KUALA LUMPUR: Finance Minister Lim Guan Eng said the forecast rebound in crude oil prices bodes well for the Malaysian oil and gas (O&G) industry.
In his speech at the Asian Oil, Gas and Petrochemical Engineering Exhibition (OGA 2019) today, he said the improved sentiment is expected to revive exploration and production activities that were previously deferred or suspended due to lower oil prices.
Lim added that the price of Brent crude is expected to hover around US$60 (RM250.95) to US$70 per barrel this year.
“Last year, the world experienced great volatility in oil prices. Brent crude oil prices rose to US$86 per barrel in early October 2018 from US$67 at the start of last year. But less than two months afterwards, prices dropped by 30% to US$57 per barrel due to a glut in the global market, before rising to US$62 per barrel as of today.”
“For the government, each US$1 per barrel increase in oil prices brings the Treasury approximately RM300 million in revenue per year.”
However, he explained that the government no longer heavily relies on oil revenue as before. He further shared that while petroleum-related revenue accounted for 41.3% of government revenue in 2009, this figure has declined over the years to an estimated 19.5% of total government revenue in 2019 which excludes the special dividend from Petronas that was used to finance the goods and service tax and income tax refunds.
Lim also noted that the expected increase in global crude oil prices is positive for Malaysia’s upstream sector as it is reviving industry appetite in exploration and development works, especially for projects located in deepwater and technologically challenging areas where the costs of investment and operation are high.
He is of the view that Malaysia is strategically located in the supply chain that it is benefiting greatly from the ongoing US-China trade war through business relocation as well as trade and investment diversions.
“The reorientation of the global supply chain, and Malaysia’s competitiveness have resulted in the country’s approved foreign direct investment (FDI) in manufacturing surging 127% to RM20.2 billion in the first quarter of 2019 from RM8.9 billion a year ago.”
“Total approved FDI across all sectors for the first quarter of 2019 rose 73.4% year-on-year to RM23.9 billion from RM16.9 billion,” he added.
