MALAYSIAN oil and gas service and equipment (OGSE) companies operating domestically are set to see a boost in activities amid persisting volatile crude oil prices in 2019, said a report.

Malaysia Petroleum Resource Corporation (MPRC) said in the report “Top 100 OGSE Companies in Malaysia FY2017” crude prices are expected to remain volatile in 2019, but global oil and gas development activities are expected to increase in the coming years, with operators aiming to move forward to develop new offshore fields, particularly in deep waters. 

“This development brings about significant opportunities for OGSE companies, in particular subsea, drilling, and maintenance, repair and overhaul (MRO) players,” said the report.

At the time of writing brent crude oil is trading at US$61.69 per barrel after trading at a range of US$ 60.60-62.91 per barrel for the day.

Last year, brent crude oil hit a high of US$86.29 per barrel and a low of US$50.47 per barrel.

Citing the Petronas Activity Outlook Report for 2019-2021, MPRC expects activities to pick up on the domestic front.

Segments of upstream oil and gas such as rigs drilling, support services and base activities for maintenance of both onshore and offshore facilities are expected to see a rise in activities.

MPRC said it expects more OGSE companies to diversify downstream with the completion of Petronas’ Pengerang Integrated Complex (PIC) in southern Johor.

While activities on the domestic front are set to pick up in 2019, the impetus for OGSE companies to venture abroad for jobs remains, driven by the need to be globally competitive in the long term. In recent years, local companies that have carved their niche in the domestic markets went on to secure contracts in Angola, Mexico and Kazakhstan, among others.

In the global landscape, oil majors are working towards higher efficiency through new technologies or processes, thus it is imperative for Malaysian OGSE companies to advance technology
development to stay ahead, it said.

“We also anticipate 2019 to be an exciting year with ongoing developments on the management of hydrocarbon resources in the country. Regardless of the outcome, it is important for local OGSE
players to remain focused on raising their capabilities to tap into new opportunities.”

MPRC deputy chief executive officer Mohd Yazid Jaa’far said the concerted efforts of non-US producers to cut output in 2017 helped to lift oil prices to US$60 a barrel at the end of the year,
marking the highest close since 2013. 

The advances in oil prices saw the announcement of several new projects by oil majors throughout that year.

With oil prices subjected to market volatility, uncertainties over the prices as seen in the past few years are a clear reminder to OGSE players of the need to stay focused and push ahead with reforms to improve operational efficiencies, even as the industry sees a gradual recovery in activities.

The year 2017 saw OGSE companies guarding themselves against these uncertainties by turning to innovation and technology to gain economic advantages, achieve economies of scale and undertake measures to improve export capabilities.

These companies also  continued to develop and retain skilled talent to support their diversification strategy into other segments, particularly downstream. All these adjustments promised to better equip local OGSE firms in undertaking new growth ventures in Malaysia and beyond.

“The government remains committed to advancing and globalising our OGSE capabilities as well as encouraging a more robust, competitive sector in the global marketplace. MPRC will continue to work with our sister agencies under the Ministry of Economic Affairs and with other agencies under the Ministry of Entrepreneur Development and Ministry of International Trade and Industry, namely the Malaysian Investment Development Authority and the Malaysia External Trade Development Corporation.”

“Our national oil company is key to realising this vision. MPRC will continue to collaborate with Petronas to carve a better and brighter future for the local OGSE industry in the areas of information transparency, human capital development, access to finance and technology development.These collaborative efforts are essential to spearhead growth, elevate Malaysia’s profile in the global oil and gas landscape and ultimately realise the government’s vision in cementing Malaysia’s position as the top OGSE hub in the Asia Pacific.”

Regionally, Malaysian OGSE players fared better than their counterparts owing to contributions from domestic activities in both upstream and downstream segments.

In comparison to the Top 20 OGSE companies in Asean, Malaysian OGSE firms registered an average revenue growth of 12%. Other regional players showed an average revenue decline of 14%, mostly due to OGSE companies listed in Singapore and Vietnam.

The report’s analysis showed that the Malaysian OGSE sector recorded a total revenue of RM68.1 billion against FY2016’s RM68.8 billion, representing  a marginal drop of 1.1%.

The sector’s profit before tax (PBT) also registered a decline of 48.1% to RM9.4 million from RM18.1 million, attributable to the asset impairment charges undertaken by various asset-heavy firms.

MPRC was established to advance the local OGSE industry and develop a thriving regional hub for the sector in Malaysia.

MPRC works collaboratively with fellow government agencies, industry players, trade associations and international counterparts as part of industry development and growth efforts. – February 8, 2019.