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February 14, 2016
Petronas Anticipated Townhall
IF you casually ask any employee of Petroliam Nasional Bhd (Petronas) if they have been affected in any way by the plummeting crude oil prices they are likely to say this: 'ask again in early March'..
Because that’s when Petronas’ top management will be addressing all employees in what is turning out to be one of the most highly anticipated townhall briefings in the history of Malaysia’s only Fortune 500 company.
On that day, likely to be Friday March 4th, president and CEO Datuk Wan Zulkiflee Wan Ariffin is expected to announce some significant measures to reduce the operational expenditure (opex) of Petronas, among other things.
Not surprisingly, the water-cooler chatter in the company is now centred on what the chief executive of the national oil company will say in the townhall address.
Sources say among options that may come out is a pay cut among senior management of the national oil company. Another possibility is a reduction in the number of working days for some employees.
Previously, Petronas’ management have denied contemplating the laying off of employees. It is unclear if this is still the case today.
The affable Wan Zulkiflee has had a challenging task of steering Petronas through it toughest times amidst the current oil price rout since taking over the reins last April.
Besides having to make tough decisions to reduce costs, moves that impact the livelihoods of the thousands of employees, contract staff, agents, contractors and other business associates of the oil giant, Wan Zul had also inherited two massive projects which had been entered into by Petronas when the price of oil was above US$100 a barrel. These are the Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor and the US$36bil (RM137bil) Petronas-led Pacific NorthWest LNG project in Canada.
Sources say that at the coming town hall address, Wan Zul will reaffirm Petronas’ commitment to both projects. This would not be a surprising move, considering that Petronas has been indicating its support for these projects throughout this oil crisis. Petronas has indicated that there is wisdom in such a move as the renegotiation of contracts in the current climate can lead to a lower cost of build up of these projects. Petronas could then reap the benefits of that when the price of oil recovers.
About a month ago, Wan Zul wrote a note to all employees of Petronas, noting among other things that the company needed to undertake another round of cost cutting and a change in business model.
In the note, Wan Zul also acknowledged the general concern and anxiety of Petronas’ staff on their job security and had said this: “I believe that honest, open communication is key to keeping us united as a team and trudging forward together. For now, I sincerely ask for your understanding, cooperation and support in this difficult time. We need to keep on going, keep on striving. There is still much to fight for and as long as we don’t stop, we will move forward.”
The note is a clear precursor to his upcoming townhall address.
Petronas had embarked on cost cuts by slashing opex and capital expenditure since early last year and has a staff strength of reportedly 51,000. Petronas now targets to cut up to RM50bil in costs over the next four years and defer some of its projects.
Last year, Petronas cut its capex by 30% and opex by 20%. It generally allocates more than RM350bil in capex over five years.