Malaysia’s services look to the future

Malaysia

Executive director of the Malaysia Petroleum Resources Corporation (MPRC), Shahreen Madros, speaks to TOGY about the collaborative efforts being made to grow investment across Malaysia’s upstream and downstream sectors and the likely impact of the global oil price slump. The MPRC is working to help Malaysia meet its goal of becoming a regional hub for oil and gas services and equipment.

Why is Malaysia an attractive place for oil and gas services and equipment providers to establish their regional bases?

Malaysia is the second-largest oil and gas producer in the Association of Southeast Asian Nations (ASEAN) and one of the world’s top LNG producers. The industry is characterised by Petronas’ stability and an emphasis on enhanced oil recovery, marginal fields and deepwater developments, making Malaysia an attractive market for higher-value services.

With a mature upstream hydrocarbons industry, the country possesses a strong ecosystem of services and equipment companies that support the needs of the oil and gas value chain, both domestically and regionally.

The period between 2011 and 2014 saw a significant increase in capital expenditure directed toward enhanced oil recovery and marginal field developments. Throughout this period, we saw a clear trend of services and equipment companies acquiring assets while also expanding their services capabilities.

How is the investment climate for major midstream and downstream projects?

In addition to growth in upstream exploration and production, the midstream and downstream sectors also receive among the biggest investments in capital expenditure.

The importance of this industry is reflected in the recent budget reading in October 2014 by the prime minister, in which he reaffirmed the government’s commitments to the Pengerang Integrated Petroleum Complex and related infrastructure projects. Many of these investment opportunities are promoted as private sector investments, while the government works to provide the necessary infrastructure to facilitate their development.

The federal and state governments have co-operated to facilitate investment in the form of tax incentives. They have also helped support infrastructure and ease bureaucratic processes. This shows the long-term perspective and the importance of this industry for Malaysia.

How has Malaysia progressed towards achieving its goal of becoming a regional centre for oil and gas services and equipment?

Malaysia has secured a number of significant achievements towards realising its goal. Since 2011, the country has hosted the 2014 Offshore Technology Conference Asia in Kuala Lumpur.

Kuala Lumpur was also registered as part of the World Energy Cities Partnership programme in the same year. As a result, a good working relationship has been developed between Malaysia and all major international centres around the world to ensure a continued flow of investments and co-operation.

On the domestic front, a number of significant projects were carried out to encourage the involvement of local universities in research activities for the industry. These initiatives involve getting more graduates into the oil and gas industry by promoting internships in the services and equipment sector and encouraging industry players to share industry experience with universities to improve the quality of graduates.

How will lower oil prices impact the domestic services and equipment sector?

No one is exempted from the impact of lower oil prices, not even major players. The same could be said about Malaysia. While the degree of impact may be different depending on each company’s circumstances, smaller services providers stand to be impacted the most.

Many international companies have announced specific responses on a local level, but we have not seen such announcements yet. Many are analysing the situation or streamlining processes and improving their efficiency in order to generate a competitive solution.

About the company: An agency of the Prime Minister’s Department, MPRC’s initiatives include talent and technology development, encouraging foreign and domestic investment and promotional activities such as participating in international events and conducting business missions to target markets. In view of Malaysia’s chairmanship of ASEAN in 2015, MPRC is focusing on collaborations between oil and gas services and equipment markets in ASEAN countries. 

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