Malaysian Oil Company 'Petronas' Turns to Renewable Energy

Due to Increased Losses from COVID Impact
Restructuring Strategy Focused on Solar and Wind Power

[Asia Economy Kuala Lumpur Correspondent Hong Seong-ah] Malaysia's state-owned oil company Petronas is restructuring its portfolio with a focus on renewable energy projects. This is due to increasing losses caused by a global decline in demand and falling oil prices amid the impact of the novel coronavirus disease (COVID-19). Petronas is the world's fourth-largest liquefied natural gas (LNG) exporter and the only Malaysian company listed among the Fortune 500, a biweekly comprehensive economic magazine in the U.S.

According to local media on the 15th, Petronas has begun drafting a new renewable energy strategy centered on solar and wind power, primarily in the Asia-Pacific region. Petronas expects renewable energy demand in the Asia-Pacific region to be the highest compared to other regions. Additionally, with accelerated development of solar and wind energy technologies, investment costs are predicted to be relatively low.

This shift is due to the uncertain future of the oil industry. The company recorded a loss of 21 billion ringgit (6.022 trillion KRW) in the second quarter. This is the first quarterly loss in 18 quarters since Q4 2015. In contrast, Petronas posted a net profit of 14.7 billion ringgit (4.2015 trillion KRW) during the same period last year. Even after the COVID-19 crisis ends, travel demand is not expected to recover, and demand for transportation oil is predicted to remain sluggish, stagnating until the second quarter of next year.

Since last year, Petronas has started reducing investments from upstream (oil exploration, crude oil sales, and other crude oil production sectors) to downstream (refining sectors producing various petroleum products such as gasoline and heavy oil from crude oil). Looking at Petronas' investments last year, upstream accounted for 51%, the largest share, and downstream accounted for 22%. Compared to gas and new energy development (17%) and others (10%), it is still overwhelmingly high, but the difference is significant compared to 2018 investments. In 2018, the upstream investment ratio was 58%, and downstream investments accounted for 32%. Investments in gas and new energy development were nonexistent until 2018.

Last year, Petronas acquired 100% equity in Amplus Energy Solutions, an energy company, marking its first overseas solar project. This company is a leading solar power company in India and Southeast Asia. This symbolizes Petronas' full-scale entry into the renewable energy business.

Petronas is also increasing renewable energy investments within Malaysia. This year, Petronas signed a solar energy supply contract with Tesco, a major supermarket chain in Malaysia. This is the largest commercial solar energy contract in Malaysia.

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