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THE OIL & GAS YEAR

The Who’s Who of the Global Energy Industry


ARTICLES | INTERVIEWS | VIEWPOINTS | MARKET ANALYSIS | RESOURCES | PROJECTS | MAPS | INVESTOR SPOTLIGHTS

MALAYSIA 2015

Catalyst for change


www.theoilandgasyear.com

Tan Sri Ngau Boon KEAT


ISBN 978-1-78302-096-6

Executive Chairman
9 781783 020966

DIALOG GROUP
Up and away
SEE Kok Yew
President
EXXONMOBIL EXPLORATION AND PRODUCTION MALAYSIA
Maximise your assets’ value
Maen RAZOUQI
Vice-President and General Manager for Malaysia
SCHLUMBERGER
THE OIL & GAS YEAR MALAYSIA 2015
The Who’s Who of the Global Energy Industry

In partnership with:

12 20

CONTENTS
Diplomacy & Politics Exploration & Production
While balancing a national agenda promoting Low oil and gas prices are denting the operations
economic transformation through lowering of national and international oil companies glob- 1
subsidies and taxes with an international pro- ally. With cuts to capital and operational expen-
Content partners:

MALAYSIA 2015
gramme for progressing a common market ditures planned by Malaysia’s state-owned
for member states of the Association of Petronas for 2015, on the back of heavy fourth-
Southeast Asian Nations, Malaysia’s govern- quarter losses the previous year, the national oil
ment must also deal with the economic im- company must weigh its upstream priorities. As
pact of depressed oil prices, which at the be- development continues at major deepwater plays
ginning of 2015 reached new six-year lows. in the country, brownfield sites are to be rejuve-
nated through production enhancement efforts.

4 THE YEAR IN REVIEW 30 INVESTOR SPOTLIGHTS: Hibiscus Petroleum, Cliq


Energy, JX Nippon Oil & Gas Exploration, Inpex Offshore
5 INTERVIEW: Shahreen Madros, Malaysia Petroleum North West Sabah
Resources Corporation 31 COMPANY PROFILE: Roc Oil Malaysia
6 THE YEAR’S AWARDS 32 ILLUSTRATION: Kikeh deepwater development
7 MALAYSIA AT A GLANCE FOLDOUT MAP: Petronas’ global presence
8 THE INVESTORS INDEX 33 INTERVIEW: Heng Hiok Boon, Dialog Group
10 THE YEAR IN ENERGY 34 COMPANY PROFILE: Petrofac
35 ILLUSTRATION: Gumusut-Kakap semi-submersible
12 DIPLOMACY & POLITICS floating production system
36 VIEWPOINT: In transition. Michael Rodgers, IHS
13 ARTICLE: Common goals. Malaysia looks to foster 37 COMMENT: The oil price roller coaster. Petronas’ costly
co-operation in the Association of Southeast Asian Nations deepwater investments
13 IN SUMMARY: Malaysian oil revenue, Tapis crude prices,
fuel subsidies and development expenditure 38 THE GAS YEAR
15 VIEWPOINT: To the forefront. N. Rajendran, Malaysian
Investment Development Authority 39 ARTICLE: Weather the market storm. Amid depressed
FOLDOUT TIMELINE: Petronas: 40 years of Malaysian Oil commodity prices, LNG infrastructure projects progress
and gas 39 IN ASSOCIATION: Regional gas production and reserves-
17 INTERVIEW: Vanu Gopala Menon, Singapore High to-production ratios
Commissioner to Malaysia 42 INTERVIEW: Pramod Kumar Karunakaran, Malaysian Gas
18 TRADE REPORT: Malaysia and Qatar: Room to grow. Association
Essa Mohamed Al Mannai, Qatari Ambassador to 43 MAP: LNG infrastructure in ASEAN countries
Malaysia 43 RESOURCE: ASEAN LNG export and import facilities
19 INTERVIEW: Roger F. Poulin, Malaysia Canada Business 44 COMMENT: Malaysia in the regional LNG market.
Council Malaysia seeks to weather the commodity price storm
45 INTERVIEW: Kenji Ohta, Mitsubishi Corporation
20 EXPLORATION & PRODUCTION 45 IN CONSUMPTION: Asia-Pacific gas consumption, 2013
46 PROJECT HIGHLIGHT: Petronas FLNG 1
21 ARTICLE: Production push. Malaysia must strike a balance 46 ILLUSTRATION: Petronas FLNG 1
between budget restrictions and expensive ventures
21 IN COMPARISON: Local and regional oil production and 48 FINANCE & CONSULTING
reserves-to-production ratios
23 PULLOUT MAP: Exploration and production blocks 49 ARTICLE: Malaysia pushes back against the slump.
24 RESOURCE: Petronas faces down the oil price drop Determined to move the country’s economic development
25 INTERVIEW: See Kok Yew, ExxonMobil Exploration and forward, Malaysia pursues major hydrocarbons projects
Production Malaysia 49 IN DEFICIT: Malaysia's budget deficit, 2006-2015
26 COMPANY PROFILE: ConocoPhillips Malaysia 51 VIEWPOINT: New possibilities. Scott Darling, J.P. Morgan
27 ILLUSTRATION: Malikai tension-leg platform 52 COMMENT: Incentives to invest. Malaysia seeks to become
28 INTERVIEW: John James, Murphy Oil a centre for hydrocarbons storage, trading and services
29 COMPANY PROFILE: Lundin Malaysia 53 INTERVIEW: Nurul A’in Abdul Latif, PwC Malaysia

The Who’s Who of the Global Energy Industry www.theoilandgasyear.com THE OIL & GAS YEAR | MALAYSIA 2015
MALAYSIA 2015
The Oil & Gas Year is audited by BPA Worldwide

38 48 58
CONTENTS

The Gas Year Finance & Consulting The Year’s Focus: Pengerang
Integrated Petroleum Complex
As the second largest exporter of LNG glob- As a net hydrocarbons exporter, Malaysia faces
2 ally after Qatar, Malaysia must weather con- a difficult 2015. Yet despite a downwards revi- In April 2014, after two rounds of delays, state-
ditions posed by sustained low oil prices, re- sion of growth prospects by the World Bank owned Petronas approved a $16-billion final
MALAYSIA 2015

flected in LNG prices at a lag of several and a struggling national currency on the back investment decision for the Refinery and Petro-
months. National oil company Petronas has of low oil prices, the country will stick to its chemical Integrated Development project. The
stated that its most critical infrastructure GDP growth target of 5-6 percent for 2015. project is a cornerstone of the Pengerang In-
projects will advance unaffected, including State-owned Petronas says it still intends to tegrated Petroleum Complex, which underlines
two floating LNG facilities and a new train pursue most of its planned projects, with major the goal of establishing Malaysia as a regional
at its onshore complex in Bintulu, Sarawak. domestic developments planned both in the oil storage and trading centre by 2020.
upstream and further down the value chain.

54 VIEWPOINT: Market re-evaluation. Aaron Tan Wei Min, 75 INTERVIEW: Ngadni Temon, Energy Quest
Malaysian Industrial Development Finance 75 IN CONSUMPTION: Gas exports and consumption
55 INTERVIEW: Ismed Darwis, EY Malaysia in Malaysia, 1990-2035
55 IN GDP: Malaysia's GDP per capita, 2006-2014 76 VIEWPOINT: Drill past the drop. Rohaizad Darus, UMW
56 MARKET ANALYSIS: Special purpose equity. Tan Theng Oil & Gas
Hooi, Deloitte 77 INTERVIEW: Scott Tidemann, Petrosys
67 VIEWPOINT: Core contributors. Frederico Gil Sander, 78 ARTICLE: Brownfield projects a likely alternative. New
World Bank opportunities for oilfield services companies in brownfield
developments and deepwater plays
58 THE YEAR’S FOCUS: Pengerang Integrated Petroleum 79 COMMENT: Technology at sea. Technological expansion
Complex drives Malaysia’s upstream production, counteracting a
natural decline at the country’s maturing assets
59 ARTICLE: Downstream dream no longer deferred. 79 ILLUSTRATION: Offshore production platform models
Pengerang will host major downstream investments 81 ILLUSTRATION: Tapis enhanced oil recovery project
60 PROJECT HIGHLIGHT: Refinery and Petrochemical 82 VIEWPOINT: From the bottom up. Syed Salikhin Alsagoff,
Integrated Development Bumi Wangsa
60 IN CONTRACTS: Key contracts awarded by Petronas
61 INTERVIEW: Tan Sri Ngau Boon Keat, Dialog Group 84 ASSOCIATED SERVICES
62 MAP: Midstream and downstream infrastructure
63 PROJECT HIGHLIGHT: Pengerang Independent 85 ARTICLE: Back to basics. Malaysia’s associated
Deepwater Petroleum Terminal services sector looks to ride out the oil price slide
64 ILLUSTRATION: Pengerang Independent Deepwater 85 IN CONSUMPTION: Oil consumption in the Asia-Pacific
Petroleum Terminal region, 2010-2013
66 INTERVIEW: Mohd Yazid Ja’afar, Johor Petroleum 86 COMMENT: The promise of ageing assets. Efforts to
Development Corporation maximise production across Malaysia’s upstream sector
87 INTERVIEW: Raza Amin, DNV GL
68 OILFIELD SERVICES 88 INVESTOR SPOTLIGHTS: Olio Resources, Wood Group
PSN, Inext Petroleum & Oilfield Services
69 ARTICLE: Ambition in the face of adversity. Oilfield 89 INTERVIEW: Laurent Alessio, Leap Energy
services players in Malaysia look to flourish both locally and 90 VIEWPOINT: A matter of education. Azdi bin Abass,
globally, despite cuts to upstream expenditure in 2015 Octagon Petroleum Technology
69 IN COMPARISON: Malaysian oil production and 91 COMMENT: Structural support. Petronas develops its
consumption, 2003-2013 vendor development programme, which seeks to foster the
70 VIEWPOINT: Maximise your assets’ value. Maen Razouqi, expansion of small and medium-sized enterprises
Schlumberger 91 INVESTOR SPOTLIGHT: Valser Oil & Gas
71 COMPANY PROFILE: SapuraKencana Petroleum
72 COMPANY PROFILE: Deleum 92 ENGINEERING & CONSTRUCTION
73 COMMENT: Slick application. Methods for maximising
production and flow from wells 93 ARTICLE: Work in progress. Malaysia’s engineering and
74 MARKET ANALYSIS: Domestic services. Ramlan Malek, construction sector is host to large, technically challenging
Malaysian Oil & Gas Services Council projects in both the upstream and downstream

THE OIL & GAS YEAR | MALAYSIA 2015 www.theoilandgasyear.com The Who’s Who of the Global Energy Industry
THE OIL & GAS YEAR MALAYSIA 2015
The Who’s Who of the Global Energy Industry

68 92 108

CONTENTS
Oilfield Services Engineering & Construction Marine Services
As Malaysia seeks to develop an internationally In a period marked by budget cuts in the pub- With state-owned Petronas having revised its
recognised oilfield services sector, declining lic and private sectors, Malaysian engineering 2015 expenditure budgets, Malaysia’s marine 3
oil and gas prices have dented the confidence and construction is supported by a raft of services sector will look to carefully monitor the

MALAYSIA 2015
of major sector players and reduced overall major projects underway throughout the hy- national oil company’s upstream intent. This said,
national spending in the industry. Yet while drocarbons supply chain. Multi-billion-dollar, nearly all of Malaysia’s oil and gas production
cost-consciousness will be a strong theme in technically challenging domestic investments comes from offshore fields in the South China
2015, the country’s primary oil and gas projects include complex deepwater projects, floating Sea. Continued investment in hydrocarbons pro-
will demand technological development and LNG facilities and the Refinery and Petro- duction, both in shallow waters and at deepwater
efficient oilfield utilisation, aimed at maximis- chemical Integrated Development project. plays, will prop up the domestic maritime market,
ing production levels over the long term. from drilling to offshore support vessel provision.

109 IN PRODUCTION: Malaysia’s industrial production index 112 COMMENT: To import, or not to import. The impact of low
95 VIEWPOINT: Time to innovate. Abd Rashid Sidek, Malaysian oil prices on Malaysia’s net export receipts
Oil & Gas Engineering Council 113 INTERVIEW: Lim Chern Yuan and Daniel Bong, Yinson
96 INTERVIEW: Max Bellotti, Saipem Asia 114 COMMENT: Oil price slump hits OSVs. The gradual decline
97 PROJECT HIGHLIGHT: Petronas Malaysia LNG Train 9 in international oil prices has had repercussions for
99 COMPANY PROFILE: MMC Oil & Gas Engineering Malaysia’s marine services sector
100 MARKET ANALYSIS: Good market for brownfields. Ken 115 COMPANY PROFILE: Icon Offshore
Crawford, Aquaterra Energy 116 INVESTOR SPOTLIGHTS: Tresenergy, Opulens,
100 IN REVENUES: Employment in Malaysia by sector, Oceancare, VH Energy
January-June 2014 117 IN DISCUSSION: Does Malaysia have what it takes to be
101 COMPANY PROFILE: Technip the oil and gas services centre for the Asia-Pacific region?
103 COMPANY PROFILE: Eversendai Icon Offshore, Olio Resources
104 INTERVIEW: Abdul Rahman Hariri, Winmore Engineering 118 COMPANY PROFILE: Bumi Armada
105 ARTICLE: The future looks bright. Engineering companies, 109 IN EARNINGS: Earnings per share of key service providers
both international and local, are working on new LNG in Malaysia, 2013-2015
and petrochemicals plants and refurbishing older facilities
106 COMPANY PROFILE: SBM Malaysia 120 EXECUTIVE GUIDE

108 MARINE SERVICES 121 ACCOMMODATION


127 EVENTS
109 ARTICLE: New year, new chapter. Continued upstream 129 ACKNOWLEDGEMENTS
investment should prop up Malaysia’s maritime market 131 ADVERTISERS INDEX
109 IN RIGS: Offshore rig count by region 132 IN BRIEF

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The Who’s Who of the Global Energy Industry www.theoilandgasyear.com THE OIL & GAS YEAR | MALAYSIA 2015
THE YEAR IN REVIEW

5 Expansion along the value chain


Shahreen MADROS
Executive Director
MALAYSIA PETROLEUM RESOURCES CORPORATION

6 The Year’s Awards


8 The Malaysia 2015 Index
INTERVIEW

Expansion along the value chain

THE YEAR IN REVIEW


The Malaysia Petroleum Resources Corporation (MPRC) is working to help Malaysia
meet its goal of becoming a regional hub for oil and gas services and equipment.
Executive director of the MPRC, Shahreen Madros, speaks to TOGY about the
collaborative efforts being made to grow investment across Malaysia’s upstream Shahreen MADROS
and downstream sectors and the likely impact of the global oil price slump. Executive Director
MALAYSIA PETROLEUM
RESOURCES
Why is Malaysia an attractive place for oil related infrastructure projects. Many of these CORPORATION 5
and gas services and equipment providers investment opportunities are promoted as pri-

INTERVIEW
to establish their regional bases? vate sector investments, while the government
Malaysia is the second-largest oil and gas pro- works to provide the necessary infrastructure
ducer in the Association of Southeast Asian to facilitate their development.
Nations (ASEAN) and one of the world’s top The federal and state governments have
LNG producers. The industry is characterised co-operated to facilitate investment in the form
by Petronas’ stability and an emphasis on en- of tax incentives. They have also helped support
hanced oil recovery, marginal fields and deep- infrastructure and ease bureaucratic processes.
water developments, making Malaysia an at- This shows the long-term perspective and the
tractive market for higher-value services. importance of this industry for Malaysia.
With a mature upstream hydrocarbons in-
dustry, the country possesses a strong ecosystem How has Malaysia progressed towards achiev-
ing its goal of becoming a regional centre for
oil and gas services and equipment?
We saw a clear trend Malaysia has secured a number of significant
achievements towards realising its goal. Since
of services and 2011, the country has hosted the 2014 Offshore
Technology Conference Asia in Kuala Lumpur.
equipment companies Kuala Lumpur was also registered as part
of the World Energy Cities Partnership pro-
acquiring assets while gramme in the same year. As a result, a good
working relationship has been developed be-
also expanding their tween Malaysia and all major international cen-
tres around the world to ensure a continued
services capabilities. flow of investments and co-operation.
On the domestic front, a number of signifi-
cant projects were carried out to encourage
of services and equipment companies that the involvement of local universities in research
support the needs of the oil and gas value activities for the industry. These initiatives involve
chain, both domestically and regionally. getting more graduates into the oil and gas in-
The period between 2011 and 2014 saw a dustry by promoting internships in the services
significant increase in capital expenditure di- and equipment sector and encouraging industry
rected toward enhanced oil recovery and mar- players to share industry experience with uni-
ginal field developments. Throughout this versities to improve the quality of graduates.
period, we saw a clear trend of services and
equipment companies acquiring assets while How will lower oil prices impact the domestic About MPRC
also expanding their services capabilities. services and equipment sector? An agency of the Prime Minister’s De-
No one is exempted from the impact of lower partment, MPRC’s initiatives include
How is the investment climate for major mid- oil prices, not even major players. The same talent and technology development,
stream and downstream projects? could be said about Malaysia. While the degree encouraging foreign and domestic in-
In addition to growth in upstream exploration of impact may be different depending on each vestment and promotional activities
and production, the midstream and downstream company’s circumstances, smaller services such as participating in international
sectors also receive among the biggest invest- providers stand to be impacted the most. events and conducting business mis-
ments in capital expenditure. Many international companies have an- sions to target markets. In view of
The importance of this industry is reflected nounced specific responses on a local level, Malaysia’s chairmanship of ASEAN in
in the recent budget reading in October 2014 but we have not seen such announcements 2015, MPRC is focusing on collabora-
by the prime minister, in which he reaffirmed yet. Many are analysing the situation or stream- tions between oil and gas services and
the government’s commitments to the lining processes and improving their efficiency equipment markets in ASEAN countries.
Pengerang Integrated Petroleum Complex and in order to generate a competitive solution.

The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | MALAYSIA 2015
THE YEAR’S AWARDS – MALAYSIA 2015

MAN OF THE YEAR


Tan Sri Ngau Boon KEAT
Under the leadership of Dialog Group executive chairman Tan Sri
Ngau Boon Keat, Phase 1 of the Pengerang Independent Deepwater
THE YEAR IN REVIEW

Petroleum Terminal (PIDPT) came on stream in 2014. One of the


country’s most important oil and gas infrastructure projects, the $1.58
billion PIDPT will help Malaysia reach its goal of becoming a regional
oil and gas storage and trading centre. PIDPT is being developed by a
consortium led by Dialog Group and including Dutch company Vopak
and the Johor state government. Phase 1-A included construction of 25
storage tanks with a total capacity of 432,000 cubic metres. The project
aims to create 1.3 million cubic metres of storage.

6
UPSTREAM PROJECT OF THE YEAR
THE YEAR’S AWARDS – MALAYSIA 2015

The largest full-field enhanced oil recovery project in Malaysia and one of the largest in
Southeast Asia, the Tapis project is being led by ExxonMobil in partnership with national oil
company Petronas. The field has been producing since the late 1970s with a total production to
date of around 400 million barrels of oil. Tapis-blend crude, with an API gravity of 45 degrees
and very low sulphur content, is one of the major benchmark crudes in the region. The $3.1-
billion project is expected to recover an additional 10-15 percent of the field’s crude oil.

ENGINEERING AND CONSTRUCTION PROJECT OF THE YEAR


Japanese engineering and construction company JGC Group plans to complete Petronas LNG
Train 9 at the Bintulu LNG complex by the end of 2015 and have the facility on stream by the
beginning of 2016. The contract is valued at $2 billion. Train 9 will have a production capacity of
3.6 million tonnes per year and will receive its feedstock from Petronas’ newly developed gasfields
offshore Sarawak. The total output of the Petronas LNG complex is 25.7 million tonnes per year.
JGC has a long history at the complex, having worked on the existing trains since the late 1980s.

NEW EXPLORATION AND PRODUCTION ENTRANT OF THE YEAR


SapuraKencana Petroleum was already Malaysia’s largest oilfield services company and the
world’s largest tender rig owner and operator when the company took on its new role as a
major upstream operator in the country. In February 2014, the company completed the
acquisition of US independent oil company Newfield’s Malaysian assets. SapuraKencana
Petroleum is now the operator of eight production-sharing contracts, one alliance contract and
a risk-service contract. They are all located offshore Peninsular Malaysia, Sabah and Sarawak.

LOCAL OILFIELD SERVICES COMPANY OF THE YEAR


Deleum increased its number of operational slickline units to 53 in 2014. Doubling its capacity
has allowed the company to take 50 percent of Malaysia’s slickline market. The company has
invested MYR45 million ($13.5 million) to upgrade its operating equipment. In addition to its
slickline business, Deleum’s chemicals arm has patents on a range of chemicals for improved oil
recovery work, including Solid Clenz, a chemical solution jointly developed by Deleum Chemicals
and Petronas that has proven effective in achieving production increases as high as 70 percent.

INITIAL PUBLIC OFFERING OF THE YEAR


Malaysian offshore support vessel provider Icon Offshore had one of the largest initial public
offerings on the main market of the Bursa Malaysia stock exchange in 2014. The company raised a
total of MYR945 million ($284 million) in the offering on June 25, 2014, and the value of its stock
rose by 15 percent on its first day on the market. The country’s largest offshore support vessel
company is using the funds to expand its fleet of 32 vessels. The company is acquiring two new
vessels in addition to a new-build programme that will add an additional seven ships to its fleet.

THE OIL & GAS YEAR | MALAYSIA 2015 The Who’s Who of the Global Energy Industry
MALAYSIA AT A GLANCE

CAMBODIA VIETNAM

PHILIPPINES

THE YEAR IN REVIEW


THAILAND

Kota Bharu Kota Kinabalu


Alor Setar
SABAH
Kuala Terengganu Bandar Seri Begawan
George Town
Ipoh MALAYSIA BRUNEI
Kuala Lipis Kuantan 7
Bintulu
KUALA LUMPUR

MALAYSIA AT A GLANCE
SARAWAK
Seremban
MALAYSIA
Malacca Kuching
Johor Bahru
SINGAPORE

INDONESIA INDONESIA

National capital
City
International boundary 0 100 200 400
State boundary
Kilometres

© 2015 The Oil & Gas Year Ltd., The Oil & Gas Year Malaysia 2015. All rights reserved.

POLITICS GDP (official exchange rate): $312 billion (2013)


Population: 30.4 million (2014 estimate)
GDP (real growth rate): 4.7 percent (2013)
Area: 329,847 square kilometres
GDP (per capita): $17,500 (2013)
Capital city: Kuala Lumpur
Natural resources: Oil and gas, tin, timber, copper, iron ore, bauxite, palm oil
Climate: Tropical with annual monsoons
Major economic activities (percent of GDP): Agriculture: 11.2 percent,
Official language: Bahasa Malaysia industry: 40.6 percent, services: 48.1 percent (2013)

Political system: Constitutional monarchy with a bicameral parliament Oil production: 657,000 barrels of oil per day (2013)
consisting of an elected lower house and unelected upper house
Oil reserves (proven): 3.7 billion barrels (2013)
Ethnic groups: Malay (50.4 percent); Chinese (23.7 percent); Indigenous (11
percent); Indian (7.1 percent); others (7.8 percent) Natural gas reserves (proven): 1.1 tcm (38.8 tcf) (2013)

Legal system: Mixed legal system of English common law and Islamic law Natural gas production: 69.1 bcm (2.44 tcf) (2013)

ECONOMY Sources: CIA; World Bank; Bank Negara (Malaysian Central Bank); BP 2014
Currency: Malaysian ringgit (MYR1: $0.301) Statistical Review, Malaysia Statistics Department, ASEAN Briefing

The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | MALAYSIA 2015
THE INVESTORS INDEX

The Malaysia 2015 Investors Index


fairly strong, although tempered when com-
BY MARKET
82.2 pared to results from last year’s survey.
THE YEAR IN REVIEW

Of those surveyed in 2015, 89.2 percent


said current business conditions in the oil Abu Dhabi 95
and gas market are positive, compared to
95.8 percent in 2014. Only 76.9 percent of Qatar 88.4
executives surveyed by TOGY said they ex-
pected their company’s revenue to increase Azerbaijan 86.3
in 2015, compared to 98.4 percent in 2014.
Malaysia 82.2
However, 86.1 percent of respondents
still said this is a good time to invest in Indonesia 79
Malaysia’s oil and gas market.
8 Kazakhstan 67.95
MARKET STABILITY: The government aims
THE INVESTORS INDEX

to turn Malaysia into a regional hub for oil 50 60 70 80 90 100


storage and trading, and oilfield services
and equipment rivalling the existing oil and
The Oil & Gas Year Malaysia 2015 Investors gas finance and trading centre of Singapore. compared to only 8.06 percent in 2014.
Index reflects a market hit hard by the global Political and economic stability is key to However, investors do still view Malaysia’s
fall in oil prices, but one that has managed this target, and it is clear the right steps are government policies as supportive of the
to retain its appeal for investors. being taken. In 2015, 100 percent of respon- domestic oil and gas industry, with 83.1 per-
dents rated Malaysia’s oil and gas market as cent of respondents saying the government’s
PRICE SLUMP: Lower oil prices have had a either highly stable or stable. policies on oil and gas were pro-business.
strong impact on Malaysia’s oil and gas in-
dustry. As a key oil and LNG exporter, the IN BUSINESS: A total of 76.9 percent of re- ABOUT THE INDEX: The TOGY Investors
country has been viewed by investors as spondents rated Malaysia’s climate for doing Index measures confidence among oil and gas
being among the countries in the Asia-Pacific business as easy, including 15.3 percent who investors as expressed in their level of spending
region that was hit hardest by the slump. rated the country’s operating environment in a given market. Participants are asked to
In February 2015, national oil company as very easy. These results are, however, give positive or negative responses to a set of
Petronas posted its first-ever quarterly loss, down from 91 percent in 2014 who rated questions about the market. A reading above
followed by the announcement that its in- the climate as easy or very easy. 50 on the index represents a positive perception.
vestment plans would be cut by as much as More surprising is that, in 2015, 23 per- The Malaysia 2015 index is based on the
$8 billion. In spite of the bad news, confidence cent of respondents rated Malaysia’s business responses of 65 oil and gas executives surveyed
in Malaysia’s hydrocarbons industry remains climate as difficult or extremely difficult, between September 2014 and March 2015.

RESPONSE
IN

How would you describe the How would you rate the ease of How would you rate the level of
policies of this government vis-à- doing business in this country? transparency in this oil and gas
vis the oil and gas industry? market?
Very easy 15.4 %
Pro-business 53.9 % Easy 61.5 % Very transparent 1.5 %
Pro-business, but restrictive 29.2 % Difficult 12.3 % Transparent 73.9 %
Anti-business, but accommodating 13.9 % Extremely difficult 10.8 % Not transparent 21.5 %
Anti-business 3.1 % Corrupt 3.1 %
Extremely
difficult Very easy
10.8% 61.5%
How would you rate the ease of Difficult How would you rate the level of
starting an oil and gas business 12.3% political and economic stability
in this market? in this oil and gas market?

Very easy 3.1 % Easy Highly stable 64.6 %


Easy 69.2 % 61.5% Stable 35.4 %
Difficult 27.7 % Unstable 0%
Extremely difficult 0% Highly unstable 0%
Source: Survey conducted by The Oil & Gas Year in Malaysia between September 2014 and March 2015
THE OIL & GAS YEAR | MALAYSIA 2015 The Who’s Who of the Global Energy Industry
THE YEAR IN ENERGY

05 Ottawa approves the 05 Petronas signs a deal 11 The Ophir Production 18 Spain’s Técnicas
acquisition of Talisman with the Canadian joint venture signs Reunidas is awarded a
Energy’s British province of British seven-year small field 50-month, $1.5-billion
Columbia gas assets by Columbia for a 62- risk service contract to contract as part of the
Petronas for $1.5 billion. percent stake in the develop the Ophir Refinery and
Pacific NorthWest oilfield off Terengganu. Petrochemical
LNG project. Development project to
engineer, supply
and build part of
07 Petronas agrees to 14 Barakah Offshore 10 An explosion the complex.
THE YEAR IN REVIEW

sell a 10-percent stake in Petroleum wins $78.3- destroys a section of the


its Canadian shale gas million contract to build $904-million Sabah-
project to New Delhi- the 282-kilometre Sarawak pipeline
based Indian Oil. Pengerang pipeline. between Lawas and
Long Sukang.

15 SapuraKencana 03 Petronas and Shell 29 SapuraKencana


Petroleum says it expand the terms of the Petroleum announces
secured $304 million Baram Delta production- a gas discovery at the
in contracts for work sharing contract to Bakong-1 well in
10 in Brunei, Côte d’Ivoire, include gas rights in block SK408.
India, Malaysia and Russia. its enhanced oil
THE YEAR IN ENERGY

recovery project.

20 Japan’s JX Nippon 06 Swedish


signs a contract to buy independent Lundin
380,000 tonnes of LNG Petroleum completes
per year for 10 years first well in Tembakau-2
from the Malaysia LNG in block PM307, drilled
Dua project. by Seadrill’s West
Prospero jack-up.
2014

MAR APR MAY JUN JUL AUG

13 UK oil company
EnQuest buys
ExxonMobil’s share in
Malaysia’s Seligi field to
own a 50-percent stake
alongside Petronas. 13 UK company
Petrofac is awarded an
17 Japan’s Tohoku engineering, procurement,
Electric Power Company construction and
signs a contract to buy 13 Petronas approves JX commissioning contract to
370,000 tonnes per year Nippon’s development develop Petronas’ Refinery
of LNG from Malaysia’s plan for the Layang field and Petrochemical
LNG 2 project for 10 in block SK10, with Integrated Development
years starting in commercial production project in Johor, valued at
April 2016. to start in Q2 2016. more than $500 million.

10 First talks take place


on a merger between
12 Malaysia’s Destini the CIMB, RHB and
acquires Kejuruteraan Malaysia Building
Samudra Timur’s Society banks to
Samudra Oil Services form the country’s 26 Shell makes a gas
for $22 million. biggest bank. find at its Marjoram-1
17 Shell finds gas at its well in block SK318 in
Rosmari-1 well in block water depths of around
SK318 off Sarawak. 800 metres.
06 Petronas-owned
Malaysia LNG and 23 Petronas announces
Petronas LNG sign a the start of oil
contract to sell up to 2.6 production at the
million tonnes of LNG Bentara field
per year to CPC Taiwan. offshore Sarawak.

THE OIL & GAS YEAR | MALAYSIA 2015 The Who’s Who of the Global Energy Industry
THE YEAR IN ENERGY

30 Perdana Petroleum 11 Malaysia’s Bumi


sells an offshore support Armada seals a $1.18-
vessel to Virgin Islands- billion floating
headquartered Hauston production, storage and
for $28.5 million. offloading vessel
contract for Indonesia’s 20 Malaysia’s prime
Madura field. minister announces
measures to combat the
fall of oil prices, 27 Petronas reports
17 Singapore-listed

THE YEAR IN REVIEW


including a reduction its first-ever
Nam Cheong secures of oil subsidies.
letters of intent worth quarterly loss,
around $186 million for amounting to
the sale and charter of $2.97 billion.
12 anchor-handling tug
supply vessels.

20 SapuraKencana 07 Petronas’ domestic


Petroleum acquires operational expenditure
Petronas’ stake in three will face cuts of 30
shallow-water upstream percent, a source
assets off Vietnam for tells Reuters. 11
01 Japan’s Inpex $400 million. 09 Datuk Wan Zulkiflee

THE YEAR IN ENERGY


transfers a 25-percent Wan Ariffin is named
stake in deepwater new CEO and president
block S, located of Petronas, elected for a
30 Murphy Oil says it 12 US-based three-year term
offshore Sabah, to ConocoPhillips
plans to sell 30 percent starting April 1.
Australia’s Santos. produces first oil from
of its Malaysian assets to
Indonesian state oil Kebabangan field
company Pertamina offshore Sabah.
for $2 billion.

2015

SEP OCT NOV DEC JAN FEB

19 South Korea’s
25 Lundin Petroleum Samsung C&T lands a
acquires a 50-percent contract to build a
stake in block PM328 regasification facility at
offshore Peninsular the Malaysian LNG
Malaysia. terminal in Johor.

08 Shell announces first


oil from the Gumusut- 14 The merger between
Kakap floating platform the CIMB, RHB and
in Sabah, expected to Malaysian Building
reach 135,000 barrels 28 Petronas says it will Society banks, is called
of oil per day at cut capital expenditure off due to the
peak production. for 2015 by 15-20 fall in oil prices.
percent following a drop
in oil prices after OPEC 26 Japan’s JGC secures
decides against cutting a $510-million contract
16 The price of Brent production. with Petronas for an
crude oil continues to LNG project at Bintulu,
fall, sinking to $96.2 per Sarawak, one of the
barrel, the lowest level largest LNG facilities
seen since 2012. 04 Singapore’s Keppel in the world.
Gas signs an agreement
to purchase a 10-year
supply of LNG
10 Argentina’s YPF
from Petronas.
ratifies a $550-million
shale exploration deal
with Petronas for the
development of the
Vaca Muerta field.

The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | MALAYSIA 2015
DIPLOMACY & POLITICS

13 Common goals
15 To the forefront
N. RAJENDRAN
Deputy CEO
MALAYSIAN INVESTMENT DEVELOPMENT AUTHORITY

17 Close co-operation
Vanu Gopala MENON
Singapore High Commissioner to Malaysia
ARTICLE

DIPLOMACY & POLITICS


Common goals
Malaysia’s government is determined to better foster diplomacy and co-operation as the
country heads the Association of Southeast Asian Nations (ASEAN) in 2015. Internally, the
government is pursuing an agenda of economic transformation that involves lowering
subsidies and taxes, while the country moves towards achieving a high-income status by 2020.

FIGURES

IN
In 2015, Malaysia is working to move forward increase in diesel. Cuts have reduced the share of 13
with the planned ASEAN common market. The subsidy spending in government expenditures from
ASEAN

ARTICLE
project aims to secure the free movement of goods a peak of more than 20 percent in 2011 and 2012 to
and services in the region. ASEAN comprises 10 17 percent in the first half of 2014. ECONOMIES
countries, which together make up a marketplace Moody’s evaluated the subsidy decreases as a
worth $2.4 trillion, the seventh-largest in the world. positive development. However, the ratings agency WERE WORTH
Meanwhile, the Malaysian government is ad- added that more reforms might be needed for the A COMBINED
justing its own economic agenda in response to country to reach a balanced budget by 2020.
lower oil prices and changes in global demand for
its staple products. The government plans to lower PRICE CRUNCH: The long-term impact of lower oil
$2.4 trillion
the country’s fiscal deficit to 3 percent of GDP in prices on Malaysia’s economy is still unclear. Malaysia IN EARLY 2015
2015, down from 3.9 percent in 2013, and eventually has a more diversified economy than most oil-pro-
reach a balanced budget by 2020. This will entail ducing countries and is marginally a net exporter
cuts in subsidies and other expenditures, as well as of crude. The country’s mining sector, including oil THE
an expansion of the tax base. extraction, was responsible for 43 percent of GOVERNMENT
Malaysia’s growth in gross fixed capital in 2012.
SUBSIDISED DEVELOPMENT: The government low- Many of the projects under the Economic Trans- AIMS TO
ered fuel subsidies in December 2014. The price of
the widely used RON 95-grade petrol is now based
formation Programme, an initiative to turn Malaysia
into a high-income economy by 2020, are in the oil
LOWER THE
on a managed float system, allowing state intervention and gas industry. Lower oil prices may make these FISCAL
to protect against outside economic shocks. In 2013, investments less attractive. Petronas also projected
the government spent about MYR29 billion ($8.72 that its contribution to government revenues would
DEFICIT TO
billion) to subsidise RON 95, diesel and LPG, up
from MYR27.9 billion ($8.39 billion) in 2012.
be 37 percent lower in 2015 if oil traded in the
range of $70 to $75 per barrel.
3 percent
The subsidy reductions equate roughly to a 9.5- A 6-percent goods and service tax will be intro- OF GDP IN 2015
percent increase in petrol prices and a 10-percent duced in April 2015 as part of wider efforts to

SUMMARY
IN

The Malaysian government’s …and cuts to longstanding fuel …however, development


oil revenues correlate closely subsidies may not suffice to expenditure may be cut,
with the price of Tapis crude… prevent a budget shortfall… as it has been in the past.
Malaysian oil revenue and Tapis prices, 2001-2013 Malaysian subsidies and Tapis prices, 2008-2015 Expenditure cutbacks; current accounts, 2008-2013
Estimated total oil revenue ($ million) Tapis crude ($ per barrel)
Fuel subsidies ($ million)
Cutback in development expenditure from budgeted ($ million)
Tapis crude ($ per barrel) Official budgeted Current account excess vs. budgeted ($ million)
25,000 120 Total subsidies ($ million)
MIDF estimate
5,000
20,000 120
100
20,000
17,500 105 2,500
80 15,000 90
15,000 0
12,500 75
60
-2,500
10,000 60
10,000
40 7,500 45 -5,000

5,000 5,000 30
20 -7,500
2,500 15
0 0 0 -10,000
0
2001 2003 2005 2007 2009 2011 2013 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013

Source: Malaysia Industrial Development Finance


The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | MALAYSIA 2015
ARTICLE

to foster dialogue over disputes in the South China


Sea. China and Taiwan, as well as ASEAN members
Brunei, Malaysia, the Philippines and Vietnam,
have conflicting territorial claims to the sea.
In May 2014, China sent rigs to areas Vietnam
claims as its territory, a move that set off protests in
the latter country. ASEAN foreign ministers re-
DIPLOMACY & POLITICS

sponded with a united voice, calling for all parties


involved to follow international law, including the
UN Convention on the Law of the Sea. Malaysia’s
foreign minister has said stability in the maritime
region would be a top priority in 2015.
Malaysia’s prime minister visited China twice
in 2014, with the second trip made during the 40-
year anniversary of bilateral ties between the two
countries. Malaysia is working to continue improving
bilateral relations with neighbours Indonesia and
Malaysia’s prime minister visited China twice in 2014 to improve bilateral relations Singapore, as well. Despite disagreements over in-
cidents in neighbouring waters and migrant worker
FIGURES
IN

14 reduce state dependence on petroleum-related in- issues, maintaining good relations is important for
come. The tax will replace other consumption taxes both Indonesia and Malaysia.
2014 SUBSIDY
ARTICLE

such as the sales and service tax, but will also cover The same is true for relations with Singapore.
REDUCTIONS a wider range of goods and services. Plans to construct a bridge on the Johor Strait to re-
place the Johor Causeway may be in the works. The
LED TO A BUDGET FOR THE FUTURE: The prices of palm oil strait marks the coastal divide between Malaysia
9.5-percent and rubber, Malaysia’s two biggest exports,
have also fallen. In response, the government
INCREASE IN has created a fund to assist rubber producers Regional priorities for Malaysia in 2015
if the price continues to fall. In December
PETROL PRICES 2014, the country’s northern states were
ravaged by the worst flooding seen since 1971,
include advancing progress on the
THE
with more than 230,000 people evacuated
from their homes. Palm oil production slumped
planned ASEAN common market and
BUMIPUTERA to a 10-year low as a result of the damage. ensuring maritime security and co-
Malaysia’s 2015 budget was unveiled in
ECONOMIC
EMPOWER-
October 2014 and amended in January 2015
to accommodate for low oil prices and the
operation in the South China Sea.
devastation from monsoon floods.
MENT The original version of the budget included and Singapore. The primary reasons cited for con-
PROGRAMME measures to improve opportunities for jobs and struction of the bridge are to ease congestion and
housing. The updated version of the budget intro- further improve bilateral relations.
IS VALUED AT duced more allocations for small and medium-sized
$10 billion enterprises to help further reduce dependence on
the oil industry and flood relief for affected businesses
GLOBAL TIES: Malaysia’s relations with the US are
also improving. Barack Obama visited Malaysia in
and rehabilitation projects. April 2014, the first visit made by a US president
A more controversial component of the budget since Lyndon B. Johnson’s in 1966.
MALAYSIA is the nearly $10-billion Bumiputera Economic Em- On the docket were talks to increase co-operation
PLACED powerment programme, which will benefit ethnic on economic issues, security, education and tech-
Malays and other indigenous people, around 68 nology, as well as the feasibility of visa-free access
18th percent of the country’s population. Critics have for work and travel for up to 90 days for Malaysians
IN THE 2015 raised concerns over the initiative’s cost and its po- visiting the US. Malaysia’s home minister has said
tential exacerbation of a “brain drain” among the that the efforts to meet US visa-free requirements
DOING Chinese and Indian-Malaysian population, who could succeed by the end of 2015.
BUSINESS may perceive themselves as being at a disadvantage.
DIPLOMATIC PUSH: Malaysia has already indicated
RANKINGS ECONOMIC CHANGE: Malaysia aims to become a it will be a strong diplomatic player in 2015. The
high-income country by 2020, and the World Bank prime minister actively promoted both the country
says it is on track to do so. “Malaysia is poised to and the ASEAN community at the World Economic
reach the World Bank’s high-income status before Forum meeting in January 2015 during talks with
2020, as the basic drivers of growth at the macro foreign leaders and representatives of UK defence
level remain firm,” World Bank senior country company BAE Systems, engineering multinational
economist for Malaysia, Frederico Gil Sander, said. Lloyd’s Register and Shell, among others.
In 2014, the country placed among the top five For the first time in 15 years, Malaysia was
economies in the Asia-Pacific region in seven areas voted back into the United Nations Security Council
measured by the World Bank’s Doing Business in- in October 2014 as a representative of the Asia-
dicators. Its overall ranking was 18th worldwide. Pacific region. While oil prices remain uncertain in
2015, the Malaysian government is working to
REGIONAL RELATIONS: As the chair of ASEAN in ensure the country and the wider ASEAN region
2015, Malaysia is in the delicate position of having will be poised for longer-term economic security.

THE OIL & GAS YEAR | MALAYSIA 2015 The Who’s Who of the Global Energy Industry
VIEWPOINT

N. RAJENDRAN
To the forefront

DIPLOMACY & POLITICS


The Malaysian Investment Development Authority (MIDA) is a
government body tasked with advancing Malaysia’s services and
manufacturing industries. Deputy CEO of MIDA, N. Rajendran, discusses
the role of the oil and gas industry in the nation’s economic
transformation and outlines its potential to be the regional energy leader.

The Economic Transformation Programme (ETP) is meant inviting foreign investors to come to the country and set up 15
to move Malaysia from a middle-income to high-income collaborations with local companies.

VIEWPOINT
nation by 2020. Previous development plans have not suc- Incentives in the local oil and gas industry include the
ceeded in this goal. Growth maintained the same rate, but Petroleum Income Tax Act, which encourages enhanced
Malaysia was not getting any richer than its neighbours. oil recovery and deepwater projects through tax incentives,
Countries such as Singapore, Japan and Korea were at the Refinery and Petrochemical Integrated Development,
the same economic level as Malaysia in the 1960s, but we known as RAPID, to expand and diversify Petronas’ petro-
were stuck in the middle-income trap, unable to sustain chemicals operations and the Global Incentive For Trading,
the necessary growth to reach high-income status. That is to draw in global commodity trading firms.
why the government launched the ETP in 2010, seeking With the exception of strong domestic services companies
growth with a targeted investment of $444 billion by 2020. such as SapuraKencana, Bumi Armada and Dialog Group,
Malaysia has always sourced technology abroad. We need
THE ROLE OF OIL: The government realised that with larger numbers of such companies and a more intense
limited resources, developing every aspect of the economy focus on advancing the technology available in the country.
would not be possible. If we were to invest in developing 40 Malaysia has more than 3,500 companies in the hydro-
different industries, 20 of them would likely fail. carbons industry, yet we do not have a robust local services
With this in mind, the government environment or make a major contri-
selected 12 sectors (11 industries and bution to the oil and gas technology
Greater Kuala Lumpur) that it felt would
benefit most. Because the oil and gas
Malaysia has more sector globally. We need to step up the
capacity of Malaysian companies to
industry contributes more than 20 per- than 3,500 companies compete at the global level.
cent of the country’s GDP, it was iden-
tified as a key economic area and became in the hydrocarbons SURPASS SINGAPORE: Future hydro-
central to the plans. carbons consumption growth will be
To meet the goals of the ETP and industry, yet we do driven by India, China, Malaysia and
transform Malaysia into an Asia-Pacific the Association of Southeast Asian Na-
oil and gas centre by 2017, the hydro- not have a robust tions more than anywhere else in the
carbons industry must contribute 5 world. Singapore is strong in the re-
percent of annual growth to the GDP local services gional hydrocarbons industry, but we
between 2010 and 2020. This will re- believe Malaysia can take the lead.
quire the industry’s contribution to in- environment. Malaysia has both the area to accom-
crease to about $70 billion by 2020. modate an expanding industry and oil
MIDA has been facilitating this ex- and gas production, unlike Singapore.
pansion, approving 13 oil and gas projects for the first seven Major projects and investors are flourishing in the
months of 2014, with a projected investment value of almost country today. In addition to Petronas’ $17.2-billion RAPID
$5 billion. This is an increase over the more than $2 billion project, US company GE Oil & Gas has established its Mon-
of investment in the industry in 2013. itoring Diagnostics Centre in Kuala Lumpur, overseeing
around 800 gas turbines and compressors in 27 countries.
TECHNOLOGY AND SERVICES: Oil and gas production is Swedish independent company Lundin Petroleum also
becoming more difficult and conventional methods less plans to invest $385 million in its Malaysian operations.
common. Exploration is farther afield and drilling is deeper. These projects are just a few examples of the billions of
The challenges presented by higher pressures and tempera- dollars being invested in Malaysia’s hydrocarbons industry
tures, unconventional hydrocarbons developments and in both upstream and downstream projects.
brownfield projects pose many potential complications. Given its location and economic climate, Malaysia can
Malaysia must have the latest exploration techniques in become a cost-competitive place for investors to establish
order to discover new reserves, as well as access to enhanced offshore operations and manufacturing of advanced tech-
oil recovery technologies. Furthermore, these approaches nologies for regional and international markets. In the years
have to be developed through local manufacturing and by to come, Malaysia will lead Asia’s hydrocarbons industry.

The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | MALAYSIA 2015

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