Petroliam Nasional Bhd (Petronas) faces near- to medium-term earnings pressures as oil price volatility persists, petrochemical margins soften, and global energy demand remains uncertain.
Economists attributed the national oil company’s third consecutive earnings decline to declining oil prices and shrinking margins. Geopolitical tensions further cloud the outlook, disrupting markets and weighing on investor sentiment.
Putra Business School professor Dr Ahmed Razman Abdul Latiff said weaker benchmark crude prices and narrower refining and chemical spreads are likely to compress profitability across Petronas’ business segments. Foreign exchange fluctuations and higher operating costs could also weigh on margins.
He added, “Balancing capital expenditure for upstream reinvestment and energy transition projects with dividend commitments could tighten free cash flow if market conditions soften.”
Dr Ahmed Razman described Petronas’ outlook over the next one to three years as stable but cautious. Continued upstream investment and asset optimisation are expected to sustain production levels. However, margins may remain cyclical due to ongoing petrochemical oversupply and fluctuating crude prices. Dividend payouts are projected to stay close to the 10-year average of RM31.9 billion annually, though they will depend on commodity prices and overall earnings resilience.
Economist Samirul Ariff Othman said Petronas’ FY25 financial performance showed strong cash generation but a turning earnings cycle, with weaker realised prices, tighter margins, and cost inflation affecting results. He noted that margins are expected to remain range-bound and highly price-sensitive over the next three years. “Upstream margins face headwinds unless geopolitical developments maintain a lasting risk premium,” he said.
Industry Shift Accelerates
Dr Ahmed Razman highlighted that broader industry trends are reshaping Petronas’ long-term prospects. Persistent oil price volatility challenges revenue visibility and capital planning, while energy transition pressures are driving the company toward natural gas, liquefied natural gas, and lower-carbon ventures.
“Uneven global demand growth, particularly in Asia, presents opportunities for gas expansion but creates uncertainty for refining and petrochemical margins. Portfolio diversification, cost discipline, and strategic partnerships will be key to maintaining competitiveness,” he added.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said Petronas’ profit decline reflects a lower crude oil environment, with average Brent crude prices at US$68.2 per barrel last year and trending downward. He noted that recovery will depend on OPEC+ production decisions and emphasised the importance of prudent cash and capital deployment.
Petronas’ FY25 results showed net profit fell 18% to RM45.4 billion from RM55.1 billion in FY24, while revenue declined 17% to RM266.1 billion from RM320 billion, driven by lower realised prices, foreign exchange effects, and reduced sales volume. Earnings before interest, tax, depreciation, and amortisation (EBITDA) also slipped 10% to RM103 billion.
The company now faces a critical period as it navigates market volatility, margin pressures, and the ongoing energy transition while seeking to maintain strong financial and operational performance.
