Oil and gas companies are seen to reduce their capital expenditure this year as demand remains muted on the back of the Covid-19 pandemic PETALING JAYA: Local oil and gas companies will still cut their capital expenditures (capex) this year as demand for the commodity remains gloomy amid the Covid-19 pandemic. AmInvestment Bank pointed out that for the first half of 2020 (1H2020), the new contract awards to Malaysian operators dropped 62% year-on-year (y-o-y) to RM2.2bil, with the worst fallout yet to come in 2H2020 onwards. It added that even though a measure of optimism has returned for crude oil prices, oil producers were expected to proceed with their planned production cuts this year given that demand globally remains depressed amid prolonged movement restrictions and social distancing measures across the new normal. The research house said this could mean potentially long-term changes in energy usage. National oil company Petroliam Nasional Bhd (Petronas), which had earlier indicated intentions to maintain domestic capex, announced in May that it will cut 21% for capital and 12% operating expenditure this year. This is similar to the 20% to 30% capex reductions for 2020 which were earlier announced by Exxon Mobil, Royal Dutch Shell, Saudi Aramco and Petrobras. Year-to-date, Brent crude oil prices have averaged at US$41 per barrel while the current spot price has recovered to US$42/barrel currently from the year-low of US$14/barrel on April 22,2020.,
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