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Exploring Malaysian Oil and Gas - by Anrike Visser

Published by Norway-Asia Business Review
 

Malaysia has seen an influx of Norwegian investments of the last couple of years, according to the Royal Norwegian Embassy in Kuala Lumpur. Norway is the 9th largest investor country in Malaysia, with approximately 19 billion MYR in investments, the embassy states on its website.
 

One of the areas of interest in the country for foreign investors, is the oil and gas industry. OGA 17, the 16th Asian oil, gas and petrochemical engineering exhibition, provides an overview of the sector on its website.
 

“Southeast Asia has around 412 active offshore fields with ongoing field development activities and Malaysia has the maximum offshore projects and accounts for a large portion of the regional Capital Expenditure (CAPEX).”

But there are also challenges according to OGA 17. “Faced with maturing oil fields, declining domestic production and a finite fuel source in the face of accelerated economic growth, the main challenge for energy suppliers is not just the availability of alternative energy supply but also the commercial potential of these resources.”
 

OGA 17 continues by looking at the past, “In the past decade, Malaysia’s Oil, Gas and Energy (OGE) industry has been contributing about one-fifth to the national GDP (Gross Domestic Product). As part of the Economic Transformation Programme (ETP) that will propel Malaysia forward into a truly developed nation, the OGE sector is targeting 5 percent annual growth until 2020.”
 

According to the exhibition’s website there is a way to overcome the challenges. “To sustain and increase oil & gas production, the focus is on deep water exploration and EOR [enhanced oil recovery] of mature fields with Malaysia generating big potential as a regional EOR hub. Hence, it is crucial that Malaysia continues to highlight its oil and gas potential while staying up-to-date with the latest innovations and technology to strengthen its position.”
 

One of the companies providing services to help transition oil and gas companies move into this new reality is Salcon Petroleum Services (SPS). SPS was established in 2015 as a service provider and agent for representing overseas oil and gas service companies in Malaysia and the Asia Pacific. “SPS covers the entire Asia Pacific region and provides support and services wherever needed,”. The solutions showcased on the website range from leadership programs, all the way to software, consultancy and oil spill detection.
 

We talked with CEO Mr Thomas Alexander Sjøberg about founding SPS back in 2015. “After many years in Malaysia, working with several local agents, we saw the need for a bit more proactive agent that is strong both technically and in sales. We therefore decided to start SPS and to offer our experience in selling products in Asia Pacific. Our three-year goal was to sign up five companies to represent. We got more than 15 companies within the first year, so we got off to an exceptional start!”
 

“Our primary offering is to be a sales agent and to provide local support for our principals’ services. In Malaysia you are required to use a local company for conducting business in oil & gas, as there are PETRONAS requirements to local content. SPS is registered with PETRONAS and licenced to sell products and carry out services in the oil and gas sector in Malaysia. Hence, we help overseas companies to enter the oil and gas sector here in Malaysia as well as in the Asia Pacific,” Mr Sjøberg states.
 

Norwegian companies are an important part of the clients of SPS. “Out of all our principals that we represent, about 50 percent of the companies are from Norway. The other 50 percent are from all over the world including UK, US, Canada, Australia and Austria. We are very pleased to have signed up 12 companies from Norway so far. The list is constantly growing, but currently we have the following companies signed up with us: AGR, VISSIM, MIROS, AnkoBluepix, eDrilling, Resoptima, OTG, Total Safety, RAYVN, Promineo, Contiki and Safran,” Mr Sjøberg says.
 

SPS is not only focused on the oil and gas sector Mr Sjøberg mentions. “Most of these companies are specific to the oil and gas industry only. However, some of the products has their main clients in oil and gas, but is also applicable outside the oil and gas sector. This is of course positive when the oil market is down, so that we have a diversified marked to offer to. In addition to the companies above, we also represent a few Norwegian companies that are not oil and gas related. These are O.B. Wiik which produces large tents for storage, and Aquafence, a flood barrier protection system. Our network in general in Asia expands far outside the Oil & Gas and we are therefore happy to also represent companies that has products that are possible to market in Asia.”
 

Why are Norwegian companies investing so massively in Malaysia? Mr Sjøberg provides his vision on this question. “For the oil and gas sector, I believe the main reason for investing in Malaysia is due to PETRONAS who always have had a good relationship with Norway and Norwegian companies. PETRONAS is a very active national oil company, with lots of exploration, production and research ongoing. They are always welcoming research and development opportunities and new technologies. In addition to PETRONAS a lot of international oil companies are present in Malaysia, like Hess, Murphy, Total, Exxon and Shell. This creates a lot of opportunities in oil and gas services in Malaysia, so it is natural to invest here if you are in oil and gas. We also see more and more companies establishing a regional headquarter in Malaysia, due to lower cost than surrounding countries, as well as being centrally located in Southeast Asia with easy connections to all countries in the Asia Pacific.”
 

For the next 5 to 10 years Mr Sjøberg sees opportunities for the oil and gas industry in the Asia Pacific in plug and abandonment, enhanced oil recovery and decommissioning on a large scale. “There is also a digital transformation ongoing and systems for Big Data, Internet of Things and Robotic Process Automation seems to be something the exploration and production players are looking into.”
 

Mr Sjøberg next explains the challenges he sees in the industry. “Asia Pacific seems to be one year behind the western world in the recovery from the 40 USD oil price we had over the past few years. Hence, Asia Pacific seems to be still in recovery mode and lacking the big investments. I think this will create some issues in the coming years, as the exploration and production companies have reduced their spending on exploration and very few discoveries have been made. Without discoveries you don’t have new developments and the bigger projects will therefore only materialize several years from now. Right now, I believe anything that contributes to cost-cutting is of interest to the exploration and production companies here in Asia. And again, the digital transformation process is taking place and hence good products in this space is certainly interesting.”
 

For international companies, there are some new opportunities in Malaysia specifically Mr Sjøberg states. “I believe that innovation has always been very important and this is where Norway in particular have been very strong! However, what we see now is that the government and PETRONAS here in Malaysia is encouraging more and more local players to focus on R&D and innovation. A lot of new grants, tax benefits and free office space are being given if you try to develop new products and services in Malaysia. This could in fact also be international companies that set up a base her in Malaysia and grow their business from here. This is very exciting and a lot of platforms for innovation locally is being developed.”
 

In the upcoming years SPS is looking to growing their service offerings, rather than expanding on product offerings. In addition, SPS is considering investments to become a more diversified player in the offshore service sector by merger or acquisition of existing service companies.
 

“We are always on the look-out for new technology and services that has potential,” says Mr Sjøberg.

Facts:
  • Norway is the 9th largest investor country of Malaysia at approximately 19 billion MYR;
  • Southeast Asia has around 412 active offshore fields;
  • The next OGA will be from 18 to 20 June 2019 in Kuala Lumpur. See the website for more information;
  • Salcon Petroleum Services was established in 2015;
  • YSPS’s customers are 50 percent Norwegian and 50 percent from other countries across the world.

 

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