KUALA LUMPUR — Petroliam Nasional Berhad (Petronas) plans to cut spending by as much as 50-billion ringgit ($11.4bn) over the next four years and review its business structure, as a slump in oil prices hits profits at the Malaysian state firm.
The troubles at Petronas, which brings in nearly half of Malaysia’s oil revenue, are bound to add pressure to the southeast Asian economy, already reeling from a slide in the ringgit and political uncertainty due to a scandal surrounding state investor 1Malaysia Development.
Petronas said in November it would cut its dividend to the government this year by nearly 40%, after reporting a 91% drop in profit, and analysts say the company could further reduce its contribution to the exchequer.
"We will go through another round of capex (capital expenditure) and opex (operating expenditure) review, to target cuts up to 50-billion ringgit over the next four years. This means that we are going to have to defer some of our projects," CEO Wan Zulkiflee Wan Ariffin said in an internal memo on Monday.
A copy of the memo was seen by Reuters.
In February last year, Petronas said it planned to cut capital spending 10% and operating expenses by up to 30% last year. It also said at the time that it would cut capital spending 15% this year. It had spent about 65-billion ringgit in annual capital expenditure in 2014.
"We have also made a strategic decision to begin a review of Petronas’s business operating model for better efficiency in response to the external environment," Mr Wan Zulkiflee said.
Petronas was not immediately available for comment.
Malaysian Prime Minister Najib Razak, facing lower revenue from the energy sector, is expected to make changes to this year’s budget later this month to adjust for falling oil prices. The budget assumed oil at $48 per barrel. Global oil benchmark Brent is now trading near $29.