Malaysia's state energy firm Petronas said on Dec. 28 that it anticipates recovery in oil demand from the impact of the coronavirus pandemic to remain fragile and uncertain in the next few years.

The industry was optimistic about economic recovery but remained cautious and needed to be ready to face oil price volatility, Petronas said in its activity outlook report for 2022-2024.

"The path toward sustained oil demand recovery remains fragile and uncertain due to the emergence of new COVID-19 variants that trigger fresh waves of lockdowns," the custodian of Malaysia's petroleum resources said.

Oil prices slumped in November due to the new Omicron variant but have largely recovered and are up about 50% this year, supported by improved demand and supply cuts by the Organization of the Petroleum Exporting Countries and its allies.

After 2024, Petronas forecast a positive outlook for drill rig activity and a steady outlook for fabrication of fixed structures and subsea facilities, as it continues efforts to monetize its oil and gas resources.

LNG spot prices were expected to be volatile in the coming years due to weather patterns and potential policy changes that could alter supply-demand dynamics, it said.

Petronas said many of its current oil and gas projects are expected to be for ready for hook-up and commissioning by 2023 and 2024.

While many projects had to be deferred and rationalized due to the pandemic, those that survived are expected to resume and reach peak production only in 2025, it said.

Petronas also said it is targeting domestic hydrogen production from 2024, starting with so-called blue hydrogen, which uses natural gas as a feedstock, and then moving to green hydrogen, which uses water.