Good times in store for oil and gas industry

  • Business
  • Saturday, 18 Dec 2004

Prospects for the oil and gas sector are bright. Petra Perdana Bhd executive chairman and CEO Tengku Datuk Ibrahim Petra sees bright prospects against significant oil finds. For Petra, the growth sectors would be brown field redevelopment, marine and exploration and production services. 

SapuraCrest Petroleum Bhd will continue to be busy in 2005. Executive vice-chairman Datuk Shahril Shamsuddin sees the global demand for energy rising rapidly and expects the company's clients' activity levels to follow in tandem. 

For Tengku Daud Shaifuddin, executive director of Perisai Petroleum Teknologi Bhd, industry prospects were boosted by the recent rises in crude oil prices. Additional investment in the sector augur well for Perisai which has been charting tremendous growth over the past five years. 


TENGKU DATUK IBRAHIM PETRA Executive Chairman & CEO Petra Perdana Bhd What are the prospects for the oil & gas sector going into 2005? 

The prospects for oil & gas are positive and very encouraging in 2005 and beyond. This is attributable to a number of factors, starting with the significant oil finds off East Malaysia from 2002 onwards. The spin-offs from the major discoveries will have a significant impact on the overall growth of the upstream sector, benefiting not only oil majors but also the service providers. The first oil from recent discoveries is expected to flow in 2007/08. 

Given these finds, more oil majors are expected to focus on upstream exploratory and development works. We are also confident that national petroleum company Petronas will set the development pace by enhancing its role in the domestic market. The tendering of more new deep and ultra-deep water blocks by Petronas will further reinforce the growth potential of the upstream sector. 

Further, Petronas’ aim to enhance the output of aging oil fields (brown fields) will not only result in increased revenue but also spur redevelopment activities.  

This is expected to provide more new opportunities for service providers, resulting in prolific growth of the industry over the next couple of years. 

What will be the main areas of focus for your company in 2005? 

Since streamlining its business activities in 2004, Petra has embarked on an expansion programme that is in tune with the market’s growth development opportunities.  

Today the group's main growth sectors are in brown field (existing oil & gas fields) redevelopment, marine and exploration & production services. 

Being in the oil & gas industry for the past 16 years, we have developed a strong foundation in our services capabilities, and believe that these growth sectors (brown field redevelopment, marine and exploration & production services) will augur well for the group in the long term. 

We plan to continuously grow and build on our resource capabilities in these growth areas, including other potential growth sectors, so as to leverage on market opportunities. 

In the long term, we hope to achieve the status of a “one-stop” integrated service provider to the oil & gas industry.  

Is your company considering expansion? If yes, in what areas? 

Yes. Expansion in the upstream oil & gas industry was never an option for Petra. As a dynamic integrated service provider, we are continuously expanding our services to meet the growing demands of the oil & gas industry. 

The streamlining and expansion of our business activities this year (2004) are a part of our strategy to leverage on more new growth potentials of the oil & gas industry. This is a an on-going process to provide highly sophisticated services to meet the growing demands by the oil majors or production sharing contractors. 

For 2005, our expansion will be primarily focused on brown field redevelopment, marine, exploration & production services. This scope will not be limiting given the expansion and new business opportunities arising from the country’s dynamic oil & gas industry. 

What are your expectations for earnings next year? 

We are confident of achieving much higher earnings and improved profitability in 2005. This would be attributable to the continued expansion of our services and primarily the business activities in which we are involved. We foresee more new business opportunities in the year ahead.  

What are some of the challenges you anticipate in 2005? 

Challenges are part of growth and development. However, given our fundamental growth, I believe that we are in a strong position to address challenges in the wake of new business opportunities in the industry. 

Ongoing challenges: 

·To manage and operate our in-house marine assets (fleet) efficiently and maximise utilisation.  

Currently, we are managing to maximum efficiency. It also means meeting all our clients’ offshore marine requirements based on given schedules.  

·To closely work with our clients in optimising maintenance work schedules during project planning.  

This is part of our practice. Ultimately, it would help achieve the client’s cost and scheduled objectives in the long term. 

·To maintain high quality products and services. 

Although the group has in place stringent quality assurance and quality control standards, continued surveillance is practised to ensure that we subscribe to the latest and highest standards.  

·To provide round-the-clock and effective service 

Most of our service facilities are located in close proximity to oil & gas installations and manned by a competent work force to address any inconveniences/breakdowns faced by oil majors. 

DATUK SHAHRIL SHAMSUDDIN Executive Vice-Chairman SapuraCrest Petroleum Bhd 

What are the prospects for the oil & gas sector going into 2005? 

It has been a very busy year for us and we expect 2005 to remain busy across the board. The global demand for energy is rising rapidly and the need for greater production is having a knock-down effect throughout the sector. Our clients' activity levels can be expected to continue rising as well in support of this demand. In addition to that, deep-water reserves are being found and some level of exploration is also taking place there. In 2005, therefore, we are looking at a very aggressive expansion of facilities by global energy players as they continue to work hard at meeting the demand for oil and gas. This will see companies like SapuraCrest Petroleum benefiting as the demand for maintenance, installation, marine services and vessels will continue to rise.  

What will be the main areas of focus for your company in 2005? 

We have been working hard on streamlining our operations over the past 18 months resulting in all of our lines of business experiencing strong growth. In 2005, we will focus on two main areas – ensuring quality and delivery of existing contracts and expanding around the region.  

The first fruits of this expansion are already in hand as we recently secured a one-year contract with the Champion West fields in Brunei. This contract is the largest overseas contract we have secured to date and we are optimistic that it is the first of many that we will see coming our way. We see more regional opportunities being offered to us and this will be a key engine of growth for SapuraCrest Petroleum in the coming months.  

What we are offering our clients in turn is a company that has the technology, the people, the track record and the management to deliver the highest quality work in a competitive manner both here and around the region. We are also ensuring that we maintain the best practices along with the latest health and safety equipment to keep our operations running smoothly. We spend a lot of time offshore, and safety remains a key focus area for us going forward.  

Next year is also likely to see an increasing level of complexity in the work that needs to be done around the region. We’re seeing a number of contracts that call for specific assets and people skills that are not common among local players. We are developing our abilities in this area and we look forward to retaining a greater proportion of the earnings from our contracts as we secure and integrate these new assets, people skills and abilities. This will enhance our overall competitiveness and open new revenue streams to us as well.  

Is your company considering expansion? If yes, in what areas? 

We certainly are. We spent the last 18 months putting our house in order, so to speak. During that time, we examined the synergies between our subsidiaries, the resources that we had in hand, and how we could better leverage on these to maximise our potential in the local and regional oil and gas market.  

Today we are well placed to address the needs of local and regional oil & gas players as they grow. As such we are expanding our reach throughout the region and working hard at securing contracts there.  

While doing this, we are also ensuring that we maintain a tight rein on quality and delivery of contracts already in hand. Recently, this effort showed its first signs of success as we secured a RM144mil contract in Brunei and we look forward to similar wins in the future.  

What are your expectations for earnings next year? 

This year was a significant year for us. The latest financial results we have – our third quarter – showed positive movements for us from a financial standpoint and we definitely expect that trend to continue.  

We have streamlined our operations, explored the synergies between our units and re-looked at the resources, technology and skills that we would need to maintain our leadership in the provision of oil & gas services here. Through this process we now have a proven, able and technologically empowered company in SapuraCrest Petroleum and we remain optimistic of continued growth in the coming year.  

We have also been working hard in ensuring that our ability to deliver on time for contracts and issues of safety are managed well and these, combined with our ability, are bearing fruit here in Malaysia and around the region.  

Our optimism is built on the back of these facts along with an expectation of increased activity levels in the regional E&P market that will filter through to our bottom line. 

What are some of the challenges you anticipate in 2005? 

The main challenge for the oil & gas industry in general moving into 2005 is focused on the shortage of skilled and experienced people to operate and maintain all the assets that are being built.  

For us, we will be spending a fair amount of time next year ensuring that we manage our current growth to continue maintaining the rate of improved profitability for the SapuraCrest Group as we move forward. We are also focused on further enhancing our position as the leading oil & gas services provider here. 

Supporting this commitment is the integration of new assets and people as we acquire them into the company alongside out continuing effort with regard to technology. We also aim to constantly introduce the latest technology, especially in health and safety, into the country and our operations around the region.  

This, coupled with our experience, track record and current resources, will form a keen competitive edge for us as we grow. 

TENGKU DAUD SHAIFUDDIN Executive Director Perisai Petroleum Teknologi Bhd  

What are the prospects for the oil & gas sector going into 2005? 

The industry’s prospects have been boosted by the recent increase in crude oil prices, especially when the average sustained price is well above US$30 per barrel. It spurs (i) additional investment in the sector via exploration – especially in deeper waters as well as previously economically non-viable wells, (ii) upgrading of existing plant and equipment to enhance extraction rates and efficiency, and (iii) prolonging the viability of existing oil fields. 

All these developments benefit Perisai because: (i) upgrading and maintenance of existing platforms create opportunities for the whole range of the group’s products and services, and (ii) higher opportunity cost in the event of disruption in oil production – hence the greater urgency for Perisai’s products and services. 

Shell Malaysia recently announced its second major oil discovery offshore Sabah within a year of the first discovery, adding to the three other major discoveries in Malaysian waters since early 2004. Other major discoveries made during the year were by Murphy Oil in partnership with Petronas Carigali in Kikeh and Kakap in Block K off the coast of Sabah, and in Block PM311 (Kenarong) in the peninsular ongoing upstream and downstream activities.  

New platforms can be designed and built with Perisai’s products, such as flanges, nuts and bolts and riser protection systems as standard. 

With oil prices soaring to US$55 per barrel, demand for maintenance and inspections has become more critical. Certification from independent accreditation bodies to ensure product quality is highly sought after in the oil & gas industry. Nevertheless, our business is not dependent on the movement of oil prices. When prices are high, oil companies cannot afford to shut down production. However, when prices are low, these oil companies would also turn to players like Perisai to inspect and secure their infrastructure. 

There are more than 700 platforms in the region. In the global petroleum offshore platform market, demand is projected to grow at a compounded annual rate of 8.9%. 

What will be the main areas of focus for your company in 2005? 

Perisai started as a provider of protective systems to help control corrosion of oil and gas pipes, flanges, nuts and bolts and risers. As a high-tech oil and gas company, we will continue to build up our niche in the surface coating segment of the oil & gas industry. We are very proud of our composite sleeve repair system, which can extend the life of an old pipe for another 20 years without interrupting the oil supply. The market for corrosion preventive control in Malaysia, Indonesia and Brunei was estimated to be worth more than RM150mil in 2002. According to a report by Frost and Sullivan, the domestic market is anticipated to increase to RM201.2mil in 2008. The oil & gas business presents abundant opportunities for Perisai to develop. 

However, we are in the midst of further strengthening our presence in the industry by strategically diversifying vertically to offer a wider range of related niche expertise required in the industry. We aim to be a fully integrated one-stop centre that specialises in corrosion control. In the industry, corrosion control extends from above the oil platform to the underwater platform structure and underground oil pipelines. Hence, Perisai has developed underwater marine capabilities, in-house composites and oil clean-up services.  

Through these diversification programmes, Perisai is now not only able to provide products and solutions in the operation and maintenance stage of the oil & gas industry, but also offer them in the development, production and de-commissioning phases. With such expertise within the Perisai group, we can offer fully integrated corrosion control solutions of international standard at competitive prices to our clients.  

Is your company considering expansion? If yes, in what areas? 

Perisai’s expansion plans are aimed at fulfilling our strategy of being a fully integrated corrosion control solutions provider. To execute this strategy, we would also be providing the full range of services and products, from inspection to design, fabrication and installation of long-term protection systems for piping and pipelines. 

We have recently embarked on several memoranda of understanding (MoUs), joint ventures (JVs) and acquisitions. While the MoUs and JVs will mainly undertake research in surface coatings, fibre-optic sensors and intelligent electronic systems, the acquisitions aim to expand Perisai’s range of businesses instantly. We have acquired three companies, namely Bio-X Technologies, Merit Composites Sdn Bhd and Allied Marine and Equipment Sdn Bhd (AME). 

Bio-X Technologies supplies bio-remediation products, equipment and services which help remove hazardous oil contaminants and transform them into environment-friendly products. 

Merit Composites supplies composites for marine and civil works to strengthen or rehabilitate various structures like highway supports or marine platforms.  

The biggest and perhaps most exciting acquisition made was a 55% stake in AME for RM29.7mil. This is to take advantage of the current and long-term demand for diving and inspection support in the oil & gas industry both locally and regionally. AME provides offshore diving and related services to inspect and maintain oil and gas pipes and risers. It expects to execute over RM300mil worth of contracts over the next 3½ years. 

Perisai’s expansion plans also target especially the regional and global markets as we replicate the successful strategies that we have implemented locally in overseas markets. Approximately 90% of our earnings currently come from Malaysia while Brunei, Indonesia and Thailand account for the balance. We hope to increase our overseas contributions to 75% of total earnings in the next five to six years. 

What are your expectations for earnings next year? 

Perisai has been charting tremendous growth over the past five years, achieving a turnover and pre-tax profit compounded annual growth rate (CAGR) of 60% and 140% respectively. Going forward, we expect FY2005 sales and net profit to more than double, driven by the recent acquisitions. In FYE2005, we expect dive support services and development, operations and maintenance to account for more than 90% of our total turnover and bioremediation pollution abatement for the balance. 

We expect the sale of some of our patented products and solutions to also boost earnings. Perisai has over 40 patents worldwide and has a technical collaboration arrangement with Petronas Research and Scientific Services Sdn Bhd.  

What are some of the challenges you anticipate in 2005? 

With the recent acquisitions, the group is strengthened in our core business of being a fully integrated corrosion control solutions provider. We will face ongoing competition from numerous existing global peers as well as potential new entrants in the industry.  

Nevertheless, Perisai’s competitive edge is that we can provide internationally accepted quality products and solutions at competitive prices. Our products have been rigorously tested and have already proven themselves in the field and this established track record gives us the edge to compete internationally. Our credentials, products and expertise have not only allowed us to clinch contracts awarded by Petronas but also by Shell Brunei and Total in Indonesia. 

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