Response to oil price change: A case study of national oil companies in Southeast Asia
PETROLEUM ECONOMICS & MANAGEMENT
PETROVIETNAM JOURNAL
Volume 6/2020, pp. 54 - 62
ISSN 2615-9902
RESPONSE TO OIL PRICE CHANGE: A CASE STUDY
OF NATIONAL OIL COMPANIES IN SOUTHEAST ASIA
Doan Van Thuan
Vietnam Petroleum Institute (VPI)
Email: thuandv@vpi.pvn.vn
Summary
In the most recent crude oil price fluctuation in the 2015 - 2017 period, when the average price was around USD 47 per barrel, the oil
and gas industry witnessed many players imperatively conducting various synthetic and systematic measures in an effort to withstand
the effects. Looking into the practices of the three largest NOCs in Southeast Asia (Petronas of Malaysia, PTT Public Company Limited
of Thailand, PT Pertamina - Persero of Indonesia) through the period, this paper aims to bring about some measures learnt from them,
of which the most notable ones are i) guaranteeing a risk management system appropriate to different scenario, ii) being flexible and
ready to adapt to any changes and iii) maintaining a full business value chain to maximise opportunities for business and values for
shareholders.
Key words: Oil price decline, capability, portfolio, operation, technology, risk management.
1. Introduction
Like any other energy companies in the world, na-
2. Theoretical framework
2.1. Global oil price overview
tional oil companies (NOCs) in Southeast Asia always have
to cope with the high volatility and uncertainties of the
industry. Petroliam Nasional Berhad (Petronas), PTT Public
Company Limited and PT Pertamina are the case. By rev-
enue, these three NOCs are ranked among the top 10 larg-
est oil and gas companies in Asia Pacific according to the
Forbes Global 20001 [1] list in 2017.
A critical characteristic of the oil market is its volatil-
ity in price as illustrated over the last 10 years since 2010
(Figure 1). Unlike other products, oil price is not only influ-
enced by supply and demand principle but also strongly
governed by decisions about production output made
by OPEC [2]. From 2015, a combination of stable demand
and oversupply had put pressure on oil price, resulting in
its drop-off to approximately USD 47.56 per barrel in the
period 2015 - 2017.
Among the oil and gas companies in the region, they
were considered the ones to have timely and appropriate
responses, which helped them to efficiently limit the crisis
consequences of the oil price drop-off and accommodate
future changes.
2.2. Concept of the Boston Consulting Group
Boston Consulting Group (BCG) is a global manage-
ment consulting firm, having extensive experiences in al-
liances and joint ventures in both emerging, developed
markets across the world, in a broad range of industries.
Among those, the oil and gas industry is grappling with
complex challenges such as energy transition, unstable
oil prices, and intensified global competition. These ele-
ments increase risks for even the best-run firms. In an
adaptive strategy helping energy companies to thrive in
the years ahead [8], BCG addressed the concept that an
By synthesising the business performance of each of
the three NOCs and analysing their responsive actions
during the oil price slump of 2015 - 2017, the authors con-
sequently draw some implications to PVN.
Date of receipt: 18/3/2020. Date of review and editing: 19 - 21/3/2020.
Date of approval: 5/6/2020.
1The Forbes Global 2000 is determined by a composite score of equally weighted measures of
revenue, profits, assets and market value [3].
PETROVIETNAM - JOURNAL VOL 6/2020
54
PETROVIETNAM
Table 1. Brief description of Petronas, PTT and Pertamina
ꢊeꢃcriꢌtion
ꢄeꢅenue
ꢆꢇillion ꢈꢉꢊꢋ
ꢀꢁꢂꢃ2
Petronas is wholly owned by the government through the Ministry of Finance. Four of its
majority-owned subsidiaries having some private ownership, including foreign equity
participation, are listed on Bursa Malaysia stock exchange. Traded subsidiaries are
Petronas’ E&P company, its natural gas transmission company, reꢀning company and
petrochemical company [4]
100.74
PTT is an operating and holding company, of which the Thailand Ministry of Finance is
the largest shareholder. Main business is conducted by itself and other PTT Group
companies [5].
93.55
70.65
Pertamina is a state-owned enterprise of the Republic of Indonesia with the mission of
carrying out integrated business in oil, gas, new and renewable energy based on
marketing principles [6].
USD per barrel, 3 years later (2015 - 2017) was thriving
through tough time for the NOCs.
109.45
107.46
105.87
3.1. Petronas
96.29
77.38
52.51
Since 2015, Petronas has undertaken numerous trans-
49.49
40.68
formative initiatives.
2010 2011 2012 2013 2014 2015 2016 2017
The focus areas were (i) cash generation, cost efficien-
cy, process simplification and project execution to ensure
the immediate survival; (ii) technology, talent manage-
ment, and culture change towards long-term sustainabil-
ity. These are integrated in upstream and downstream as
in Table 2.
Figure 1. Average annual crude oil price from 2010 to 2017 (in USD per barrel) [7].
Capability
level
At portfolio management level, Petronas conducted
the followings:
Portfolio level
- Maximise cash generator through international
assets: monetising Canadian gas resources; continuing
focus on Southeast Asia to pursue monetisation resources
and further exploration opportunities.
Operational level
Capability level: systematically build-up adaptive capability, increase resilience.
Portfolio level: develop, execute strategic portfolio decisions, take into account risks and competi-
tive advantages.
- Expand core business: delivering material oil
in Atlantic basin: building materiality and improving
the balanced portfolio of oil and gas; expanding
unconventional resource in North America with a focus
on short-cycle investments; balancing portfolio through
major reserve holder proven oil: obtaining steady cash
flows that were less susceptible to oil price; successfully
delivering RAPID (Refinery and Petrochemical Integrated
Development) by 2019 and expanding value chain
by extending into adjacent products; developing the
Integrated Business Model: replicating the integrated
Operation level: achieve cost competitiveness, productivity improvement.
Figure 2. Three levels to cope with uncertainties.
NOC needs to formulate its responses to risks at 3 levels:
capability, portfolio and operational level [9]. This BCG
concept is employed as the theoretical framework of this
paper, as described in Figure 2.
3. Analysis of the cases
If the period of 2011 - 2013 was maximising resources
for growth as oil price reached the peak of more than 100
2According to PFC Energy, an international energy consulting company based in Washington DC, Petronas and PTT are public entrepreneurs which support the industrialisation and growth in the respective
countries as they are granted more autonomy in the pursuit of commercial goals both domestically and globally while Pertamina is development bureaucracy, ensuring revenues to the government, providing
domestic subsidies for fuel, facilitating broader socio-economic development [5].
PETROVIETNAM - JOURNAL VOL 6/2020
55
PETROLEUM ECONOMICS & MANAGEMENT
Table 2. Petronas focuses in the upstream and downstream
ꢀꢁꢂtream
Prioritise safety and asset integrity;
ꢃownꢂtream
-
-
-
-
-
-
-
Strive for operational and commercial excellence;
Deliver project excellence;
Prioritise margins over production volume via cost reduction;
Maximise value of integrated domestic production across the
value chain;
Optimise value chain;
Ensure the right talent and cultural beliefs to
deliver on strategies;
-
-
Secure new LNG customers;
Maintain consistent investment in exploration.
-
Leverage on digital and technology.
carbon from 11 greenfield projects, most of which were
from international operations. Upstream production rose
by 3% in 2015 to 2,290 kboe/d compared to 2,226 kboe/d
in 2014. The downstream posted a higher PAT of USD
2,043.81 million, an increase of 56% in comparison with
2014. This was basically owing to higher refining, mar-
keting margins benefiting from lower feedstock prices
as well as higher petrochemical products sales volume.
The downstream was responsible for 50% of the Group's
gross PAT.
mil. USD
12,000
10,404
10,000
8,000
6,000
4,000
2,000
-
4,162
4,087
2015
In 2017, the upstream improved substantially in com-
parison with 2016, accounting for 73% of the Group's
gross PAT, thanks to higher prices, rigorous operational
excellence, and cost management. Upstream efforts saw
13 projects achieving first production and the delivery
of 443 LNG cargoes in total from Bintulu - the highest in
Petronas’ history. Downstream also showed a higher PAT
of USD 2,595 million, 36% increase compared to 2016, due
to improved petrochemical product spreads, internation-
al refining margin plus higher trading and marketing mar-
gins. The downstream business shared 25% of the Group's
gross PAT.
2016
Downstream PAT
2017
Upstream PAT
Figure 3. Petronas financial performance in 2015, 2016, 2017 [3].
model in Malaysia to selected regions, aligned with the
growth of resource base.
- Step out: Specialty Chemicals3, New Energy.
Specially, Cost reduction alliance 2.0 (CORAL 2.0), a
long-term industry-wide program, was launched in March
2015 across the domestic upstream sector through close
collaboration among the petroleum arrangement con-
tractors and service providers. A total of 24 petroleum
arrangement contractors and more than 100 service pro-
viders were involved in 11 initiatives. The primary results
recorded were USD 550.65 million in cost savings in 2015,
USD 596.54 million in 2016 and USD 1,491.34 million in
2017.
3.2. PTT
During this time, PTT defined its business strategies
in 3D:
- Do now: productivity improvement to be
implemented immediately.
- Decide now: sustainable growth to be achieved
through 3 - 5 years investment decisions for organic
growth with a focus on enhancing competitiveness and
business advantages.
Figure 3 illustrates Petronas' financial performance in
the 2015 - 2017 period.
In 2015, upstream reported a PAT (profit after tax) of
USD 367.39 million, lower by 95% compared to 2014, con-
tributing only 9% to the Group’s gross PAT. The impact of
lower prices was slightly offset by the improvement in the
operational performance with the delivery of first hydro-
- Design now: priming for leapfrogging growth by
leveraging innovation and new technologies.
In upstream business, strategic redirections were:
3Specialty Chemicals are amongst the broad range of petrochemical products developed in the Pengerang Integrated Complex which has a petrochemical production capacity of 3.3 million mtpa.
PETROVIETNAM - JOURNAL VOL 6/2020
56
PETROVIETNAM
- Maintain production levels for projects in
production phase but lower the costs.
taxes depreciation, and amortisation including other non-
operating income and expenses) margin in 2016 was well
maintained at 71%, with net profit turning positive at USD
372 million, compared to a USD 854 million loss in 2015
after an impairment recognition of USD 1.385 billion dur-
ing the year.
- Review capital investment or final investment
decision for projects in the development phase,
particularly those with high costs.
- Focus only on low-risk projects for those in the
The scope of petrochemical and refining business
ranges from fuel processing, production and sale of up-
stream, intermediate, and downstream petrochemicals
together with various polymers, worldwide marketing
business and integrated logistics services, in addition
to jetty terminal and tank services. In 2017, PTT restruc-
tured its shareholding in the Group's companies associ-
ated with propane and bioplastics business. In 2015, a net
profit was USD 716 million. In 2016, it was USD 1,894.28
million, excluding the net profit from PTT’s shares in
Bangchak Petroleum Public Limited and Star Petroleum
Refining Public Limited, which were sold out. In 2017, the
net profit amounted to USD 2,454.54 million. The down-
stream business stayed superior thanks to efficiency im-
provement, cost reduction, application of best practices,
logistics management, value chain optimisation, higher
output and sales volumes along with the overall improved
spreads between refined products and crude oil.
exploration phase.
- Choose to invest in projects with existing or
imminent production for merger and acquisition (M&A)
projects aimed to increase petroleum reserves, generate
revenue in a short timeframe.
- Reduce costs of general and administration
category.
The major portfolio management activities were in
Myanmar, Indonesia, Mozambique, Kenya, and Thailand.
PTT Exploration & Production PLC (PTTEP) engaged in
20% equity transfer of 2 projects in Myanmar, PSC-G and
EP-2, to a subsidiary of Mitsui Oil Exploration Co., Ltd.
(MOECO) and Palang Sophon Offshore Pte., Ltd. Another
10% equity of Myanmar MOGE-3 was transferred to a sub-
sidiary of MOECO. PTTEP made a total relinquishment of 3
blocks: Malunda, South Mandar of Indonesia and an on-
shore block, Rovuma, of Mozambique.
3.3. Pertamina
Besides, following the launch of the“SAVE to be SAFE”
programme, PTTEP modified its investment plans and
took actions to reduce costs, avoid expenses and defer in-
vestment, consisting of:
To maintain stability in this challenging time, Pertami-
na embarked upon 5 strategic priorities as in Table 3.
These strategies were supported by the followings:
- Reduce operating and capital costs while seeking
solutions to increase efficiency by the way of working or
technologies;
- Implement integrated supply chain strategy to
ensure the procurement of national stocks.
- Formulate risk appetite and risk tolerance in the
corporate top risk profile.
- Avoid all activities deemed unnecessary or just
“nice to have or nice to do”and focus only on projects and
activities classified as “need to have or need to do”;
- Improve the performances of corporates, business
units and subsidiaries performances through performance
management system.
- Defer investments marked as risky; reprioritise
projects based on the capital amount; invest only on
projects with positive returns.
- Develop a corporate portfolio optimisation.
“SPEND SMART” programme helped the descending
unit cost to USD 30.46 per BOE (2016), a drop of 22% from
USD 38.88 per BOE in 2015. Total expenditure before im-
pairment was brought down to USD 3.664 billion in 2016
compared to USD 4.601 billion in 2015. PTTEP’s financial
status remained strong with a positive cash flow of USD
2.308 billion from operations, production levels being as
planned, and cost management performance exceeding
targets. EBITDA (Earnings before finance costs, income
- Optimise ERP based human resources information
system for the whole cycle of human resource
management.
- Apply the business planning and consolidation -
MySAP module.
- SetupSAPBusinessObject-CFODashboardsystem
to support the speed and availability of standardised
information for mobile decision makers.
PETROVIETNAM - JOURNAL VOL 6/2020
57
PETROLEUM ECONOMICS & MANAGEMENT
Table 3. Pertamina's five strategic priorities and the gains [6]
Strategic priorities
Gains
- As of December 2016, Pertamina was the holder of 24.53% shares in
Maurel & Prom SA.
- Extension of ONWJ block management contract.
Expansion in upstream: acquisition, development of
Indonesia’s main blocks; international development:
Algeria, other international M&A; geothermal/new &
- Discovery of 2C reserve in 2016, 10% higher than in 2015.
renewable
energy
development;
operations
excellence (drilling, EOR, eꢀciency); exploration.
- Cost efꢁciency of upstream operations: USD 1.2 billion.
- Reꢁnery cost decreased to 97.1% of MOPS (Mean of Platts Singapore)
compared to 98.2% of MOPS in 2015.
- Yield valuable product increased from 75.52% to 77.67%.
- The eꢀciency of crude and oil products procurement by an integrated
supply chain worth up to USD 315.4 million.
- Reduced total losses to 0.13% with the eꢀciency value worth up to
USD 143 million.
Eꢀciencies at all lines of activity:
- Reformation of crude and oil product procurement.
- Reduce volume losses in all lines of operation.
- Streamlining corporate functions; procurement
centralisation.
- Marketing concentration.
- The eꢀciency of the centralised non-hydrocarbon procurement was
worth up to USD 280 million.
- Development of existing reꢁneries:
Increasing reꢁnery capacity: reꢁnery upgrade
(reꢁnery development master plan); grass root reꢁnery
(GRR) project; revitalisation and integration of private
reꢁnery.
+ Blue sky project Cilacap in Cilacap reꢁnery unit.
+ Reꢁnery development master plan in Balikpapan, Cilacap, Dumai
and Balongan reꢁnery units.
- Construction of new reꢁneries: GRR East in Bontang, GRR West 1 and
2 in Tuban.
Plans for infrastructure development:
Development of infrastructure
& marketing:
- LPG refrigerated development in West Java
- Construction of gas pipeline in Java.
Leverage of storage and terminal capacities;
development of public fuel ꢁlling station and world-
class marketing network; development of LNG
receiving and regasiꢁcation facilities as well as fuel gas
ꢁlling stations; marketing; operation excellence; go
international.
+ Marketing goes international programme with a market entry
strategy to Thailand.
+ Locally constructed of 8 units of crude oil tankers Type GP 17,500
DWT.
- The increase of free cash used to accelerate the loan repayment.
- The decrease in short-term and long-term liabilities resulted in the
decrease of interest expense.
Improvement of ꢁnancial structure: settlement of
receivables to the government, alignment of short-
term/long-term funding strategies, management of
investment planning and evaluation.
- Better long-term liabilities to total assets ratio.
- Encourage
communication - technology and shared services.
changes
through
information
in oil price caused a severe decrease in upstream revenue
and immediately influenced input values of refining and
petrochemical business. In other words, a marginal loss
of the financial indicators in the upstream sector can be
partially offset by the downstream or other business seg-
ments' returns. Consequently, the company’s profit which
had been dominated by the upstream before, then was
led by the downstream surplus.
Employ internal control over financial reporting pro-
gramme to encourage the internal control in Pertamina
in accordance with international financial reporting stan-
dards. It is clear that upstream performance dynamically
depends upon the world oil price, petroleum exploration,
field development success, efficient cost management of
E&P projects, investment opportunities, and corporate
competency development while the downstream sector
is primarily subjected to feedstock and product prices in
the world market, which are a function of world supply
and demand, year-end inventory (stocks), and world econ-
omy. As crude oil price declines, the NOCs need to quickly
adjust other elements (cost, investment and competence,
etc.) to mitigate negative impacts on the upstream.
Typical initiatives conducted by the NOCs and critical
factors are discussed in more details in the following sec-
tion.
4. Discussion
4.1. The NOCs’ responses were implemented
systematically as shown in Table 4
The commonality across the companies was technol-
ogy at capability level, while it was M&A, relinquishment
of blocks, equity transfer, and enhanced diversification at
the portfolio level. However, it is important for a NOC to
On the other hand, the three NOCs still demonstrated
a sound business performance in this period because each
company has a fully integrated value chain. The downturn
PETROVIETNAM - JOURNAL VOL 6/2020
58
PETROVIETNAM
Table 4. Initiatives at 3 levels of risk management
ꢀaꢁaꢂilitꢃ leꢄel
ꢅortfolio leꢄel
ꢅetronaꢇ
ꢆꢁerational leꢄel
- Technology and innovation
- Intensify capability and talent
development
- Maximise cash generation through - Cash generation, cost eꢀciency (for
international assets.
- Expand core business: specialty
chemicals, new energy.
ꢅTT
example: CORAL 2.0), process simpliꢁcation,
project execution program.
- Culture change
- In the upstream: review the capital - In the upstream: “Spend Smart”, “Save to be
investment/ꢁnal investment decision, Safe” programs.
M&A of projects, relinquishment of - In the downstream: eꢀciency improvement,
- Innovation, technology
blocks, equity transfer.
- In the downstream: sold out some
public limited companies.
ꢅertamina
cost reduction, application of best practices,
logistics management, value chain
optimisation.
- Human capital development
- Technology
- Acquisition, development of Indonesia’s - Develop infrastructure and marketing.
main blocks; international M&A.
- Improve ꢁnancial structure.
- Enhance eꢀciencies.
- New/renewable energy.
- Develop downstream business of CNG, - Tools: integrated supply chain, performance
LNG, gas trading, transmission,
distribution.
management system, business planning
and consolidation - MySAP module, SAP
business object-CFO dashboard system,
information communication, technology
and shared services, internal control over
ꢁnancial reporting program, ERP based
human resources information system.
define its future competitive advantages [9] for portfolio
management driven by efficiency principles to optimise
expected returns at a given level of market risk [10]. At op-
eration level, cost cutting-off needs to go beyond plan as
much as possible and broadens into strategic productivity
improvements.
PRPC to become a connected and agile organisation that
can make informed decisions, rapidly adapt to different
situations.
In PTT, since 2014, the integrated technology and
innovation management operating system (TIMOS) has
been implemented to provide a synchronised manage-
ment system in transforming technology and innovation
strategic direction into value realisation. In 2015, PTT man-
aged technology and innovation by diversified practices
across the company which USD 68.32 million (5.73% of
total income) was invested in research and development.
4.2. Among those initiatives, technology and
risk management are recognised as vital factors to
boost the company capability
4.2.1. Successful application of technology will bring out dif-
ferentiation and shape up the competitive edge
Pertamina strived to facilitate demands in informa-
tion and technology through its Corporate Shared Service
functions.
Petronas has been enlarging the technology funnel
via multiple avenues comprising in-house R&D, innova-
tion gateway, technology challenge, collaboration and
corporate venture capitals. At the same time, the group
is seeking ways to deploy technology in terms of digital,
data analysis, automation and robotic solution in the as-
sets, which will address brownfield assets with a 50% op-
erational expenditure reduction target by 2026, specifi-
cally in surface operations, maintenance and logistics.
- Upstream business management transfer:
providing infrastructure (WAN), radio telecommunication
support, telephone systems and VoIP; computing for
end-user assistance involving the implementation of
managed print services, replacement for proprietary
application, which was suitable with standard Pertamina
applications; software license transfer, procurement of the
vessel traffic information system as a navigation system,
non-directional beacons and radio beacons; as well as the
rearrangement and adjustment of IT compliance and &
governance.
An example: In downstream, in line with Petronas as-
piration of creating the plants of future, the conceptual
design of Petronas Refinery & Petrochemical Complex-
PRPC - a digital plant - started since 2011, aimed to enable
PETROVIETNAM - JOURNAL VOL 6/2020
59
PETROLEUM ECONOMICS & MANAGEMENT
CONNECTED
COLLABORATIVE
-
-
Cross-function interlock across the
value chain
Single source of truth through shared
data across PIC
-
-
-
IT/OT integration
Pervasive wireless and mobility
Remote field force enablement
ANALYTICS
CONTEXTUAL
-
3D models with embedded asset
data
Real-time tracking of people and
assets
-
-
Predictive insights unlocking value for PIC
Data-driven and right-time decision making
-
CAPABLE
SECURED
-
-
-
Rapid decision making
Digital mindset
Agile organisation structure
-
-
Physical security to prevent onsite intrusions
Cybersecurity to protect PIC’s data, opera-
tions and assets
Operational Excellence
Commercial Excellence
Project Delivery Excellence
Figure 4. Digital PRPC vision [11].
Pertamina’s material number, through material code
standardisation from Pertamina nomenclature into
global Shell code nomenclature.
Governance:
risk policy,
organisation
& structure, role &
responsibilities
- Corporate
administration
system
re-
Continual
improvement
system
engineering encompassed the development of
E-Correspondence 2.0 using an alternative platform
to the previous version, from the web 1.0 to the web
3.0.
Context
setting:
external/
internal, risk
appetite/
criteria
monitoring &
review, risk
assurance,
capacity
building
- Concurrent employment and corporation
management was an expansion of the SAP HCM
Module, used for multiple employment scenario
management between the company and its
subsidiaries.
Risk
Risk
monitoring &
review: reporting &
monitoring,
information
system
assessment:
identiꢀcation,
analysis,
- Investment improvement programme aimed
to monitor the success of Investment Projects. In
2017, Pertamina implemented Direct Link SIIP at
2 of its subsidiaries: PT. Pertamina EP Cepu and PT.
PDSI and the non-business development marketing
directorate (527 projects).
evaluation
Risk
treatment:
strategy, plan
In this challenging time, technology has proved
its crucial role in cost reduction, efficient operation
and driving higher competence for oil and gas com-
panies.
Figure 5. Enterprise risk management framework.
- Digital marketing: implementation of B2B and B2C
technology/application; acceleration of culture change in
relation to creativity and promoting an agile work scheme.
4.2.2. Risk management is essential in strengthening
abilities to withstand forthcoming uncertainties
- PTKAM ICT improvement was conducted through the
ERP and non-ERP (web E-LC) enhancement system, supporting
loss calculations that occurred as a result of oil flow activities.
Throughout years of development, the Board
Governance & Risk Committee has been established
in Petronas to provide oversight and in-depth discus-
- Logistic excellence was an ongoing improvement of
PETROVIETNAM - JOURNAL VOL 6/2020
60
PETROVIETNAM
- Risks from business strategy implementation;
Governance:
Risk struture,
- Risk from diminishing natural gas outputs,
continuity of gas production;
Strategi
c risks
- Risks concerning investment eꢀciency;
- Risks concerning personnel development to
accommodate business growth;
- Reputation risks.
oversight/CM
three-tiered response
protocol,activation,
role &
responsibilities
Crisis
assessment: risk
assessment,
credible
- Price volatility of petroleum and petrochemicals;
- Government actions creating potential impacts
on PTT businesses.
Business
risks
Continual
improvement:
as in ERM
scenarios
identiꢀcation,
thresholds
identiꢀcation
framework
- Disruption of production, business operations;
- Changes in environmental, safety regulations;
- Delayed project construction.
Operatio
n risks
Crisis response
- The volatility of Baht
- Financial support to aꢀliated companies;
- Acquisition of funds for plan execution.
strategy: strategies,
actions development,
resources identiꢀcation,
emergency/CM plan
establishment/
Testing &
Financial
risks
exercising:
Planning,
excecution&
review
Figure 8. PTT key risk factors [5].
communication
Figure 6. Crisis management framework.
Governance:
as in ERM
framework
Figure 9. Pertamina ERM roadmap [6].
ARiskManagementCommitteewasappointedtosteer
all risk management activities in PTT: monitoring risk man-
agement every quarter, deliberating and commenting on
long-term obligations, business complication, significant
impacts toward the corporate, screening the list of corpo-
rate risks and seeking endorsement of the Board. Emerg-
ing risk factors had been identified and managed annu-
ally under risk management plans. PTT continues to refine
the risk factors to better reflect risks affecting investors
(Figure 8).
Continual
improvement
as in ERM
Risk
assessment
as in ERM
framework
framework
Business
impact analysis:
Testing &
exercising:
plan, BCP
simulation
critical business
functions,
minimum
resource
requirement
ISO 31000: 2009, a global risk management standard,
has been put into implementation in Pertamina since 2011.
Business
recovery strategy:
recovery strategy,
business
The roadmap implementation was done in stages,
starting from risk awareness, framework, discipline to
habit and culture (Figure 9). Throughout 2017, 1,908 risks
with 1,071 qualitative risks and 837 quantitative risks
were found. From the identification result, the risk profile
(financial risk4, operational and infrastructure risk5, risk of
governance6, compliance risk7, reporting risk8) was ob-
tained by the Board of Directors and the mitigation plans
were undertaken.
continuity
plan
Figure 7. Business continuity management framework.
sion on risk management at the Board level. Since 2015,
the Resiliency Model has focused on 3 areas, namely En-
terprise Risk Management (ERM) - Figure 5, Crisis Manage-
ment (CM) - Figure 6 and Business Continuity Manage-
ment (BCM) - Figure 7 [3].
4Financial risk is associated with accounting, credit, liquidity & financial intelligence, financial market, planning & budgeting, and operational, which has resulted in financial loss, including the risk of movement
or fluctuation of market variables: commodity prices, interest rates, oil prices and the risk of delays or failures of customers.
5Operational & infrastructure risk contains corporate assets, human resources, information technology, external events, legal, process management, product development, sales, marketing and communications.
6Risk of Governance is caused by the lack of or non-compliance with the rules of Corporate Governance and Business Ethics.
7Compliance risk is derived by the deficiency of or non-compliance with prevailing regulations. There are two major risks: the Risk of a Decreasing Good Corporate Governance Assessment and Fraud Risk.
8Reporting risk is related to the obligation to submit reports to interested parties/shareholders.
PETROVIETNAM - JOURNAL VOL 6/2020
61
PETROLEUM ECONOMICS & MANAGEMENT
In short, the oil price shock, a frequent issue in short/
middle-terms which happened in many years, is regarded
as one of the most crucial components in the overall risk
profile. Thanks to effective risk management frameworks
connecting at all levels in each NOC, the decision makers
have been efficiently assisted to achieve the company’s stra-
tegic objectives in a fair, informed, and transparent manner.
statista.com/statistics/262858/change-in-opec-crude-oil-
prices-since-1960/.
[3] Adelaida Salikha, “Asia's Pacific largest oil & gas
companies in 2017”, 27/10/2018. [Online]. Available:
companies-in-2017-by-revenue.
[4] Silvana Tordo, Brandon S.Tracy, and Noora Arfaa,
“National oil companies and value creation, Volume II:
Case studies”, World Bank Working Papers, No. 218, 2011.
org/handle/10986/16651.
5. Conclusion
Although the upstream recorded low profit in the first
year of the period 2015 - 2017 because of oil price down-
turn, in the following years it recovered steadily thanks to
significant efforts to improve operational efficiency and
cost management. In the downstream, revenue was excep-
tional due to lower oil price, higher production and sales,
less impairment from a lower inventory as well as increas-
ing refinery capacity. In general, the NOCs' performance
was sustained thanks to their complete business value
chains with a consolidated interrelation among sectors,
which helped to offset the loss of one business segment by
the earnings of others.
[5] Bianca Sarbu, Ownership and control of oil,
explaining policy choices across producing countries,
Routledge Taylor and Francis Group, 2014. DOI:
10.4324/9781315778099.
[6] Nick Lioudis,“What causes oil prices to fluctuate?”,
com/ask/answers/012715/what-causes-oil-prices-
fluctuate.asp.
[7] Ir.V.R.Harindran,
“Petronas
refinery
&
These best practices in Petronas, PTT and Pertamina
give some reflections to PVN. The overall success of re-
maining highly resilient firstly comes from considering
low oil price as the most-likely scenario in order to regu-
larly develop and revise short-term and middle-term busi-
ness plans and long-term strategies to accommodate fu-
ture changes. Secondly, it is the company’s preparedness
and readiness to adapt that enable necessary actions
to be implemented in time. Each NOC might pursue dif-
ferent paths to respond to particular contexts; however,
the fundamental issues are (i) (at the capability level) the
establishment of consistent policies and guidelines that
guarantees the risk management system enforcement; (ii)
(at the portfolio level) portfolio refining toward competi-
tive advantages; and (iii) (at the operational level) extend-
ing cost reduction into strategic productivity improve-
ments and utilising technology in all lines of businesses.
petrochemical complex - digital automation journey”,
Proceeding of the 1st ISA Event 2019, Ho Chi Minh,
Vietnam, 13 June, 2019.
[8] Petronas, “Annual reports”. [Online]. Available:
[9] Boston Consulting Group. [Online]. Available:
[10] BCG, "Resilience - A vital capability in today's
volatile environment", 2015.
[11] Pertamina, “Annual reports”. [Online]. Available:
tahunan.
[12] PTT,“Annual reports”. [Online]. Available: https://
[13] Rai Technology University, “Security analysis
and portfolio management”, [Online]. Available:
analysis_&_portfolio_management.pdf.
References
[1] Forbes, “GLOBAL 2000: The world's largest public
forbes.com/global2000/#780ebf52335d.
[2] Statista, “Average annual OPEC crude oil price
PETROVIETNAM - JOURNAL VOL 6/2020
62
9 trang
16/04/2022
4220
Bạn đang xem tài liệu "Response to oil price change: A case study of national oil companies in Southeast Asia", để tải tài liệu gốc về máy hãy click vào nút Download ở trên
File đính kèm:
- response_to_oil_price_change_a_case_study_of_national_oil_co.pdf
