renewable energy with carbon dioxide. Through this process, CO2 emissions from the combustion of the carbon-neutral methane will be offset with the CO2 separated or captured during production, noted Petronas.

In tandem, the company continues to expand its traditional hydrocarbons operations at home and internationally.

Hoping and praying

Tengku Muhammad Taufik on Tuesday confirmed that Petronas is still targeting the final investment decision before year end for its next floating liquefied natural gas project.

The JGC Corporation-Samsung Heavy Industries consortium and Italy’s Saipem are going head-to-head in a dual front-end engineering and design competition for this near-shore FLNG project in Sabah. Dubbed ZLNG, the project will have a minimum capacity of 2 million tonnes per annum. The novel FLNG facility is scheduled to be ready for start-up by the end of 2026.

“We are hoping and praying that this [project] will achieve FID by the end of this year,” he said.

Back in the black

Petronas posted a profit after tax of 48.6 billion ringgit (US$11.59 billion) for the financial year ended 31 December 2021, bouncing back into the black from a 21 billion ringgit net loss one year prior.

Revenues in 2021 totalled 248 billion ringgit, supported by surging commodity prices driven by the recovery in global energy demand as key economies reopened and travel restrictions eased amid higher Covid-19 vaccination rates around the world.

Earnings before interest, tax, depreciation and amortisation increased to 100.5 billion ringgit, primarily attributed to higher revenue, partially offset by an increase in product costs. Accordingly, cash flows from operating activities improved to 78.6 billion ringgit last year.

Petronas’ total assets stood at 635 billion ringgit at the end of 2021 versus 574.1 billion ringgit on 31 December 2020.

The company made a profit after tax of 13.4 billion ringgit in the fourth quarter of 2021, reversing a 1.1 billion ringgit net loss in the same three months of the previous year.

Petronas in 2021 recorded average total production of 2.275 million barrels of oil equivalent per day, up from 2.209 million boepd in 2020, mainly due to higher crude oil production from international operations coupled with higher natural gas production, contributed by stronger demand for both Malaysia and international operations.

The company last year brought on stream 21 projects — 17 brownfield and four greenfield.

It also took the final investment decision on 22 projects — eight in Peninsular Malaysia, eight in Sarawak, two in Sabah, two in Indonesia and one apiece in Brazil and Turkmenistan.

Petronas also made eight discoveries in 2021 — six off the coast of Sarawak and Sabah in East Malaysia, one discovery offshore East Java in Indonesia, and one discovery offshore Brunei.

Other highlights last year included Petronas and its consortium partners winning the Sepia field, located in the Santos Basin, during Brazil’s Second Transfer of Rights Surplus Volume Bidding Round in December.

This marked Petronas’ entry into the prolific Santos Basin, strengthening its ventures in Brazil and presence in the Americas in line with the group’s global growth strategy.

“Petronas’ strong performance in 2021 bears testimony to the dedication of our workforce. Coupled with a robust integrated energy portfolio, Petronas has remained resilient after two years of extreme disruptions to the energy ecosystem, positioning us better to capitalise on market recovery,” added Tengku Muhammad Taufik.

“However, even as we progress with relatively steadier footing, Petronas’ focus will continue to be in safely delivering commercial and operational excellence. We remain committed to exercising discipline when reinvesting to both strengthen our core and grow our portfolio, even as we prudently manage our financial commitments and debt obligations.

“We are determined to seize new opportunities for sustainable, profitable growth as we uphold our responsibility as Malaysia’s national oil company and lay the foundation for our future growth.”

Reporting its 2021 results on 1 March, Petronas said that the industry is expected to continue to operate in a challenging environment due to market uncertainties and heightened geopolitical risks.

“Amidst these challenges, the group will focus on executing our growth plans and sustainability efforts while remaining committed to deliver operational and commercial excellence.”