Petronas urges ASEAN national oil firms to cooperate

The chief of Malaysian oil firm Petronas Monday urged national oil corporations (NOC) in Southeast Asia to form alliances to counter the influence of growing industry giants.

Mohamad Hassan Marican, Petronas president and chief executive, said there appeared to be a new round of consolidation among medium-sized multinationals hit by weak oil prices, AFP reported.

The recent acquisitions by United States oil producers Conoco and Amerada Hess highlighted this, he said.

"There is greater urgency for NOCs, being niche players, to work even closer together to keep pace with the industry giants or risk being marginalized and forced to swallow the terms others will impose on us," he told the ASEAN Council on Petroleum Conference.

"Maybe in the not too distant future... we may see the NOCs coming together, leading towards the formation of so-called regional supra-nationals and closer to us, an ASEAN super major."

Hassan said the global oil and gas industry would be reshaped by developments in the aftermath of the September 11 terror attacks on the US.

"There are indications towards a more volatile Middle East, the cradle of oil for the world," he said, citing political tension and negative developments in oil-rich Saudi Arabia, Iran and Iraq.

The Association of Southeast Asian Nations (ASEAN) was also not spared of its share of political tensions and instability, and this would push up the cost of doing business, he said.

Over the short-term, Hassan said the global economic downturn and the forecast of warmer winter would create excess oil supply and further depress prices which have hit two-year lows since the US tragedy.

Under these circumstances, he said ASEAN NOCs must evolve into "more efficient and competitive bottom-line driven companies."

Hassan said Petronas was finalising negotiations with Indonesia's Pertamina and PetroVietnam to form three-party joint-ventures in projects in their respective countries.

He also urged ASEAN to tap its vast gas reserves of 235 trillion cubic feet as the region's oil reserves, which stood at some 11 billion barrels as at January, was insufficient to meet future energy needs.

ASEAN is the world's top producer of liquefied natural gas with 60 million tonnes yearly. Borneo island -- shared by Indonesia, Malaysia and Brunei -- is the single largest producer with 52 million tonnes.

"ASEAN must therefore tread with caution and prudence to ensure a proper and effective development of its indigenous resources," he said.

Towards this, Hassan said the proposed Trans-ASEAN gas grid linking the national gas network of ASEAN countries would provide the "infrastructure to monetise the region's vast natural gas resources" and fuel the region's industrialisation.

"While we acknowledge that many obstacles exist, we are confident that the Trans-ASEAN Gas Grid will be fully realised by the year 2015."

He later told reporters the grid project faced problems in terms of regulatory, fiscal and technical issues but it could be completed before 2015 with strong support and political will of all ASEAN members.(*)