Malaysia’s location in the centre of ASEAN countries enables us to easily attract clients from [its] community.

Darhim Dali HASHIM Director LABUAN SHIPYARD AND ENGINEERING

Sail set for success

April 6, 2017

TOGY talks to Darhim Dali Hashim, director of Labuan Shipyard and Engineering (LSE), about the advantages of having a shipyard in Labuan and the strengths of Malaysia as a regional oil and gas hub for the ASEAN community. Established in 1972, the company is the largest private employer in Labuan and works as a shipbuilding and repair centre for the country.

Labuan Shipyard and Engineering (LSE) provides for oil and gas and marine industries through its shipyard located in Labuan, Malaysia. LSE is a joint venture between Radimax Group and SapuraKencana Petroleum, both companies hold 50% of the shares. LSE has an office located in Kuala Lumpur, Peninsular Malaysia.
LSE does shipbuilding and ship repair, offshore and onshore oil and gas facility fabrication works. LSE has licences for major and minor fabrication works. In addition, LSE constructs power barges and does modernisation and maintenance of naval and paramilitary vessels. LSE also provides port services, including storage and warehousing, as well as import and export services through its shipyard.

• On Malaysia’s tax regime for shipbuilding and marine services:
“LSE welcomes the recent announcement by Malaysia’s Ministry of Industrial Trade and Industry to give an investment tax allowance of 60% to existing shipbuilding and ship repair companies like LSE. We intend to take advantage of this tax incentive if the right investment and right time comes along.”

• On government programmes: “Under the sixth entry point project of the economic transformation programme, the government aims to develop in-country design capabilities for offshore support vessels by training up to 160 engineers and technicians in shipbuilding and ship repair. This is good news for shipyards like us because it means there will be an abundant pool of skilled and talented workforce for the industry as well as speed up the hiring process, all while uplifting overall work standards and quality in the industry.”

• On the importance of major oil and gas projects: “The Refinery and Petrochemical Integrated Development project at the Pengerang Integrated Petroleum Complex is a major project that can enhance the downstream oil and gas value chain sectors’ contribution to the national economy and make Malaysia a regional oil storage and petrochemicals hub.”

• On Malaysia and the low price of oil: “Even though the lower oil prices hurts Malaysia since we are both a net oil exporter and gas exporter, overall, the impact will not be huge because Malaysia’s economy is more diversified, with strong tourism, manufacturing and exports of electronics.

The interview talks about the shipbuilding business in Labuan and how the sector is pushing the oil and gas industry in Malaysia. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Darhim Dali Hashim below.

Can you describe your company and its core business?
Under the current management, Radimax Group, LSE began diversifying its core businesses to include the fabrication of oil and gas facilities after obtaining a major fabrication licence from Petronas in 2011. Its position as a main player in the oil and gas industry strengthened when SapuraKencana Petroleum, one of the world’s largest integrated oil and gas services and solutions providers, came on board as a shareholder of the company that same year. Since then, LSE has continued to become a leading and dynamic shipyard in the region, offering integrated solutions for both oil and gas as well as shipbuilding and ship repair industries.
As at December 31, 2016, LSE had successfully completed more than 20 million accumulated man hours without LTI [lost time injuries]. This significant achievement was made possible with the support and co-operation from all employees, clients and contractors in strictly adhering to LSE’s 10 golden rules and good health and safety practices of the oil and gas and the marine industry.

What is the scope of your operations in Malaysia?

LSE is one of the largest and most well-equipped shipyards in Southeast Asia. With our primary yard, covering an area of 60 acres [243,000 square metres], and a 28-acre [113,000-square-metre] secondary yard that is readily available for further expansion, we are capable of dry docking ships that are up to 16,000 deadweight tonnes, with the capability of further expansion to take vessels of more than 20,000 tonnes in deadweight. Our 900-metre deepwater wharfage allows a wide range of vessel types and lengths to berth alongside it, whereas our syncrolift system for lifting ships is able to accommodate a loadout capacity of up to 7,000 tonnes.

How do you differentiate from other shipyards?
Being a shipyard, we provide an extensive range of general shipyard services, such as 24-hour access and around-the-clock service, a gated security system with video surveillance system at priority areas, floodlit open and covered fabrication bays, transport for heavy loads, freshwater, scaffolding as well as warehousing and space rental, just to mention a few.
The yard has been around for almost 45 years now and continues to be one of the leading landmarks in Labuan since we are the single largest private sector employer on the island. We are aware of our social responsibility of not only prospering in our businesses, but ensuring that our surrounding community develops and progresses together with us.
Furthermore, most shipyards act solely as a shipyard for the marine industry or a fabrication yard for the oil and gas industry, capable of only offering solutions to either one of the two industries. However, LSE is among the most fully-equipped shipyards in the region, particularly [within] Borneo and East Malaysia, and is able to provide integrated solutions for both the marine and oil and gas industries.

 

What major projects have you recently completed?
Our oil and gas division has successfully completed various oil and gas [equipment], such as flowline jumpers, pipeline end manifolds, single-point mooring buoys and mid-water arches.
Among our recent notables feats would be the engineering, procurement, construction and commissioning of the Permas Production substructure and interim production facility (IPF) for Murphy Sarawak [Oil Company]’s SK311 development project in 2013. The onshore work for this project was completed in a record-breaking time of 4.5 months, with approximately 381,000 man hours worked without LTI, beginning from the project’s award date right up to the IPF loadout offshore.
The deadline for this project was very tight and demanding, but its completion within the stipulated contract is a testament to our ability to provide efficient project management services and the necessary resources to get the job done to meet our client’s deadline and budget.

What major milestones have you passed on works related to your marine division?
An equally important division, and one that we are focusing on more in this medium term, is our marine division. So far, we have successfully completed the commissioning and delivery of two offshore vessels.
The first was Tanjung Piai 2, a platform supply vessel, [that was] delivered in 2015. It was the first electrical driven vessel ever built in Malaysia at that time. Currently, it is operating in Sabah waters for reputable clients.
The second vessel, SapuraKencana Aman, was delivered in Q1 2016. It is an offshore work and accommodation vessel (OWAV) that possesses capabilities of a dynamic positioning system, carriage of 50 million tonnes and accommodation for 200 people. The vessel is operating within Sabah and Sarawak waters for clients as such Petronas and Murphy [Oil].

What are the priorities in 2017 for your marine division?
We are looking forward to delivering another vessel. Currently, we are in the final construction stages of SapuraKencana Duyong, the sister vessel of [the previous] OWAV. It possesses the same specifications as the SapuraKencana Aman. Our dedicated project and technical team were successful in solving one of the main hurdles we encountered during the construction of this vessel, which was the interfacing and integration of all major machinery. The construction is planned for completion in Q1 2017.

How are you managing the slowdown in the oil and gas industry?

In view of the slump in the overall shipping industry and the cutback of offshore exploration and production activities by oil and gas majors in the current low oil price environment, we are diversifying our business segment in the marine division by actively looking for clients with vessels outside of the oil and gas industry.
Our strategy is to focus more on securing jobs involving conversions and upgrades as well as shipbuilding and ship repair [works] on both government naval and paramilitary vessels. We are also moving more aggressively into the market of building and repairing commercial vessels, such as cargos, tankers, ferries and fishing trawlers as well as private ships, such as leisure boats, like yachts and catamarans.

What are LSE’s advantages as a major fabrication and ship repair centre?

LSE is strategic in its location as it is based in Labuan, an island surrounded by oil and gas fields. Among them are the many promising fields off the coast of Sabah, for example, such as the Gumusut-Kakap, Kinabalu Deep, [Kinbalu] East, Kebabangan and Malikai [fields]. LSE is also situated within hours of major onshore developments in the region such as Petronas’ Sabah-Sarawak integrated oil and gas projects. This is supported by an abundance of highly skilled and technical workforce from within the island as well as the neighbouring states of Sabah and Sarawak.

What are some of the important recognitions granted to LSE?

The five-star rating on our yard under the SME Competitiveness Rating for Enhancement assessment, an assessment developed by SME Corporation in collaboration with the Malaysia’s Ministry of Defence, is proof that LSE is a business that is highly automated, demonstrates good branding in its products and services, and conducts exports in compliance to export requirements. This award helps provide our clients with piece of mind, knowing that we strive to deliver world-class services to them at very competitive prices.
Being on the duty free island of Labuan also means more cost savings for our clients when they come to us with their job requests. This is because they can enjoy tax incentives on numerous indirect taxes such as sales tax, import duties, surtax, excise duties and export duties, while enjoying nearly zero-GST [goods and services tax] business products and services on the island.

Are there an updates on Malaysia’s tax regime?
LSE welcomes the recent announcement by Malaysia’s Ministry of Industrial Trade and Industry to give an investment tax allowance of 60% to existing shipbuilding and ship repair companies like LSE. We intend to take advantage of this tax incentive if the right investment and right time comes along.

How do you assess the human capital potential of Labuan?
Under the sixth entry point project of the economic transformation programme, the government aims to develop in-country design capabilities for offshore support vessels by training up to 160 engineers and technicians in shipbuilding and ship repair. This is good news for shipyards like us because it means there will be an abundant pool of skilled and talented workforce for the industry as well as speed up the hiring process, all while uplifting overall work standards and quality in the industry.

What are Malaysia’s strengths as a preferred energy hub for the ASEAN region?

The Refinery and Petrochemical Integrated Development project at the Pengerang Integrated Petroleum Complex is a major project that can enhance the downstream oil and gas value chain sectors’ contribution to the national economy and make Malaysia a regional oil storage and petrochemicals hub.
In addition to Malaysia providing access to international shipping lanes, Malaysia’s deepwater infrastructure allows easy navigation for large vessels transporting crude.
Even though the lower oil prices hurts Malaysia since we are both a net oil exporter and gas exporter, overall, the impact will not be huge because Malaysia’s economy is more diversified, with strong tourism, manufacturing and exports of electronics. Malaysia is a key regional electric and electronics (E&E) provider and has the E&E expertise to attract the right investors and key players within the E&E market.

What role can Malaysia play as a gateway to the wider ASEAN community?
In terms of the SBSR [shipbuilding and ship repair] industry, Malaysia’s location in the centre of ASEAN countries enables us to easily attract clients from [its] community.
Malaysia is an undisputed leader in halal trade. This industry is supported by Malaysia’s position of being one of – if not the – world’s largest Islamic banking and financial centres in the world. These enhance the attractiveness to invest not just in Malaysia, but also within the ASEAN countries.
Malaysia’s Ministry of International Trade and Industry has recently announced that they intend to create 55,000 jobs between now and 2020 in the SBSR industry in an effort to spur growth and increase shipbuilding revenue in the slowing industry. We would expect that this would not only attract skills and talent from within the country, but also from within the region, thus promoting wider social and cultural integration as well as enhancing economic and political stability within the region.

For more information on Labuan Shipyard and Engineering, such as its statistics on its facilities and its major contracts, see our business intelligence platform TOGYiN.
TOGYiN features profiles on companies and institutions active in Malaysia’s oil and gas industry, and provides access to all our coverage and content, including our interviews with key players and industry leaders.
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