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Petronas splits exploration, production unit to enhance ownership, accountability

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PETALING JAYA: Petroliam Nasional Bhd (Petronas) is splitting its exploration and production (E&P) division into domestic and international segments to make the businesses more focused and accountable, sources said, adding that the oil giant was benchmarking this move against what Shell, ExxonMobil and Total had done recently.

Previously, Petronas’ E&P unit had not clearly demarcated its international and domestic operations.

The move is said to be part of a plan by Petronas to concentrate more on its domestic and international roles that require different skill sets, considering that it competes internationally with oil giants, whereas locally, it is the owner of the hydrocarbon deposits.

It is also aimed at “propelling ownership and accountability to empowered businesses,” said a source.

Petronas has also given a clearer focus on its upstream and downstream divisions.

It is under its upstream division that the domestic and international separation is made.

Notably, under its upstream segment, the domestic division is to be accountable for “commercial development of Malaysia’s resources from the exploration to the monetisation of oil and gas (O&G) in Malaysia,” said a source.

Similarly, the international division of upstream is to be accountable for the commercial development of international resources from the exploration to the monetisation of O&G. It is also to become accountable for the development of unconventional resources globally.

Petronas already has made significant inroads into unconventional resources via its acquisition of Progress Energy in Canada, which is focused on drilling for shale gas in Canada.

Parked within the upstream division is a unit called Malaysia Petroleum Management, which is touted as the single upstream body and single reference point for all upstream regulation and governance.

Petronas is also seeking to continue its push towards becoming a well-governed organisation that is also commercially viable.

Sources also added that Datuk Wee Yiaw Hin and Datuk Mohd Anuar Taib are slated to be given new responsibilities.

There is likely to be another significant elevation for Anuar, who had joined Petronas in 2012 from Shell Malaysia where he was the youngest chairman of its Malaysian operations.

Anuar heads Petronas Carigali Sdn Bhd, the E&P arm of Petronas. It had been speculated that Anuar would eventually replace current chief executive and president Tan Sri Shamsul Azhar Abbas when the latter’s term expires.

Wee, who joined Petronas in 2010, is executive vice-president of E&P and a 30-year veteran in the industry, which include high-profile stints at Shell and Talisman.

It a recent interview with StarBizWeek, Wee spoke about how he managed the upstream business as if it were a listed company.

Petronas has also set for itself aggressive targets, including an average production growth of 3.5% per year up to 2020 and a reserve replacement ratio (RRR) of 1.1 times. RRR is the amount of O&G added to a company’s proven reserves versus what it produces during the year.

A ratio of 1.1 indicates that Petronas has a good balance between hydrocarbons produced and discovered. Petronas achieved an RRR of 1.3 times in 2013.

Petronas ranks fifth on the global ranking of O&G firms, which is topped by the super-majors Shell, BP, Total and ExxonMobil. It has ambitions of moving up into fourth position.

Petronas has also emerged as a case study by other national oil companies such as Vietnam and Indonesia.

– THE STAR

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