Development In The Downturn: PETRONAS Focuses On Knowledge And Information

Tim Haïdar

Following the devastating effects of the economic downturn, companies in the oil and gas sector are now focusing on how to eliminate process failures.

Coupled with the catastrophic impact of the Gulf of Mexico oil spill, the sector is now under a greater deal of scrutiny than ever, and it is essential that organisations learn how to leverage a company's most valuable asset to drive growth, manage risk and maximise production.

As well boosting growth, managing risk and retaining margins, efficient knowledge and information management in the oil and gas sector can give firms the skills they need to strategically manage human capital, bring about organisational change and transform the enterprise, and one company which has realised this early is PETRONAS.

The oil giant PETRONAS recently said it expects the oil and gas industry to remain highly "competitive and challenging", but the company is positioning itself towards a "new reality" through cost optimisation, robust growth strategies and operational excellence, placing a major focus on knowledge and information management.

A statement made by the Malaysian company noted that the current industry environment was "fraught with high costs, elevated trend and volatility of oil prices, and the prospect of margin erosion".

However, it asserted that it had put in place strategies in all of its business segments to deliver a "sound performance" in the financial year.

In the statement, PETRONAS reported quarterly results for the first time, posting a net profit of MR12.3 billion ($2.5 billion) in the April to June period, the first quarter of fiscal year 2010-2011, which was up by nearly 60 per cent on that seen in 2009.

According to the company, the rise was led by higher oil and gas prices and sales volumes for all products, including refined oil products, petrochemicals, gas and LNG.

The organisation has revealed that upstream costs were trending higher due to the escalation of material and service costs and increasingly complex developments.

In addition, there was also greater scrutiny on deepwater operations arising from BP's oil spill in the Gulf of Mexico, which PETRONAS acknowledged made the operating environment tougher.

The company said that it "will continue as a global player but with a greater emphasis on domestic deepwater and unconventional plays to arrest domestic production declines".

Petronas also revealed that it planned to undertake several measures to ensure long-term security of gas supply for the nation, including the proposed construction of the new LNG terminal in Peninsular Malaysia.

Although in the short term there was an oversupply in the LNG market, PETRONAS expected it to re-balance earlier than 2015 amid growing demand.

In its report, PETRONAS revealed that its downstream segment generated a revenue of MR5.8 billion, up 23.2 per cent on last year, with operating profits of MR2.01 billion, down 10.3 per cent from the 2009 year.

According to PETRONAS, the higher revenue reflected greater realised prices as well as a higher sales volume, but operating profit fell due to reduced inventory gains and weakened refining margins.

The company predicted that, with an increased focus on operational excellence driven by improved knowledge and information management, it can drive growth.

It expects to refine margins to trend lower in the coming months as new capacity will come onstream and plants will return from turnarounds.

PETRONAS is also planning to review its business portfolios to enhance its strategic competitiveness, with one of the options being to realign the downstream business into focused sectors.

One thing is clear as PETRONAS sets its sights on further growth - capturing, maintaining and leveraging knowledge will be vital as companies emerge from the effects of the downturn and the Gulf of Mexico spill and drive profits in the right direction.