Reviving the O&G services and equipment sector


Asia School of Business assistant professor of business and society Dr Renato Lima de Oliveira (file pic) said Malaysia has been able to develop a strong supply base for the O&G industry, with growing inroads into international market compared with Indonesia, Thailand or Vietnam.

KUALA LUMPUR: The oil and gas (O&G) industry is yet to fully recover from the great oil bust of 2014 when the Covid-19 pandemic started in late 2019.

The oil and gas, services and equipment (OGSE) sector has not been spared from the pressure of a low oil price environment that has persisted since 2014.

Apart from the pandemic, value creation was further depressed with the emergence of two other major events last year namely the Opec+ disagreement on supply cuts and the storage shocks amid an oversupply in the oil market.

In addition to the market forces, O&G operators had reduced their capital expenditure and erased 50% of the market capitalisation of OGSE firms since early 2020.

Against a backdrop of a weaker oil and gas environment, the government has launched the National OGSE Industry Blueprint 2021-2030 to revive the industry’s ailing ecosystem with emphasis on diversification, upskilling and consolidation.

Despite the substantial growth of the OGSE industry in Malaysia in the past, the industry faced constraints in achieving further value creation, having already endured a reversal in value following the 2014-2016 oil price crash. The international oil benchmark Brent crude averaged at US$41.96 (RM172) per barrel in 2020 compared to an average price of US$64.30 (RM265) per barrel the previous year.

Malaysia has a total of 1,563 active OGSE companies as of November 2020 that has contributed RM65.1bil in revenue in 2019. Exports made up 32% of total revenue that year.

Asia School of Business assistant professor of business and society Dr Renato Lima de Oliveira said Malaysia has been able to develop a strong supply base for the O&G industry, with growing inroads into international market compared with Indonesia, Thailand or Vietnam.

“Malaysia’s OGSE is an important segment and I am glad to see the attention it received with this initiative and the efforts led by Malaysia Petroleum Resources Corp (MPRC) with the recently launched blueprint, ” he told Bernama. The long-term goals set in the industry, the blueprint included the need to have the OGSE sector contribute RM40bil to RM50bil in annual gross domestic product from RM20bil to RM40bil currently.— Bernama

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