CORPORATEREPORT2013

VISION

MISSION

Position Malaysia as the NUMBER ONE OIL AND GAS SERVICESAND MANUFACTURING HUB in the Asia Pacific region

TO CREATEa dynamic and progressive oil and gas services industry in Malaysia where companies can compete and grow

TO PROMOTEmore vitality in the oil and gas industry via joint-ventures, collaboration, strategic partnerships and alliances

TO ENCOURAGEclose cooperation among industry, government and society so that the oil and gas industry in Malaysia anchors the future prosperity of the country

TO ENHANCE AND STRENGTHENour oil and gas human capital to achieve international recognition and demand

TO ENSUREa high level of integrity, commitment and professionalism in earning the trust of those with, and for whom, we work

CONTENTS

Message from the Prime Minister

Message from the Chairman

Message from the President/CEO

Board of DirectorsBoard of Directors' Profile

Management Team

About MPRCOur Stakeholders

Our Mandates

Our Strategic Thrusts

Our Core Values

Our Subsidiary • Johor Petroleum Development Corporation

Fulfilling our MandatesSummary of Highlights

MPRC’s Performance Report • Attracting Domestic and Foreign Investments • Bridging Access to Financial Services

• Facilitating Human Capital & Technology Development • Promoting and Exploring Business Opportunities

• Enabling Markets and Industries

The Road Ahead

MPRC in the NewsOil & Gas Roundtable Discussion

Info SectionGlobal Incentives For Trading (GIFT)

Acknowledgements

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MESSAGE FROM THE PRIME MINISTER

Malays ia has come a long way from its humble

beginnings. This is due to the vision and commitment of its

leaders in ensuring sound and effective economic measures

that have spearheaded the country to its present form

and standing in the region and the world.

With its strategic location and excellent infrastructure, Malaysia clearly possesses a dynamic economic status in Southeast Asia. With this in mind, the Government is confident that the country would be able to achieve its aspiration to become a high income advanced nation by 2020.

The Malaysian Oil, Gas and Energy (OGE) sector is an essential driving force for the nation's economy, contributing about a fifth of the country's Gross National Income (GNI) annually which is equivalent to about RM127 billion. This clearly reflects the increasingly significant role this sector has to play as we approach 2020.

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the OGE NKEA come directly under the purview of MPRC. The ultimate goal is to position Malaysia as the number one oil and gas hub in the Asia Pacific region.

MPRC identifies and capitalises on growth opportunities in the upstream and downstream oil and gas segments to encourage investments. It also collaborates and promotes partnerships and joint-ventures between local companies and global MNCs and helps develop sufficient quality human capital by facilitating interactions between industry, research institutions and academia.

As a nation, our transformation journey has already brought many changes and developments that have benefited businesses and citizens. However, we still have a long trail ahead of us fraught with all kinds of challenges. There is no doubt that we have done well and achieved much but there is still more that needs to be done. We must continue to work hard before being able to reap the reward of becoming a high income nation by 2020.

I would like to take this opportunity to express my appreciation to the entire team of MPRC for their dedication and hard work in creating additional value to the oil and gas industry which is among the mainstay of the Malaysian economy.

1Malaysia "People First, Performance Now"

Yang Amat BerhormatDato’ Sri Mohd Najib bin Tun Haji Abdul RazakPrime Minister of Malaysia

Under the management and direction of the national petroleum company, PETRONAS, the domestic oil and gas industry has played a crucial role in the country's economic growth. However, after decades of oil and gas production, our domestic resources is declining and we are developing smaller fields in harder to access locations as the era of cheap oil is over. To prepare for this, Malaysia has to strengthen other value-creating oil and gas activities and ensure that we have a sustainable energy platform for future Malaysia.

This is why the Economic Transformation Programme (ETP) was formulated as part of the National Transformation Programme incorporating bold, radical and speedy measures to help the country achieve this objective.

The Oil, Gas and Energy (OGE) National Key Economic Area (NKEA) is one of the 12 NKEAs under the ETP and is targeting to maintain the sector's share of GDP contribution by keeping pace with a five percent annual growth for the sector from 2010 to 2020. By doing so, the sector's GDP contribution needs to increase to RM241 billion by 2020, a truly ambitious but not impossible goal. The OGE NKEA is also expected to deliver an additional 52,300 jobs in this sector.

The OGE NKEA has identified 13 Entry Point Projects (EPPs) that are expected to generate RM47.1 billion to GNI while RM61.2 billion will come from business opportunities and baseline growth. The remaining RM23.1 billion will come from other supporting initiatives within the sector.

Malaysia Petroleum Resources Corporation (MPRC) was established and mandated to fill the current gap in the oil and gas industry. It is tasked to promote, catalyse and transform the oil and gas services and manufacturing sector to become a stronger entity in the industry. Five EPPs within

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MESSAGE FROMTHE CHAIRMAN

Malaysia is well-positioned to reap economic benefits from

the increased demand for oil and gas locally and globally

given its excellent location, close proximity and increasing

economic inter-linkages to global energy consumers in the Asia

Pacific region.

Additionally, Malaysian oil and gas companies have the capabilities and experience to provide multi-disciplinary services that include process design, mechanical and piping design, structural and civil design, electrical and instrumentation, oil rigs engineering and fabrication, welding and pipe threading, and environmental management which involves sludge management, removal and treatment.

With this extensive combination of factors, the Malaysian Oil, Gas and Energy (OGE) sector is set to soar to greater heights. It has already surpassed most first-year targets of the Economic Transformation Programme (ETP) with the country’s total Key Performance Index (KPI) hitting 97 percent.

Malaysia Petroleum Resources Corporation (MPRC) was established just over two years ago with the vision of creating a dynamic and progressive oil and gas services and manufacturing industry in Malaysia where companies can compete and grow in this exciting business. This is MPRC’s inaugural report on its activities and achievements to this end.

MPRC is driving trans-generational changes in Malaysia to ensure that we can achieve our goal of making the country a centre for oil and gas services and manufacturing activities in the Asia Pacific region. Our efforts in the region are not merely focused on raising our production or reserves, but also on how we expand and grow the oil and gas services and manufacturing focus areas.

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has been promoting more university-industry linkages and has participated in many forums to drive students' interest in joining the industry.

Promoting local industries abroad and finding potential business opportunities is important in deriving the industry’s economic growth. MPRC has worked very closely with MIDA and MATRADE in attending conferences and exhibitions such as Offshore Technology Conference (OTC) and Offshore Northern Seas (ONS) while also organising marketing missions to other countries.

MPRC’s Global Incentives For Trading (GIFT) programme is an initiative aimed at petroleum and petroleum-trading companies to consider Malaysia as an alternative location for their trading and storage base. To leverage the GIFT programme and its transformational role in generating GDP growth, new business opportunities, creating jobs and increasing revenues, the Government has opened up GIFT to include other products such as minerals, chemicals, agricultural goods and liquefied natural gas (LNG) in 2013.

Being in the oil and gas industry goes beyond just having relevant academic qualifications. Integrity, ownership and responsibility are imperative in this field.

The upstream and downstream sectors need to perform at their very best because everyone else in the equation will be counting on them. These factors shape the unique and competitive business that drives our economy which in turn will accelerate MPRC’s success and the growth of the oil and gas sector.

I would like to thank all our stakeholders for their close cooperation with the support of MPRC and the oil, gas and energy industry at large. These are early days and there is much that needs to be accomplished to reach our goal of becoming the top oil and gas hub in the Asia Pacific region.

Through this expansion, we can create new jobs, endow our people with new skills and capabilities, generate additional business opportunities and attract more companies to invest in Malaysia. The benefits of growing the oil and gas industry have a positive spill-over effect on other ancillary industries and economic sectors in the country.

MPRC has achieved much over the past couple of years. Some of its commendable efforts include working closely with government agencies such as the Ministry of International Trade and Industry (MITI), Ministry of Finance (MOF), Malaysian Investment Development Authority (MIDA), Malaysian External Trade Development Corporation (MATRADE), state Governments and regional economic corridor authorities to encourage private investments, formulate solutions to address investor issues as well as tracking the development of major projects.

MPRC has been instrumental in engaging with industry via strong associations with industry bodies such as the Malaysian Oil and Gas Engineering Council (MOGEC), the Malaysian Offshore Constructors Association (MOCA), the Malaysian Oil & Gas Services Council (MOGSC), the Malaysian Offshore Vessel Owners Association (MOSVA) and the Institute of Materials Management (IMM).

MPRC has also actively built international linkages with associations from various countries such as UK Trade and Investment (UKTI), Scottish Development International (SDI), the Energy Industries Council (EIC), Greater Stavanger Economic Development and the Korea Trade-Investment Promotion Agency (KOTRA) among others. With these linkages, we hope that more collaboration and business opportunities could be derived to benefit the industry at large.

To ensure better access to funds, MPRC has worked with Bank Negara Malaysia to facilitate talks between the banking sector and the oil and gas companies. MPRC also organised talks with Malaysia Technology Development Corporation (MTDC) to facilitate industry understanding on available grants.

In response to industry needs for human capital, MPRC has worked closely with the Ministry of Education (MoE) via its Industry Centre of Excellence (ICoE) programme. To this end, MPRC

YB Senator Dato’ Sri Idris JalaChairman, MPRCMinister in the Prime Minister’s Department

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MESSAGE FROMTHE PRESIDENT/CEO

Since the inception of Malaysia Petroleum Resources

Corporation (MPRC) in April 2011, the agency has made

important strides in achieving its mandate. I am delighted to

share with you the inaugural MPRC performance report.

2013 milestonesAs of 2013, MPRC has assisted in generating a total of RM3.49 billion worth of investments in oil and gas (O&G) storage. A further RM3.52 billion worth of investments were attracted in O&G services.

MPRC helped to strengthen and expand collaborations between industry players, government agencies and other institutions. To secure a human capital pipeline for O&G services and manufacturing, MPRC increased the number of universities actively engaged with the O&G industry to 11, up from two in the previous year. MPRC organised the Oil and Gas Funding Forum and other networking sessions to increase the O&G industry’s engagement with Bank Negara

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With a resilient economy that grew at 4.7 percent in 2013, Malaysia is well-placed to take advantage of the opportunities ahead.

In 2014/2015, MPRC has targeted to increase the contribution of O&G services and manufacturing to Malaysia’s GDP. We also aim to bring more Malaysian O&G companies to provide their services abroad. Malaysia’s visibility on the world stage reaches new milestones in 2014 with our hosting of OTC Asia and Kuala Lumpur’s role as a WECP partner. MPRC will continue with its four strategic thrusts to promote Malaysia as the number one O&G hub in the region.

In closing, I want to offer special thanks to Mr. Mohd. Emir Mavani, the previous CEO of MPRC. I wish to thank the members of the Board for their wisdom and insights. I am also thankful for the cooperation and support of our key stakeholders, government agencies and our private sector partners. Finally, I offer my appreciation for the hard work and commitment of MPRC’s staff as we look forward to the year ahead.

Thank you.

YBhg Datuk Shahrol HalmiPresident/Chief Executive Officer Malaysia Petroleum Resources Corporation

Malaysia (BNM), 18 commercial banks and seven development agencies. We also strengthened linkages internationally through government-to-government (G-to-G) initiatives.

To raise Malaysia’s profile on the international stage, MPRC promoted the national Oil & Gas Services and Equipment (OGSE) companies to six countries. We also created the Malaysia Pavilion at the Offshore Technology Conference (OTC) in Houston, Texas and brought OTC Asia to Kuala Lumpur. Through MPRC’s efforts, Kuala Lumpur is on its way to join the World Energy Cities Partnership (WECP).

In 2013, a growing number of businesses entered or deepened their involvement in Malaysia’s O&G services and manufacturing sector. A total of 20 trading companies were registered under the GIFT programme, while eight local companies successfully graduated to the international stage. The year also saw five successful joint ventures and the arrival of a multinational corporation (MNC) in Malaysia. The completion of the masterplan for the Pengerang Integrated Petroleum Complex (PIPC) and the Sipitang Oil and Gas Industrial Park (SOGIP) will enable Malaysia to boost investment in the downstream sector.

Opportunities and challenges aheadTogether, the achievements in 2013 have put Malaysia on course to become the leading regional hub for O&G services and manufacturing. As Malaysia becomes a centre of O&G investment, MPRC’s role in promoting and fostering O&G policies will continue to grow.

The five-year period ahead will be a boom time for the O&G industry. PETRONAS is committing to a capital expenditure of USD100 billion in Malaysia and internationally during this period. The industry’s growth stems from a robust investment pipeline and a healthy expansion in the upstream and downstream business.

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BOARD OFDIRECTORS

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YBhg Datuk Shahrol Halmi

President/Chief Executive Officer Malaysia Petroleum Resources Corporation

YB Senator Dato’ Sri Idris Jala

Chairman Malaysia Petroleum Resources Corporation

Minister in the Prime Minister’s Department & Chief Executive Officer Performance Management and Delivery Unit (PEMANDU)

YBhg Datuk Dr Wong Lai Sum

Director Malaysia Petroleum Resources Corporation

Chief Executive Officer Malaysia External Trade Development Corporation (MATRADE)

YBhg Datuk Noharuddin bin Nordin

Director Malaysia Petroleum Resources Corporation

Chief Executive Officer Malaysian Investment Development Authority (MIDA)

*Datuk Noharuddin Nordin has retired from his position in MIDA in 2014 and is replaced by Dato’ Azman Mahmud

Ramlan bin Abdul Malek

Director Malaysia Petroleum Resources Corporation

Vice President Petroleum Management, Exploration & Production Business, PETRONAS

*Ramlan Abdul Malek has retired from his position in PETRONAS in 2014 and is replaced by Adif Zulkifli

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YB SENATOR DATO’ SRI IDRIS JALA was appointed as Minister in the Prime Minister’s Department and Chief Executive Officer of the Performance Management and Delivery Unit (PEMANDU) on 1 September 2009. PEMANDU is a unit tasked with transforming the social and economic performance of Malaysia.

In his current role, Dato' Sri Idris leads the development of seven National Key Result Areas (NKRAs) in the Government Transformation Programme (GTP) and also the Economic Transformation Programme (ETP) that sets the roadmap for Malaysia to achieve high-income status by year 2020.

RAMLAN ABDUL MALEK served as the Vice President, Petroleum Management, Exploration & Production (E&P) Business of PETRONAS. As the Head of Petroleum Management Unit (PMU), his responsibilities covered the promotion and regulation of upstream activities in Malaysia. PMU acts as the petroleum resource owner and production sharing contracts manager in Malaysia.

Ramlan has 32 years of working experience in upstream in the Exploration & Production areas and had held several other technical and general management positions in PETRONAS, PETRONAS Carigali Sdn Bhd and PETRONAS Research & Scientific Services. Ramlan was a member of the PETRONAS Management Committee as well as the Chairman of the Society of Petroleum Engineers (SPE) Asia-Pacific Sdn Bhd, Director of MPRC and Director of Malaysia-Thailand Joint Authority (MTJA).

*Ramlan Abdul Malek has retired from his position in PETRONAS in 2014 and is replaced by Adif Zulkifli.

Currently, Dato' Sri Idris also sits as a member of the World Economic Forum’s Global Agenda Council on New Growth Models and World Bank’s panel of Advisory Experts for Competitive Industries practice division.

Prior to PEMANDU, Dato' Sri Idris was Managing Director and CEO of Malaysia Airlines in December 2005 where the airline posted 10 consecutive quarterly profits during his tenure as CEO from 2006 to 2008.

Before joining Malaysia Airlines, Dato' Sri Idris spent 23 years at Shell, where he was appointed Managing Director, Shell MDS (Malaysia) and Vice President, Shell Malaysia Gas & Power (Malaysia) between 2002 and 2005.

Dato' Sri Idris held the position of Vice President, Retail Marketing, Shell International, based out of London from 2000 to 2002 and he was the Managing Director of Shell Sri Lanka from 1998 to 2000.

BOARD OF DIRECTORS’ PROFILE

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YBHG DATUK SHAHROL HALMI is the President and Chief Executive Officer (CEO) of Malaysia Petroleum Resources Corporation (MPRC).

In addition, he is also the Director of the Oil, Gas & Energy and Financial Services’ National Key Economic Areas (NKEA) of the Performance Management and Delivery Unit (PEMANDU) besides handling the Strategic Reform Initiative (SRI) Government Role in Business (GRIB).

Prior to this, Datuk Shahrol was the founding Managing Director and CEO of 1Malaysia Development Berhad (1MDB) which was established to help transform Malaysia into a high income economy and enhance Malaysia’s competitiveness.

Prior to founding 1MDB, Datuk Shahrol was an Executive Partner and Managing Director of Accenture Malaysia’s public service operating group. He was instrumental in growing Accenture Malaysia’s public service practice, helping government agencies to add value in their service to the people of Malaysia. He also has extensive experience in other industries such as financial services and oil and gas.

YBHG DATUK DR WONG LAI SUM was appointed as Chief Executive Officer of Malaysia External Trade Development Corporation (MATRADE) in August 2012. She was previously its Deputy CEO I. Datuk Dr Wong has served in various capacities in Malaysia’s civil service since 1980. Her areas of expertise include international business, taxation, financial and corporate management and strategic planning.

Over the past 19 years at MATRADE, Datuk Dr Wong headed various divisions, such as Corporate Management and Strategic Planning and was Deputy CEO for Export Promotion prior to her current portfolio as CEO. Datuk Dr Wong is actively involved in various committees for policy development and design to advance trade and economic growth for Malaysia and speaks regularly at many international seminars and conferences.

YBHG DATUK NOHARUDDIN NORDIN served as Chief Executive Officer of the Malaysian Investment Development Authority (MIDA), a government principal agency promoting foreign and domestic direct investment, since August 2011.

Prior to MIDA, he was Chief Executive Officer of MATRADE since 2006. He has wide experience in international business.

He had served in various management positions in MATRADE between 2000 to 2006, including a stint as the Trade Commissioner to New York, United States from 1994 to 2000. Datuk Noharuddin also served in the Ministry of International Trade and Industry (MITI) between 1986 to 1993.

*Datuk Noharuddin Nordin has retired from his position in MIDA in 2014 and is replaced by Dato’ Azman Mahmud.

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MANAGEMENTTEAM

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YBhg Datuk Shahrol Halmi President/Chief Executive Officer

Ir. Dr. Shahreen Zainooreen Madros Executive Director

Mohd Yazid Ja’afar Executive Director

Chief Executive Officer of Johor Petroleum Development Corporation (JPDC)

Shankar Kanabiran Executive Director

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Team

Close working relationship with key Government

Agencies

Trade Associationsplatform to

engage industry players

G-to-GInitiatives

ETP mandate to transform

Malaysia into the No.1 O&G Hub in

Asia Pacific

Access to Government

Ministries/ State Governments

The Oil, Gas and Energy (OGE) sector is

one of 12 National Key Economic Areas

(NKEAs) under Malaysia’s Economic

Transformation Programme (ETP).

The Oil, Gas and Energy (OGE) is the

single biggest contributor to Malaysia’s

GDP and comprises three focus areas,

all of which have been targeted for

development: to sustain the O&G

Exploration and Production activities;

to grow the contribution from O&G

Services and Manufacturing sub-sectors;

to diversify our sources of energy for

Power Generation, i.e. Alternative Energy.

AboutMPRC

Close working relationship with key Government

Agencies

Trade Associationsplatform to

engage industry players

G-to-GInitiatives

ETP mandate to transform

Malaysia into the No.1 O&G Hub in

Asia Pacific

Access to Government

Ministries/ State Governments

OURSTAKEHOLDERS

MALAYSIA PETROLEUM RESOURCES

CORPORATION (MPRC) was established to see

through the strategies to grow Malaysia’s services

and manufacturing sector and to make the country

a regional O&G services and manufacturing hub. Its

role is to promote, catalyse and globalise the country's

O&G services and manufacturing capabilities in the

upstream, midstream, and downstream segments.

OUR MANDATES• Make recommendations on policy for the O&G services and manufacturing sector

in consultation with industry stakeholders

• Make recommendations on business regulations and the tax regime for the O&G services and manufacturing sector

• Prepare and share an industrial blueprint for the O&G services and manufacturing sector

• Build a database of companies operating in the O&G services and manufacturing sector in Malaysia

• Promote the O&G services and manufacturing sector and industry players abroad

• Leverage financial incentives offered by Malaysian government agencies in applying for foreign contracts

• Support O&G services and manufacturing companies setting up in Malaysia

• Interact with industry stakeholders to ensure industry requirements are met in terms of research and development, talent and financial assistance

Formed in April 2011 as an agency reporting to the Prime Minister’s Department, MPRC’s Board of Directors consist of the CEOs of Malaysian Investment Development Authority (MIDA) and Malaysia External Trade

Development Corporation (MATRADE) as well as the Vice President of the Petroleum Management Unit at PETRONAS. Our Board is chaired by Dato’ Sri Idris Jala.

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Making Malaysia the numberone O&G services and manufacturing

hub in the Asia Pacific Region

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EPP 13

EPP 4

EPP 6

EPP 7

EPP 8

Encourage foreign and domestic

investments into Malaysia and

facilitate industry access to funds

Ensure a pipeline of quality talents for the O&G industry and support local

technology development

Promote Malaysia and facilitate the regional growth of domestic

and foreign O&G service companies based in Malaysia

Create an efficient and competitive

market via policies and regulations

Industry & Market Enabler

Promotion & Business

Opportunities

Human Capital & Technology Development

Investment & Finance

Attracting MNCs to Set Up Operations in Malaysia and Partner with Local Firms

Taking Local Oil & Gas Services and Equipment Companies to the Global Stage

Encouraging Investments in the Oil & Gas Services and Equipment (OGSE) Industry

Building a Regional Storage and Trading Hub

Increase Petrochemical Output

Our strategic thrusts cover the upstream, midstream and downstream segments of the O&G industry value chain. It focuses on catalysing initiatives and developing existing support services by working closely with industry stakeholders that can contribute towards growing the O&G services and manufacturing focus areas. These partnerships make room for addressing issues faced by the industry players quickly and effectively and help ensure a pro-market regulatory environment.

MPRC has been tasked with developing five of the 13 Entry Point Projects (EPPs) identified under the Oil, Gas and Energy (OGE) NKEA which are also embedded within the initiatives in the strategic thrusts. The EPPs were targeted to generate a GNI of RM131.4 billion and creating an additional 52,300 jobs by 2020.

OUR STRATEGIC THRUSTSOur goal is to ultimately make Malaysia the regional O&G services and manufacturing hub in the Asia Pacific region. To realise this, we encourage investments and facilitate industry access to funds while ensuring a good supply of quality human capital and supporting technology development. With these, we actively promote Malaysia and the industry internationally, and we grow the industry by exploring potential business opportunities. Underlying all these efforts, we ensure efficient and competitive market policies and regulatory frameworks are in place to achieve a sustainable long-term growth.

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Mutual Benefit for All PartiesWe will generate win-win solutions for our stakeholders that will be sources of national competitiveness and sustainable growth.

Be True to Yourself and Honest with OthersWe create an environment of trust by saying what we mean and meaning what we say. We are unyielding in our ethics and we take responsibility for our actions.

Respect for Others will Empower Us to Shape the FutureWe keep an open mind to a diversity of ideas, regardless of origin. We accept the possibility that there are better ideas than ours. We are respectful of others and their views, mindful that we are here to serve.

Every Task is an Opportunity to Add ValueWe embrace every task as an opportunity to improve. We invest in the professional growth of our people. We are relentlessly focused on creating value when delivering on our mandate as nation builders.

Win-win

Integrity

Stewardship

Humility

MPRC is guided by Core Values that guide the decisions and behaviour of its people.

In 2013, three of the five EPPs under the purview of MPRC were reviewed in order to reflect changes in priorities within the ever-evolving OGE sector. EPP 6 'Attracting MNCs to Bring Their Global Oil Field Services and Equipment Operations to Malaysia' now gives equal emphasis to both Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI). With the successful consolidation of three major fabricators over the past three years, EPP 7 'Consolidating Domestic Fabricators' has changed its focus from promoting industry consolidation towards encouraging local champions to expand abroad.

Additionally, the scope of EPP 8 'Developing Engineering, Procurement and Installation Capabilities and Capacity through Strategic Partnerships and Joint Ventures' has been expanded to include joint-venture partnerships across the entire oil & gas services and manufacturing focus areas so as to encourage more multinational companies to set up their operations in Malaysia through partnerships with local companies.

OUR CORE VALUES

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A wholly-owned subsidiary of MPRC, Johor Petroleum Development Corporation Berhad (JPDC) was incorporated as a federal agency when the O&G development project in Pengerang, Johor was declared a national project of strategic importance. JPDC’s vision is to 'Transform Johor into a Sustainable, World-Class Downstream Oil and Gas Hub'. The agency is committed to coordinating, facilitating, formulating and overseeing the implementation of the Pengerang Integrated Petroleum Complex project. It is a one-stop centre for promoting, marketing, establishing linkages and networking for the Malaysian downstream O&G industry in Johor.

Developing the nation’s petroleum resources requires collaborative and

cooperative efforts by many parties, including PETRONAS and MPRC. MPRC has

a growing and important role to play in areas which have been identified for MPRC

to participate and contribute, for the overall benefit of the industry and country.

RAMLAN ABDUL MALEK

Vice President, Petroleum Management, Exploration & Production Business, PETRONAS

OUR SUBSIDIARY JOHOR PETROLEUM DEVELOPMENT CORPORATION

JPDC has been given the mandate to plan and develop strategies for the downstream oil and gas development in Johor and to coordinate and drive the execution of development projects. This includes identifying and managing the funds required for financing downstream O&G development in Johor while facilitating the operational follow-through on completed projects. The Board of Directors of JPDC comprises representatives from federal and state government agencies and is co-chaired by the Chief Minister of Johor and a Federal Minister in the Prime Minister's Department.

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MPRC made much progress in fulfilling

its mandates in 2012 and 2013 to make

Malaysia a regional oil and gas (O&G)

services and manufacturing hub. It has

also uncovered many opportunities for

future growth.

MANDATESFulfilling our

Category Year DDI/FDI Investment Value (RM mil) Companies Description

Oil Rigs/Acquired Assets

2012DDI 634 Perisai Investment in drilling rig

DDI 685 UMW Oil & Gas Naga-3 jack-up drilling rig

2013

DDI 643 Perisai Exercises option to buy second rig

DDI 691 UMW Oil & Gas Acquired Naga-4 jack-up drilling rig

DDI 78 THHE & McDermott Assets acquired via joint venture share swap

Training & Monitoring Centre 2013FDI 30 TWI Services Established regional centre in Subang, Selangor

FDI 305 Schlumberger Set-up regional training centre, Asia Center for Reliability and Efficiency (ACRE), Port Klang

Plant 2012 FDI 184 Aker Umbilical plant

Expansion 2013DDI 50 KKB Engineering Plant expansion in Sarawak

DDI 50 ProEight Committed Investment for two manufacturing plants in Labuan

Total 3,350

Total Additional Storage Capacity in Johor (2012): 1.06 mil cbm

ATB Sdn Bhd890,000 cbm

Tanjung Bin

LGT-2171,000 cbm

Tanjung Langsat

2012 2013

Companies Companies

188Internship

Places Secured

161Internship

Places Secured

Structured Internship Programme (SIP)via TalentCorp

Upstream Oil & Gas Services and Equipment (OGSE) Investment

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2012 2013

Upstream Oil & Gas Services and Equipment Investment(RM mil)

Foreign DirectInvestment

Domestic DirectInvestment

Category Year DDI/FDI Investment Value (RM mil) Companies Description

Oil Rigs/Acquired Assets

2012DDI 634 Perisai Investment in drilling rig

DDI 685 UMW Oil & Gas Naga-3 jack-up drilling rig

2013

DDI 643 Perisai Exercises option to buy second rig

DDI 691 UMW Oil & Gas Acquired Naga-4 jack-up drilling rig

DDI 78 THHE & McDermott Assets acquired via joint venture share swap

Training & Monitoring Centre 2013FDI 30 TWI Services Established regional centre in Subang, Selangor

FDI 305 Schlumberger Set-up regional training centre, Asia Center for Reliability and Efficiency (ACRE), Port Klang

Plant 2012 FDI 184 Aker Umbilical plant

Expansion 2013DDI 50 KKB Engineering Plant expansion in Sarawak

DDI 50 ProEight Committed Investment for two manufacturing plants in Labuan

Total 3,350

Local Oil & Gas Services and Equipment Companies Venturing into International Markets

Sri Lanka: 22%Myanmar: 67%

Thailand: 11%

Note:Refer to page 35 for list of companies.

Research Universities -Engineering ConsultanciesPartnership Programme 2012

Engineering Companies

MMC Oil & Gas Engineering Sdn BhdAker Engineering Malaysia Sdn BhdPerunding Ranhill Worley Sdn BhdTechnip Consultant (M) Sdn BhdRNZ Integrated Sdn Bhd

Collaborating Universities

Universiti Kebangsaan MalaysiaUniversiti Sains MalaysiaUniversiti Putra MalaysiaUniversiti MalayaUniversiti Teknologi Malaysia

GIFT Registered Companies

2011 2011-2012

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2012-2013

Cumulative total of registered companies

Joint Ventures and MNCs Expansion into Malaysia

Local-International: 92%

MNC Expansion: 8%

Note:Refer to page 37 for list of companies.

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Event Year Successes Created Impact to Industry

Johor Oil & Gas Cities & Corridors Lab

2011 2012

• Identified Pengerang Integrated Petroleum Complex (PIPC) as a new Entry Point Project (EPP)

• Established Johor Petroleum Development Corporation (JPDC)

Attracting Foreign Direct Investments (FDI) and Domestic Direct Investments (DDI) into O&G industrial parks in Malaysia

Labuan Oil & Gas Logistics Hub Lab

2012• Developed blueprint for Labuan to strengthen its

position as the O&G logistics hub for the region

Sabah Oil & Gas Downstream Development Lab

2012• Established a high level plan for Sabah state

government to develop its O&G downstream sector

Sipitang Oil & Gas Industrial Park (SOGIP) Masterplan

2013 • EPP13: Developed masterplan for SOGIP

Pengerang Integrated Petroleum Complex (PIPC) Masterplan

2013 • EPP13: Developed masterplan for PIPC

At a Glance: Key Development Projects

As one of the fastest growing economies in the Asia Pacific region, Malaysia’s flourishing O&G services and manufacturing focus area has created robust market opportunities for businesses in the upstream, midstream and downstream segments. Malaysia already houses a number of domestic and international O&G services players, oil traders and downstream players. MPRC aims to create an attractive and conducive business environment to continuously attract and encourage foreign and domestic investments into Malaysia’s O&G industry.

Attracting Domestic and Foreign Investments

MPRC’SPERFORMANCE REPORTIn fulfilling its mandates to make Malaysia a regional O&G services and manufacturing hub (see box: 'Storage, Trading and More', page 39), MPRC has concentrated its efforts on its four strategic thrusts; investment and finance, human

capital and technology development, promotion and business opportunities, and industry & market enabler. MPRC’s efforts in all these areas in 2012 and 2013 uncovered many opportunities for future growth.

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Sabah

Sarawak

PeninsulaMalaysia

441 Discovered Oil and Gas Field

Gas: 266Oil: 175

1) Perak

2) Kuala Lumpur

3) Negeri Sembilan

4) Melaka

6) Johor

5) Terengganu 7) Sarawak 10) Sabah

9) Labuan

1) Perak

2) Kuala Lumpur

3) Negeri Sembilan

4) Melaka

5) Terengganu

Opportunities

6) Johor

Opportunities

7) Sarawak

Opportunities

10) Sabah

Opportunities

9) Labuan

Opportunities

1

2

34

6

8

910

5

PETRONAS and DIALOG are two investors located within PIPC

PETRONAS Refinery and Petrochemicals Integrated Development (RAPID)

DIALOG-VOPAK-SSI

PENGERANG, JOHOR

The initial goal of this strategic thrust was to attract major international firms to establish regional operations in Malaysia, especially within technology-intensive Oil & Gas Services and Equipment (OGSE) activities. However, in 2013, the scope was expanded to also encourage investments by Malaysian companies to acquire proprietary technology and capital-intensive assets. One of MPRC’s objectives is to increase the technical expertise of local and foreign companies based in Malaysia. The country offers foreign and domestic investors attractive incentives designed to help them get the most out of its dynamic economy. It is one of the world’s top investment destinations for the O&G sector, attracting more than 5,000 companies from more than 40 countries around the world.

Initiatives under this strategic area support the country’s efforts to transform Malaysia into a hub for Oil & Gas Services and Equipment (OGSE) activities. In 2012, MPRC helped secure the exclusive rights to host the Offshore Technology Conference Asia (OTC) in Kuala Lumpur in 2014 and 2016. This event is expected to raise the international profile of Malaysia’s Oil & Gas Services and Equipment (OGSE) industry and help attract large investments from global firms. It will also create significant opportunities for collaboration between Malaysian companies and foreign multinationals.

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Sultan Ibrahim Sultan Iskandar and Dato' Sri Najib Razak looking at the model of the PETRONAS's Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang. Pic by Hairul Anuar Rahim

While these efforts will enhance Malaysia’s reputation as a regional O&G services and manufacturing hub, it is also imperative that Malaysia offer world-class infrastructure and connectivity to attract sustained investments into the industry. To this end, MPRC works closely with various agencies to oversee the development of O&G industrial parks in Malaysia: MPRC’s subsidiary Johor Petroleum Development Corporation (JPDC) is the master planner and coordinator of the Pengerang Integrated Petroleum Complex (PIPC) in Johor, while in Sabah, MPRC works with the Sipitang Oil & Gas Development Corporation (SOGDC) to promote the Sipitang Oil & Gas Industrial Park (SOGIP).

The country’s infrastructure developments in Johor, Sabah and elsewhere began to pay off in 2013 as domestic and foreign investors began to see the many benefits of Malaysia’s regional plans. In 2013, TH Heavy Engineering and McDermott International Inc formalised their joint venture via a share swap arrangement between McDermott Inc’s locally-incorporated Berlian McDermott Sdn Bhd and TH Fabricators Sdn Bhd, a wholly-owned subsidiary of TH Heavy Engineering Bhd. The joint venture has created a company with deep technology capabilities and experience in engineering, procurement, installation and commissioning (EPIC) which will help the two partners explore ever more complex O&G projects and markets. Investments into the Oil & Gas Services and Equipment (OGSE) sub-sector from local players also increased in 2013, with UMW Oil & Gas Corporation Berhad acquiring Naga-4,

a jack-up drilling rig for RM691 million while Perisai Petroleum Teknologi Berhad exercised its option to buy a second jack-up drilling rig for RM642.7 million. KKB Engineering Berhad also expanded its fabrication capabilities in 2013 to meet the growing demands of the O&G industry (refer to diagram in Summary of Highlights, page 22).

These investments represent only a fraction of the total Oil & Gas Services and Equipment (OGSE) investments in 2013, which also saw a steady inflow of foreign direct investments (FDI) from the likes of Petrofac, Schlumberger, Aker, Technip and General Electric. The rapidly-progressing developments of the Pengerang Integrated Petroleum Complex (PIPC) and Sipitang Oil & Gas Industrial Park (SOGIP) industrial parks also attracted several significant investments in 2013 (see box: 'Moving Up the Value Chain', next page).

The vibrant oil and gas sector in Malaysia is a result of the aspirations and

initiatives of all those involved; the national oil company, PSC contractors, service

companies, national bodies and the government itself. By working together

with entities such as PETRONAS and MPRC and in-line with our spirit of ‘Beyond

Boundaries’, we hope to continue to grow and to play a collaborative role in taking

the Malaysian oil and gas industry a step further.

Rohaizad Darus

President, UMW Oil & Gas Corporation Berhad

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Moving Up the Value ChainThe thrust of EPP 13: Increase Petrochemical Output is PETRONAS’ development of the Refinery and

Petrochemical Integrated Development (RAPID) in Johor and the Sabah Ammonia Urea (SAMUR) projects.

Together, RAPID and SAMUR involve investments exceeding RM65 billion which aim to increase the country’s

petrochemicals output in order to cater to rising demand for premium speciality chemicals within the Asia

Pacific region.

The Sipitang Oil and Gas Industrial Park (SOGIP) in Sabah is being developed as a premier industrial park

focusing on petrochemicals and fertilisers and will house the SAMUR project. It could potentially attract

as much as RM10 billion in investments and provide approximately 5,370 direct and indirect employment

opportunities. Construction on SOGIP’s 40 MLD water treatment plant began in 2013, and the facility will

eventually include a storage reservoir and approximately 11 km of water pipeline. Work has also commenced

on the 4.7 km access road to SOGIP from Jalan Sipitang-Sindum, with construction scheduled to be

completed by the end of 2014.

As of December 2013, the SAMUR project is more than 50 percent complete with the delivery of three gas

turbine generators and an ammonia converter for the site’s main off-loading facility (MOLF). The SAMUR

project is expected to be on line by 2015. However, more efforts are needed to attract investors into SOGIP,

particularly in the manufacturing of petrochemical and fertiliser products such as caprolactam, diammonium

phosphate, ammonium sulphate, NPK, urea-formaldehyde and ammonium nitrate.

Downstream facilities & petrochemicalsMeanwhile, the 20,000 acre Pengerang

Integrated Petroleum Complex (PIPC) in

Johor will house the RAPID project, which

will have a refining capacity of 300,000

barrels per day. The PIPC complex will

also house naphta crackers, petrochemical

plants, a liquefied natural gas (LNG)

terminal and a regasification plant. MPRC

has established a local subsidiary Johor

Petroleum Development Corporation

(JPDC) to coordinate the development of

the PIPC and to ensure that the various

O&G projects within PIPC are managed

and administered efficiently.

Besides PETRONAS’s RM60 billion RAPID

project, the other major project within

the PIPC is the RM5 billion Pengerang

Deepwater Petroleum Terminal. The joint-

venture among DIALOG Group of Malaysia,

Vopak of Netherlands and Johor State Secretary Incorporated is expected to be operationalised in 2014 and

will have a storage capacity for trading of five million cubic metres.

The PIPC Master Plan was endorsed by the Johor state government in 2013 and will serve as a blueprint

to turn PIPC into a world-class integrated petroleum complex. To ensure that the safety and heritage of

Pengerang residents are well preserved, villagers will be relocated to a new township that will have all

necessary modern amenities such as schools, a clinic and commercial areas. Site preparations for the RAPID

project has commenced in 2013 and is in progress.

View of the jetty structure at DIALOG's Pengerang terminal at PIPC

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Event Year Successes Created Impact to Industry

Bank Negara Malaysia Business Reception

2012• Co-hosted a business reception with Bank Negara

Malaysia during World Gas Conference (WGC) 2012

Increased engagement between Bank Negara Malaysia, banks (18), development agencies (7), and the industry

World Gas Conference (WGC) Business Reception

2012

• Connected financial institutions and O&G industry players

• The transformation of the oil and gas industry will have a ripple effect on financial services, which in turn will expand banks’ earnings base, create new jobs and develop new skills for employees

Oil &Gas Funding Forum (OGFF)

2013

• 188 Malaysian Oil & Gas Services and Equipment (OGSE) companies participated in the inaugural forum

• OGFF brought together 18 banks to meet the Oil & Gas Services and Equipment (OGSE) companies

Malaysian Technology Development Corporation (MTDC) Technology, Grant, & Facility Forum

2013• 53 Malaysian Oil & Gas Services and Equipment

(OGSE) companies participated in the inaugural forum

TERAJU Forum 2013• Presented areas and opportunities in O&G

to TERAJU members

At a Glance: Engagements on Financial Services, 2012-2013

In 2013, MPRC organised the inaugural Oil & Gas Funding Forum to connect O&G industry players with the financial industry. The main objectives of the forum were to improve access to financial markets and the borrowing environment and give insights into the various financing options available to O&G companies. It brought together over 250 participants from 18 banks and 118 Malaysian Oil & Gas Services and Equipment (OGSE) companies, and comprised three

panel sessions in which panelists shared their experience in contracting and project financing strategies, sourcing funds and O&G financing.

MPRC also co-organised the Oil & Gas Industry Debrief for O&G service providers and manufacturers in cooperation with the Malaysia Technology Development Corporation (MTDC) in 2013. The half-day event attracted 47 Oil & Gas Services and Equipment (OGSE) companies

Bridging Access to Financial ServicesAside from attracting investments into Malaysia's O&G services and manufacturing sector, establishment of clear linkages to finance is important to ensure that the industry players have adequate access to financial services and funding. MPRC works with Bank Negara Malaysia to help the banking sector better understand the O&G services and manufacturing industry and the opportunities within it. MPRC also works with various other government agencies such as Malaysian Investment Development Authority (MIDA), Malaysia External Trade Development Corporation (MATRADE), Malaysian Technology Development Corporation (MTDC), Multimedia Development Corporation (MDeC), Economic Planning Unit (EPU) and Ministry of Finance (MOF) to facilitate discussions on incentives for funding to benefit the industry growth.

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The inaugural Oil & Gas Funding Forum

and included an introduction to MTDC and presentations on the Commercialisation of Research & Development Fund, Technology Acquisition Fund, Business Growth Fund and Business Start-Up Fund. The main highlights of the debrief session were the funds and grants available for the development and commercialisation of O&G technologies and the MTDC incubator and technology facility walkabout.

Small-and-medium businesses play an important role in the success of any industry. In 2013, MPRC along with SME Corporation Malaysia, Malaysian

Investment Development Authority (MIDA) and TERAJU (Unit Peneraju Agenda Bumiputera) facilitated collaboration among various parties to help provide funding and growth opportunities for small-and-medium sized Bumiputera O&G companies.

In addition to these local events, MPRC also co-hosted a networking business reception with Bank Negara Malaysia during the World Gas Conference in 2012 to connect financiers and O&G service companies. The event attracted more than 200 O&G companies and 30 financial institutions.

Collaborative efforts between MATRADE and MPRC in 2013 have resulted

in some notable achievements, namely the Specialised Marketing Mission to

Myanmar and OTC Houston. This collaboration has brought together oil and

gas services companies to these markets.

Abu Bakar Koyakutty

Director, Oil and Gas & Chemical Division, Malaysia External Trade Development Corporation (MATRADE)

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Event Year Successes Created Impact to Industry

ICoE Secretariat2012 2013

• UTM and MPRC nominated as ICoE for O&G• 5 companies participated in the 2012 Structured

Internship Programme (SIP)• 10 companies participated in the 2013 SIP

Universities actively engaged with the O&G industry increased to 11 (from 2):

• Universiti Teknologi Petronas (UTP)

• Universiti Teknologi Malaysia (UTM)

• Universiti Kebangsaan Malaysia (UKM)

• Universiti Putra Malaysia (UPM)

• Universiti Sains Malaysia (USM)

• Universiti Malaya (UM)

• Universiti Teknologi MARA (UiTM)

• Universiti Malaysia Pahang (UMP)

• Universiti Malaysia Kelantan (UMK)

• Universiti Kuala Lumpur (UniKL)

• Prestariang

MOGEC-Universities Partnership

2012• 5 Research Universities-Engineering Consultants

partnerships established

Structured Internship Programme (SIP) via TalentCorp

2012 2013

• Secured 188 Internship places from 5 companies• Secured 161 Internship places from 10 companies

Human Capital & Technology Development

2013

• Outreach to professors of local and private universities on MPRC's agenda via National Professor Council Forum.

• Linked universities to PETRONAS’ Enhanced Oil Recovery (EOR) Research & Development (R&D) initiatives

• First contact with Malaysian Technology Development Corporation (MTDC) on focus for Oil & Gas Services and Equipment industry

UTM-MPRC-MOCA-CIDB Workshop

2013

• Facilitate workshop, to agree on a more targeted and tailored training module for offshore contractors that was approved by CIDB

Upskilling Programme via TalentCorp

2013• Helped TalentCorp create awareness of the

Upskilling and GEMS 2.0 programme among industry players and universities

• Provided feedback and review on the modules for both programmes

GEMS 2.0 via TalentCorp

2013

At a Glance: Activities in Human Capital Development, 2012-2013

MPRC’s objective within this area is to encourage and promote the supply of a quality workforce for the O&G industry. Between 2010 and 2020, the 13 EPPs within the Oil, Gas and Energy (OGE) NKEA are expected to create a total of 52,300 jobs of which some 40 percent, or 21,000 jobs, will be for highly skilled professionals such as engineers and geologists.

Facilitating Human Capital & Technology Development In addition to its market-oriented economy and government policies, Malaysia must be able to offer investors a steady supply of O&G professionals and in the long term to develop local technology required by the industry. This will help make the country a compelling investment destination and create long-term growth opportunities for Malaysia within Asia’s O&G industry. A dynamic relationship between the country’s public and private sectors will also help nurture a strong O&G ecosystem that must be supported by strong labour and financial markets.

MPRC undertook several initiatives to develop human capital in 2013, including establishing the O&G Industry Centre of Excellence (ICoE) in cooperation with Universiti Teknologi Malaysia (UTM). The ICoE will address the current shortage of skilled talents and build an ample pool of qualified young talents to meet the future needs of the O&G sector.

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MOGEC-Universities Partnership

Students participating in the Oil & Gas Induction

It brings together industry players and universities and helps identify professional traits and relevant training and accreditation programmes to meet industry needs. In collaboration with TalentCorp, MPRC is also developing technical and industry-related upskilling courses for skilled O&G professionals to ensure that they have the necessary industrial skills demanded by the O&G industry. The courses are offered to fresh engineering graduates with a minimum CGPA of 3.0 as shortlisted by employers.

To support the industry’s needs and to promote research and development capacity and capabilities, MPRC helped establish the Malaysian Oil & Gas Engineering Council (MOGEC)-Universities Partnership in 2012. The MOGEC-Universities Partnership connects five research universities (UTM, UM, USM, UKM, UPM) with professional engineering consultants to promote research and development collaboration within the O&G sector (refer to diagram in Summary of Highlights, page 23). MPRC also participated in the National Professor Council Forum to reach out to professors from public and private universities in an effort to create awareness amongst university professors about opportunities in the O&G sector.

MPRC is also working closely with TalentCorp to implement the Structured Internship Programme (SIP) within the O&G industry. This initiative facilitates internships from public and private institutes of higher learning and generates more employable graduates. To support this initiative, MPRC has teamed up with Universiti Teknologi Malaysia (UTM) to form a secretariat to encourage O&G companies to participate in the programme. As a result of MPRC’s efforts, a total of 10 O&G companies participated in the SIP programme in 2013 compared to only five in 2012. Nearly 350 internship places have been secured to date (refer to diagram in Summary of Highlights, page 22).

Malaysia’s future human capital needs will also be supported by the Aberdeen Drilling School, which set up operations in Malaysia in 2013 to provide customised training in drilling practices and technology, cost reduction/unscheduled events prevention, safety, communication and leadership. The school aims to use Malaysia as its base for regional expansion into neighbouring countries such as Thailand, Vietnam and other parts of Asia.

MPRC’s role in promoting and transforming the oil & gas services

sector complements the structure we currently have in the Malaysian

oil and gas industry landscape to effectively elevate Malaysia’s profile

towards becoming a regional hub for oil and gas services.

Sofiyan Yahya

President, Malaysian Oil & Gas Services Council (MOGSC)

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The WECP Networking Reception is considered one of the premiere events during OTC

The Malaysian delegation at the Offshore Technology Conference (OTC) Houston 2013

MPRC’s efforts in this strategic thrust are focused on raising Malaysia’s profile as a regional O&G services and manufacturing hub by exporting Malaysian products and services to the global market. We keep track of local and foreign business opportunities and are actively engaged with various international institutions and government-to-government initiatives.

MPRC made significant progress in this regard in 2013, in which eight Malaysian companies expanded abroad, five joint ventures were formed and a major multinational company expanded into Malaysia. MPRC also helped Kuala Lumpur to be nominated as ASEAN’s first member of the World Energy City Partnership (WECP) in 2014; a non-profit association of 19 of the world’s leading energy cities. WECP collaboration will be beneficial for businesses within member cities as well as local governments in terms of sharing best practices, energy policies and business development activities.

Promoting and Exploring Business Opportunities The O&G sector contributes about 20 percent to Malaysia’s GDP. However, it is estimated that at least 90 percent of this total is derived from exploration and production activities. MPRC is working hard to promote the local O&G services and manufacturing sector to make it more prominent and competitive.

Malaysian Oil & Gas Services and Equipment (OGSE) companies made great strides in increasing their international presence at the Offshore Technology Conference (OTC) in Houston, Texas in 2013. During the event, Wasco Energy Group was awarded the Offshore Technology Conference 2013 Spotlight Award for its new NEPTUNE Advanced Subsea Flow Assurance Insulation System and was recognised for its unique industry collaboration involving new chemistry developed by Dow. In addition, Kuala Lumpur-based Deleum Group had the honour of being selected by the OTC to present a technical paper entitled 'Thermo Chemical In-Situ Heat Generation Technique to Remove Organic Solid Deposition: Effective Tool for Production Enhancement and Flow Assurance' during the conference.

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Event YearNo. of Participating Companies

Successes Created Impact to Industry

Oil & Gas Marketing Mission to Sri Lanka

2012

2 Malaysian Oil &

Gas Services and

Equipment (OGSE)

companies

• EPP 7: 2 companies registered in Sri Lanka

in 2012

• Government to government MoU with Petroleum

Resources Development Secretariat (PRDS)

• 1 Malaysian company memorandum of

understanding with Sri Lanka companies

• Promotes Malaysia’s

Oil & Gas Services

and Equipment

(OGSE) companies

to 6 countries

• Created Malaysia

pavilion in OTC

Houston

• Brought OTC Asia

to Kuala Lumpur

• Made Kuala Lumpur

a member of WECP

Oil & Gas Marketing Mission to Myanmar

2012

MPRC market

survey mission

to Yangon and

Naypyidaw

• EPP 7: 1 company registered in Myanmar

in 2012

• First contact with Ministry of Energy and

Myanmar Oil & Gas Enterprise (MOGE)

2013

Co-organised

a specialised

marketing mission

to Myanmar with

MATRADE and

participated by

14 Malaysian Oil &

Gas Services and

Equipment (OGSE)

companies

• EPP 7: 5 companies registered in Myanmar

in 2013

• Inaugural O&G Specialised Marketing Mission

co-organised by MPRC-Malaysia External Trade

Development Corporation (MATRADE)

• Business-to-business matching between

Malaysian companies and 28 Myanmar companies

Norway Trade Industry Mission to Malaysia

2013

22 Malaysian Oil &

Gas Services and

Equipment (OGSE)

companies

• Trade Industry Mission from Greater Stavanger

Economic Development

• Business to business matching between

22 Malaysian companies and 10 Norwegian

companies

Offshore Technology Conference (OTC), Houston

2012

7 Major Oil &

Gas Services and

Equipment (OGSE)

companies

• EPP 8: 2 joint ventures

• Kuala Lumpur as host to OTC Asia 2014 and 2016

• Participated by 15 SMEs under MATRADE

2013

8 Major Oil &

Gas Services and

Equipment (OGSE)

companies

• OTC Technology Spotlight Award to WASCO

• Technical Paper Presentation by Deleum

• OTC Asia 2014 announcement

• Participated by 15 SMEs under MATRADE

Offshore Northern Seas (ONS) & Offshore Technology Days (OTD)

201210 O&G companies

from Malaysia

• Pre-cursor to EPP 8 achievement for 2013 (Atlas

Hall-Oiltools)

• First contact with Greater Stavanger Economic

Development and City of Bergen

Malaysia Oil & Gas Services Exhibition and Conference (MOGSEC)

2012

Helped to promote

the event that

attracted over

6,250 professionals,

trade and business

visitors who came

from 38 countries

to network with

key figures from

the Malaysian oil

and gas industry

• MPRC was part of the high-level government and

private speakers team that introduced the O&G

community to the opportunities arising from the

government’s roadmap to transform Malaysia into

a regional O&G hub.

• Offered a platform for Malaysian service providers

to showcase their products and services and

demonstrate the extent of Malaysia's oil and gas

industry capabilities.

More on next page

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Event YearNo. of Participating Companies

Successes Created Impact to Industry

Offshore Europe

2013

MPRC markets

survey mission

to the United

Kingdom

• EPP 6: TWI set up regional training centre in

Malaysia in 2013

• EPP 8: One MNC set up in Malaysia (ADS) in 2013

• Pre-cursor to two EPP 8 achievements for

2014/15 (EIC, UPB)

• Established key linkages with UK Trade &

Investment (UKTI), Scottish Development

International (SDI), Energy Industries Council

(EIC) and Greater Stavanger Economic

Development

• Pre-cursor to Kuala Lumpur as WEC Partner

• Promotes Malaysia’s

Oil & Gas Services

and Equipment

(OGSE) industry

to six countries

• Created Malaysia

pavilion in OTC

Houston

• Brought OTC Asia

to Kuala Lumpur

• Made Kuala Lumpur

a member of WECP

World Energy Cities Partnership (WECP)

2013

MPRC representing

the Kuala Lumpur

City Hall in its

initiative to register

Kuala Lumpur as a

member of WECP

• Won support of Stavanger and Houston to

sponsor Kuala Lumpur’s intent to register as the

latest member of the partnership

• Dewan Bandaraya Kuala Lumpur (DBKL)

submitted letter of interest in joining the WECP

• Pre-cursor to Kuala Lumpur as a WEC Partner

in 2014

Korea Trade Promotion Corporation (KOTRA)

2013

129 Malaysian Oil &

Gas Services and

Equipment (OGSE)

companies

• MoU between KOTRA and MOGSC

• Business-to-business matching between 129

Malaysian companies and 22 Korean companies

Global Incentives For Trading (GIFT)

2011 5 companies

• Steady increase in the number of companies who

have registered for the GIFT programme.

• EPP 4: MPRC has successfully helped traders

from around the world to set up their business in

Malaysia and is continuously working with Ministry

of Finance (MOF) and Labuan Financial Services

Authority (LFSA) to resolve any arising issues

Initiative to transform

Malaysia into a

commodities hub.

It provides an

opportunity for the

country to capture

value created from

increasing international

flows and trade of

various commodities

including:

• Petroleum and

petroleum-related

products including

liquefied natural gas

• Agricultural products

• Refined raw materials

• Chemicals

• Base minerals

including coal

2012 5 companies

2013 10 companies

Oil Storage Terminals

2012

• Tanjung Langsat

(LGT-2)

• Tanjung Bin

(ATB Sdn Bhd)

• Achieved storage capacity of 171,000 cbm

• Achieved storage capacity of 890,000 cbm

At a Glance: Growth and Promotion Activities, 2012-2013

Continued from previous page

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Year Country Companies

2012Sri Lanka

Energy Quest signed JV with Malco Engineering

Daya Materials signed JV with Malco Engineering

Myanmar MIR Valve invited to bid for work with PC Myanmar

2013

ThailandProEight successful in registering in PTTEP-PETRONAS Carigali Thailand’s vendor list

Myanmar

D&P Services Group successful in registering in PTTEP Myanmar’s vendor list

Dimension Bid successful in registering into PTTEP and Daewoo’s vendor list for works in Myanmar

MIR Valve successful in registering in PC Myanmar’s vendor list

Pioneer Engineering Sdn Bhd successful in registering into MOE, Myanmar’s vendor list for works in Myanmar

Scomi successful in registering into MOE, Myanmar’s vendor list for works in Myanmar

TOTAL COMPANIES: 8 COMPANIES VENTURING INTO 3 INTERNATIONAL MARKETS

Local Oil & Gas Services and Equipment (OGSE) Companies Venturing into International Markets, 2012-2013 *Refer to diagram in Summary of Highlights, page 23

Besides initiating and maintaining the Malaysia Pavilion at the Offshore Technology Conference in Houston and significantly increasing the participation of Malaysian companies at the event, MPRC also actively promoted the country’s O&G sector throughout 2012 and 2013 at other international platforms such as the Offshore Northern Seas (ONS) and Offshore Technology Days (OTD) and the Offshore Europe (OE). MPRC also promotes the Oil & Gas Services and Equipment (OGSE) companies in domestic conferences such as the Asia Oil & Gas Conference (AOGC), Oil & Gas Asia (OGA), and the Malaysia Oil & Gas Services Exhibition & Conference (MOGSEC). In addition, MPRC collaborated with key foreign government agencies in selected countries such as the United Kingdom, Norway and the United States to link Malaysian companies to potential foreign partners and customers (see box: 'A Global Promotion Platform').

A Global Promotion PlatformMPRC has helped establish international linkages that lend support and assistance to Malaysian O&G players wishing to establish an international presence. These foreign trade government agencies include:

• UK Trade and Investment (UKTI)

• Scottish Development International (SDI)

• Energy Industries Council (EIC)

• NOF Energy

• American Petroleum Institute (API)

• Greater Stavanger/Innovation Norway

• Korea Trade-Investment Promotion Agency (KOTRA)

• United States Embassy

• UBIFRANCE

• Canadian High Commission in Malaysia

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Malaysian Technology Development Corporation (MTDC) Technology, Grant and Facility Forum

In 2013, MPRC and the Malaysia External Trade Development Agency (MATRADE) led a delegation of 14 Malaysian O&G companies on a Specialised Marketing Mission (SMM) to Myanmar. The objective of this SMM was to connect Malaysian O&G companies with key Government officials and Myanmar O&G companies. This was successfully achieved and Malaysian O&G companies have made good progress in bidding for projects in Myanmar through the Myanmar Oil & Gas Enterprise (MOGE). Dimension Bid, Mir Valve, ProEight and Scomi were all successfully pre-qualified for inclusion into the International Oil Companies’ (IOC) list of vendors operating in Myanmar.

For Malaysia to move forward, investments in the local oil & gas sector

should be strengthened and consistently promoted in line with the Economic

Transformation Programme where Oil, Gas and Energy has been identified as

one of the National Key Economic Areas. MPRC has been working together with

Malaysian Investment Development Authority (MIDA) in creating the right climate

and environment to boost and promote new and ongoing investments in oil & gas

activities throughout Malaysia.

Datuk Phang Ah Tong

Deputy Chief Executive Officer, Malaysian Investment Development Authority (MIDA)

MPRC and Malaysian Investment Development Authority (MIDA) also co-hosted the Norwegian Trade and Investment Mission to Kuala Lumpur, which gave delegates the opportunity to understand and familiarise themselves with Malaysia’s plans for the O&G sector and explore possible business ventures with Malaysian companies. A total of 21 Malaysian oil and gas services companies participated in the event, where representatives learned how SMEs in Norway support the country’s O&G industry with a wide range of services, resources and capabilities.

The development of domestic champions is encouraged by joint-ventures between local Oil & Gas Services and Equipment (OGSE) firms and foreign multinationals. World-class companies help strengthen the competitiveness of local industry players when it comes to bidding for international job tenders, thus enhancing the industry’s growth prospects. Joint-ventures also help nurture more of the advanced technology-based companies the industry needs to support its expansion and indirectly helps attract global MNCs to set up regional operation centres in Malaysia. However, there are challenges to developing joint ventures, particularly in finding the right fit between possible partners and in meeting shareholder requirements. This problem is compounded by a lack of direct incentives to promote joint ventures as an investment structure.

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Year Joint Ventures Companies

2012 Local-International

PetraEnergy-Coastal Energy

Clough-Sapura

RNZ-PETROFAC

Muhibbah Engineering-Ford, Bacon and Davis

Innovative Fluid Process Sdn Bhd-Americas Energy Company

SPK Sentosa Bhd with Superior Energy Services BV

2013

MNC ExpansionAberdeen Drilling School (ADS) set up a regional training centre in Malaysia called Aberdeen Drilling International Sdn Bhd

Local-International

Atlas Hall-Oiltools

FarleyRiggs-D&P Services

FR-D&P with Myanmar company for development of integrated services

Johor Corporation’s Tanjung Langsat Port Sdn Bhd (TLP)-Dubai’s Oilfields Supply Center Ltd

THHE-McDermott International Inc

TOTAL COMPANIES: 12

Joint Ventures and MNC Expansion into Malaysia, 2012-2013 *Refer to diagram in Summary of Highlights, page 23

Nonetheless, there were several notable JV successes in 2013, including Atlas Hall’s joint venture with Oiltools AS, which will allow Atlas Hall to market and deliver the services and products of Oiltools AS in Malaysia and across the region. The joint venture between D&P Services and Farley Riggs Malaysia will also soon begin to bear fruit once the firm starts marketing its specialty production testing services – established in 2007, Farley Riggs is Australia’s leading Drill Stem Test service provider with the capability to provide a complete and well-tested service. Joint venture agreements were also concluded between Johor Corporation’s Tanjung Langsat Port Sdn Bhd (TLP) and Dubai’s Oilfields Supply Center Ltd as a marine supply base port operator as well as between TH Heavy Engineering and McDermott International Inc.

As of 31 December 2013, 20 oil trading companies had registered for the GIFT programme, including Mercuria, an independent energy and commodities groups with revenue more than USD 110 billion in 2013. In May 2013, the group strengthened its presence in Asia by opening an office in Kuala Lumpur as Mercuria Resources Labuan Limited (MRLL). MRLL plans to increase its product supply of coal and petroleum products as well as develop its storage capacity and access to upstream production site in the region (refer to diagram in Summary of Highlights, page 23).

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Global Incentives For Trading (GIFT) launching event

One of the key elements to achieve this goal is the alignment of policies and regulations to provide the best overall solutions to promote growth. To this end, MPRC took the lead in formulating the Global Incentives For Trading (GIFT) programme to promote Malaysia as a trading hub. Working together with Labuan Financial Services Authority (LFSA), Ministry of Finance (MOF) and Inland Revenue Board (IRB), MPRC developed GIFT to attract global trading companies in petroleum and petroleum products to set up operations in

Enabling Markets and IndustriesAs global O&G markets become more complex and competitive, information transparency with consistent and aligned regulations are a key success factors to allow market efficiency that promotes further industry growth for Malaysia. The country’s upstream O&G sector has developed remarkably well over the years, but much needs to be done to strengthen its position in the services, trading and downstream sub-sectors.

Malaysia. In 2013, the programme’s scope was widened so that it would be applicable for trading with both resident and non-resident companies for petroleum and petroleum products. (See box: 'Storage, Trading and More', next page)

GIFT incentives include 0% tax rate for LNG trading companies, 3% flat corporate tax for other commodities, full tax exemption on directors' fees for non-Malaysians and various other exemptions and benefits.

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Petroleum product imports and exports for China, India and Southeast Asia are expected to rise by 1.8 million

barrels per day between 2010 and 2020. It is vitally important for the region to have adequate storage facilities

to accommodate this increased demand and to serve as a buffer against supply shocks caused by geopolitical

instability. Malaysia is ideally suited to fill this gap, which is the main goal of EPP 4: Building a Regional Storage

and Trading Hub.

The Straits of Malacca is recognised as being a major oil shipment route, linking China and Indonesia with

major oil exporters in the Middle East, Africa and Latin America. An estimated 15.2 million bbl flows through

the straits every day, of which 90 percent is crude oil1. Taking into consideration the current storage capacities

of Singapore and Indonesia and with plans afoot to increase Johor’s oil storage capacity to 10 million cubic

metres, the region will soon be the second-largest oil storage hub in the world after the renowned Amsterdam-

Rotterdam-Antwerp (ARA) oil trading hub.

By becoming a regional storage and trading hub, Malaysia and Singapore will be able to complement each

other’s refining and petrochemical activities, independent storage, bunkering and blending facilities while

enjoying easy access to customers in China, India and Southeast Asia. MPRC works closely with federal and

state government agencies as well as regional economic corridor authorities to encourage private investment

within these industries by formulating solutions to address key investor issues such as permits and incentive

schemes as well as tracking the development of key projects.

Malaysia made significant strides towards achieving the goals of EPP 4: Building a Regional Storage and

Trading Hub in 2013. ATT Tanjung Bin Sdn Bhd, a wholly-owned subsidiary of VTTI BV, launched Malaysia’s

largest oil storage terminal in January 2013 with a total capacity of 890,000 cubic meters. Additionally, ATB

Tg Bin plans to increase its storage capacity by 250,000 cubic meters in the Tanjung Bin Petrochemical and

Maritime Industrial Centre by 2015.

Meanwhile, the DIALOG-Vopak joint-venture to develop an independent oil storage terminal in Pengerang,

Johor entered the final stage of the first phase of construction. The terminal will have a capacity of 1.3 million

cubic meters when it is complete and is scheduled to launch its first shipment at Q2 2014. In addition, PUMA

Energy commenced work on its bitumen storage facility in Tanjung Langsat, with the first phase capacity of

64,000 cubic meters scheduled to be completed in the second quarter of 2014.

World oil demand is expected to grow moderately at 1.5 percent per annum, mostly due to increased demand

from developing countries. However, the oil storage and trading industry is highly susceptible to crude price

volatility and is mainly driven by supply and consumption trends within the region. That said, Malaysia is

set to assume a key role within the ASEAN Economic Community in 2015, which gives the country a unique

opportunity to lead the region’s transformation to an international O&G storage and trading hub.

1 U.S. Energy Information Administration, 'World Oil Chokepoints'.

Storage, Trading and More

Tanjung Langsat

Singapore

Nusajaya

Tanjung Bin

Melaka Straits

South China Sea

Pengerang

Overview of storage facility projects in Southern Johor DIALOG's Pengerang Terminal

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Launching of the Industry Consultative Council

In its efforts to grow the O&G services industry, MPRC was also entrusted to form the Industry Consultative Council (ICC) in 2012. ICC acts as an advisory body where industry matters may be discussed and collaborative efforts pursued to further develop the industry towards making Malaysia a regional O&G hub.

ICC is a valuable partnership between MPRC and O&G trade associations to drive the development of local companies to become regional and world-class players. Its council members are made up of presidents of five main trade associations and it is chaired by MPRC. The five associations are the Malaysian Oil and Gas Engineering Council (MOGEC), the Malaysian Oil and Gas Services Council (MOGSC), the Malaysian Offshore Vessels Owners Association (MOSVA), the Malaysian Offshore Constructors Association (MOCA) and the Institute of Materials Management (IMM).

Malaysia Petroleum Resources Corporation’s GIFT programme has

strongly supported Mercuria’s development in Malaysia. The country is an

attractive regional base for foreign companies that want to enter markets

within the Asia Pacific region.

Loo Chong Peng

Executive Director, Mercuria Resources Labuan Ltd.

One of MPRC’s most important tasks was to develop a comprehensive database of companies that are registered with PETRONAS and operating within the O&G services and manufacturing sub-sector. With the database in place, MPRC worked closely with PETRONAS to gather comprehensive data about industry players in terms of their paid-up capital, investment structure, strengths and challenges.

As at July 2011, about 93 percent of the 3,545 companies registered with PETRONAS had a paid-up capital of less than RM5 million. Many small players provided common services to support industry requirements, and there were very few companies that offered technology-intensive products or services.

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Besides its promotional activities, MPRC will continue to play a key role in developing strategic O&G projects such as Pengerang Integrated Petroleum Complex (PIPC) and Sipitang Oil & Gas Industrial Park (SOGIP) as well as other projects in Labuan, Tanjung Langsat and Port Tok Bali. MPRC will also step-up its efforts to make Malaysia a storage and trading hub by continuing its facilitation for oil storage investment and oil trading companies.

We wil l support the growth of domestic capabilities and capacity by encouraging greater strategic domestic investments and technology. Along with its partners, MPRC must sustain its efforts to ensure that the incentives and grants available from Malaysian Investment Development Authority (MIDA), SME Corporation Malaysia, Malaysian Technology Development Corporation (MTDC) and other agencies are directed towards developing advanced technology-based companies. Challenges also remain in growing Malaysian global champions within the OGSE sector, including the strict international accreditation requirements as well as the risky nature of foreign projects with stiff competition. It is imperative that the industry have better access to financing, and MPRC intends to host sector/segment-specific forums focusing on potential areas such as: O&G SMI/SMEs, Marine Services, Enhanced Oil Recovery and Fabricators.

MPRC will continue to engage with the industry to identify opportunities abroad and develop the government-to-government linkages required to support Malaysian companies in these new markets. MPRC will also work closely with Malaysia External Trade Development Corporation (MATRADE) to promote Malaysian capabilities overseas and keep up its efforts to link up foreign MNCs with credible local partners.

Smaller Malaysian OGSE players will require much assistance to enhance their capabilities before they will be able to explore opportunities outside Malaysia. However, MPRC is committed towards engaging with industry players to identify the policies and incentives best suited to grow Malaysian O&G players. Besides its current linkages with Aberdeen, Stavanger and Houston, MPRC has also built linkages with Australia, Korea, India, Sri Lanka, Myanmar, Africa, Kazakhstan, China and more. These linkages will be nurtured to foster bilateral relations and create business opportunities for Malaysian industry players.

In the year ahead, MPRC intends to increase the exposure and profile of Malaysian O&G companies through domestic and international platforms such as the Asia Oil & Gas Conference (AOGC), Oil & Gas Asia (OGA), Malaysia Oil & Gas Services Exhibition & Conference (MOGSEC) as well as the Offshore Technology Conference (OTC), Offshore Northern Seas (ONS), Abu Dhabi International Petroleum Exhibition & Conference (Middle East) and World Gas Conference (WGC).

THE ROAD AHEADIn the year ahead, MPRC will prioritise Oil & Gas Services and Equipment (OGSE) sub-sectors for growth and actively identify opportunities for investments. It will continue to leverage on its relationships with international trade promotion agencies to identify and attract suitable OGSE companies to set up operations in Malaysia, either as independent entities or as partners with local firms. It will also facilitate further discussions between the O&G services and manufacturing industry and the financial sector to encourage financing opportunities as well as nurture public-private partnerships in human capital and technology development.

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• Going Global a Necessity, Not a Choice

by Amy Chew photos by Saiful Hizam Mansor Focus Malaysia

• Lack of Collaboration Stymies Malaysia’s Growth in O&G

by Hafidz Baharom photos by Saiful Hizam Mansor Focus Malaysia

Visual credit to Focus Malaysia

OIL & GAS ROUNDTABLE DISCUSSION

NEWSMPRC in the

From left: Syahrul Zuhara, Corporate Communications Manager MPRC; Ahmad Azwan, Oil & Gas Services and Equipment (OGSE) Manager MPRC; Prathab V., Executive Editor Focus Malaysia; Abdul Rashid Md Sidek, President, MOGEC; Syed Feizal Syed Mohammad, Chairman and SVP, Technip Geoproduction (M) Sdn Bhd; Nan Yusri Nan Rahimy, Group Managing Director, Deleum Berhad; Datuk Shahrol Halmi, CEO, MPRC; Mac Ngan Boon, Managing Director, Muhibbah Engineering (M) Sdn Bhd; Azhar Zainal Abidin, Managing Director, ProEight Oshore Engineering Sdn Bhd, Dr Shahreen Madros, Executive Director, MPRC; Jamal A. Ainul, Chairman, Schlumberger Group Asia Pacic; Eric Chua, Oil & Gas Services and Equipment (OGSE) Manager. Photo courtesy of Focus Malaysia

THE local oil and gas sector is probably the single largest contributor to Malaysia’s gross domestic product (GDP), contr ibuting about 20%

annually to its economic pie. Since the discovery of oil in Miri and the subsequent incorporation of Petroliam Nasional Bhd in 1974, oil has become a major source of revenue for the government. Some estimate that a major portion of the economy is financed by oil revenue.

However, after 40 years, and with more than 4,000 local oil and gas companies, we still have a long way to go to be a global player. While Fortune ranks PETRONAS among the largest global corporations, over 90% of local oil and gas companies are still said to be either small and medium industries (SMIs) or small and medium enterprises (SMEs).

With this as background, Focus Malaysia held a roundtable last week with top local and foreign industry players, who gave their take on Malaysia’s strengths and weaknesses. The topic was: As Malaysia aims to become a regional oil and gas hub, how can local companies compete in the big leagues?

Panellists were unanimous that there is a need for Malaysian companies to change their outlook, as they can no longer afford

to be inward-looking. Malaysia is an oil and gas industry leader in the region. However, neighbouring countries are snapping at our heels. “It is not a choice but a matter of doing it now,” the panellists said.

The roundtable was moderated by Focus Malaysia ’s executive editor Prathab V. Panellists included Technip Geoproduction (M) Sdn Bhd’s chairman and senior vice-president for Malaysia and Brunei, Syed Feizal Syed Mohammad; Schlumberger Group Asia-Pacific chairman Jamal A Ainul; Malaysia Petroleum Resources Corporation (MPRC) executive director Dr Shahreen Zainooreen Madros; Muhibbah Engineering (M) Bhd managing director Mac Ngan Boon; Deleum Bhd Group managing director Nan Yusry Nan Rahimy; Malaysian Oil & Gas Engineering Council president Ir Abdul Rashid Md Sidek; and ProEight Offshore Engineering Sdn Bhd managing director Ir Azhar Zainal Abidin. The following is the first of a two-part report.

How can Malaysian oil and gas companies compete with the big boys?

Dr Shahreen: This topic is extremely relevant at this time, especially since it is no longer a choice about growing and becoming a regional hub. As Afta 2015

is looming, globalisation is setting in, competition in the region is growing. We can no longer afford to be inward-looking. Statistically, a huge majority of [local] companies are very much inward-looking. There is a handful which has ventured out. About 20% of [our] GDP comes from the oil and gas industry and, of the 20%, 80-90% is from exploration and production (E&P). Oil and gas services are way behind. So there is a necessity to move and balance the economy.

Abdul Rashid: If Malaysia wants to become a regional oil and gas hub, the manpower, the resources must be there. If you look at the industry, the backbone of it is engineering and science. If you don’t have that, you cannot go forward. Thus you have to start from the basics all the way. Training at all levels, from technicians right up to engineers, project managers, project directors and so on. Otherwise, we cannot move forward.

Jamal Ainul: I agree with Dr Shareen. I think that it is not just my thinking, Schlumberger is also thinking the same way – that it is not a matter of choice. It is a matter of doing it now because everything is falling into place. This country is the most active in this industry, overall. We have a national company admired worldwide. We have a very good population of English-speaking,

Malaysia’s O&G sector must take the critical step of change, producing a competitive model involving upscaling competence and assets, technology and solutions

by Amy Chew photos by Saiful Hizam Mansor Focus Malaysia, 7 December 2013

GOING GLOBAL A NECESSITY, NOT A CHOICE

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well-educated young and experienced people. That is a difference and if you put it all together, there is none in the Asia-Pacific like us. We have perhaps Brunei a little bit but they are extremely limited. So if we don’t do this and become the regional hub, somebody else will do it. But they may do a poor job. I think we can do a better job because we have the willpower. We have the infrastructure, the people and of course we have the [oil and gas] activities. Going forward, I think that is the objective that can be achieved – but of course, more work needs to be done.

Syed Feizal: I think this industry has been lucky over the decades to have PETRONAS championing and contributing to the domestic industry. I think with this industry, we now have to take the critical step of change. I think the critical step of change is to come up with a competitive model. We have to be really competitive. That’s why we should not rely too much on domestic support. We can use it to enhance business, of course, but I think we should look where we are going, what we do and what we have to offer. So I think we have to look at upscaling in terms of competence and assets. We should also be brave to look at acquisitions – acquisitions of technology and solutions.

Mac: PETRONAS being the major provider or the key/core of our oil and gas industry, is starting to give more field work to Malaysians. Technology is something which we Malaysians still do not have. You’ve got to give [jobs] to Malaysian companies which will in turn procure this technology, acquisitions, joint ventures; and only then can they get the knowledge. Without these, we cannot go out as we do not have a track record. So my view is very simple: PETRONAS has to identify and support [industry players]. The government and financial institutions must also give their support. Only then can Malaysian companies grow.

Azhar Zainal Abidin: Coming from an oil and gas SME company, the biggest challenge is the technology. If you want to become an oil and gas hub, one must have the technology or the manpower to attract them [industry players] to come here. At ProEight, we did the impossible thing via mechanical sealers. Then, we did not possess the technology in Southeast Asia. And if one wanted to go and acquire the technology, it was virtually impossible. Even if you wanted to buy, they would not want to do so with you. In this situation, we hired fresh, first-class degree engineers – 12 of them. Then we ventured into three main areas: technology, speed and brushing. We managed to produce and our patented invention is now going to compete and beat all these [competitors]. We captured nearly 95% of the market in terms of mechanical seal supply. Apart from acquiring technology, we could learn, emulating the Japanese and Koreans.

Nan Yusri: We are at a juncture in moving forward as a regional hub. To put it very bluntly, we have no choice. We have to do it. We have to support, as an industry player, in this goal [of] moving forward. Certainly there will be plenty of challenges. People say that there are 3Ps of moving forward – People, Process and Property. [For the oil and gas industry], human capital is very important. In terms of process, we have to be very focused in what we want to do. We have to be focused in certain areas.

But then again, some companies may not want to venture out. They are very happy here. Thus, we are very fortunate to have PETRONAS working on this initiative [driving the local oil and gas industry].

What can we do to realise our goal of becoming a global player in the oil and gas industry?

Mac: At Muhibbah, what we were and what we are today is the result of aspiration. It is a thought process within the company. When we were public-listed in 1995, we were a company with a turnover of RM215 million. The directors then got together and asked, “Where are we going?” If we had stayed in Malaysia alone, the competition is very small. We asked ourselves what the future – in 10 years – held for us. We are the best in port construction. “But are we going to stay that way?” we asked ourselves. Then we decided to do two things.

Firstly, diversify beyond construction. Secondly, diversify our geographical base.

These days, many Malaysian companies tend to be a bit averse to broadening [geographically]. “I am good in this,” they say. It is the same [story] as Kodak and other companies. Their mindset is this: “We are the best. We will not go, we will stay in this sector. We are comfortable. Why take a risk?” But we have to look beyond that and look globally. Thus the mentality of Malaysian companies has to change.

Dr Shahreen: I would like to divide this into three groups of Malaysians or existing companies on oil and gas. We have the very small, specialised SMEs; you have the mid-sized; and then the large size. When we look at the details of 4,400 companies registered in the oil and gas sector, you find that 80-90% are SMIs and SMEs. On one hand we do not want to say that small companies cannot go abroad, especially [without] technology. But I agree with Mac, that it is a mindset issue. Historically, we have been a protected economy. People are comfortable doing business in Malaysia. You need to have that extra incentive, profitability wise, to venture out, which will require hard work. As a result, naturally for the last 40 years, we have the majority of the companies looking inwards because it is a protected area. It’s easier to do business [locally]. But the scenario is changing and changing

very fast. When you increase local jobs, people tend not to go out. People ask, “Why should I go out? There are ample jobs here!” But the market is becoming more global and, because of that, mindsets must change. And that is the challenge.

Nan Yusri: Let me just add here to the discussion. For me, it is mindset and capability. These are the two areas that we really need to look at in moving forward. There is a risk that you have to look at, as Dr Shahreen mentioned. There are a lot of jobs in Malaysia but there is also a risk because you are concentrating everything in Malaysia. All in one basket.

Just to give you an example, we have been established since 1982. Only in the past two years have we been aggressively trying to move into the region. It takes a lot of effort, mindset change especially and also capability development. There is also a risk as PETRONAS is no longer there to support [us]. Once you are out there, you are on your own. You can get completely burned. Then you must be ready to compete. In order to compete, you must start to be innovative. That is where we have to look at other ways, like forming a partnership first.

Jamal Ainul: I think Mac and I have the same view. The key thing is the mindset [issue], but I think it is also the desire. It is interesting that both of you (Muhibbah and Deleum) are public-listed companies. You have [to meet the] demands of your shareholders and your board of directors. Here, you [both] always take a long-term view. I am sure one day ProEight may be a listed company (laughter) and [they will] take a long-term view too. If you take a long-term view then you know nothing [will] last forever. So Nan Yusri is absolutely right. Doing business in Malaysia is wonderful because a lot of things have happened since Independence, to help local players in the small companies succeed. But that won’t last forever either. Thus, when you take a long-term view, beyond your current companies, you have to start to compete regionally. The trick here, apart from mindset, is capability. I think we have to innovate. There are also a lot of initiatives in terms of innovation, encouragement and things like that. If we don’t do that then you go to any regional areas to compete, you have nothing unique to offer. You have PETRONAS still holding your hands, but they may not [companies] when abroad. Like Yusri said, you are on your own. So partnership, joint-ventures, acquisitions seem to be working. Some companies have taken risks, such as geographical, financial, technical risks and all kinds of risks. But with risks come the (financial) returns. So, take a long-term view and have good returns. One more thing other than the mindset is perhaps capability. We have a well-educated workforce. However, we may be a little weak on the soft skills.

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Participants at the O&G roundtable discussion. Photo courtesy of Focus Malaysia

WHILE going global is now a necessity for local oil and gas companies, the lack of corporate size and experience in

bidding for global projects can throw a damper to lofty ambitions. These challenges, say panellists at the recent FocusM Roundtable Discussion on Oil & Gas, can be overcome only by closer cooperation.

Size does matter when going global. Industry players also agree that unlike South Korea, China and Japan, where companies form consortiums and joint ventures when expanding overseas, Malaysian SMEs and their larger counterparts seemed to shy away from teaming up to achieve greater heights. Perhaps the lack of trust and teamwork are among the key reasons.

The lack of experience, talent and financial strength further aggravates the situation when going global. The panellists also pointed out that many local financial institutions tend to be rigid and decline to take risks in lending money to SMEs when they need it most to expand in the region or globally.

The roundtable session was moderated by FocusM executive editor Prathab V. Panellists include Technip Geoproduction (M) Sdn Bhd chairman and senior vice-president for Malaysia and Brunei, Syed Feizal Syed Mohammad; Schlumberger Group Asia-Pacific chairman Jamal A Ainul; Malaysia Petroleum Resources Corporation (MPRC) executive director Dr Shahreen Zainooreen Madros; Muhibbah Engineering (M) Bhd managing director Mac Ngan Boon, Deleum Bhd group managing director Nan Yusry Nan Rahimy, Malaysian Oil & Gas Engineering Council president Ir Abdul Rashid Md Sidek; and ProEight Offshore Engineering Sdn Bhd managing director Ir Azhar Zainal Abidin.

In this second and final part from our roundtable session held earlier, the panellists proposed that Malaysian oil and gas companies collaborate more in order to make waves globally. They also shared their frustration on how government red tape is slowing down the pace of activities in the sector.

Does size really matter in the oil and gas industry?

Syed Feizal: I think the main purpose is to help companies to go global. So [if] that’s one of the key objectives, I think this is where synergy of local entities need have strong fundamentals. Sometimes [it needs] synergy with multinational companies [MNCs] and I think that when you put the two together [Malaysian companies and MNCs], then it gives a lot more synergy in terms of breaking into the market.

A combination of the two can compete for almost all of [the] opportunities in the Asia-Pacific region as well as outside.

I think local companies should also find synergy with analysis and ride on the network, ride on the competency and skill sets that MNCs can provide. MNCs themselves also have to think largely of being multi-local, not just multi-national; to be local-minded, and with opportunities given within the country should re-invest in the country to grow the business.

Today we start, maybe as a one-person (show), so to speak. Today, we are three thousand people.

Mac: In my opinion, for a lot of Malaysian companies, we have the real capital but we don’t have the expertise. The only way companies can move forward is to

work [together] with MNCs. I think there are no two ways about it. In terms of our engineering, the depth of the oil and gas in the Malaysian companies are still not there yet. Take for example the work processes. I think only one or two [local] companies have some form of process experience, while the rest do not have the process experience.

It is true from the one or two jobs, you will learn something and maybe you can try something with fewer processes. But at this moment, other than one or two which have taken the initial steps, the rest are not capable.

We need to collaborate. As far as SMEs are concerned, I think if they are specialised in some form or another, they may have to look at keeping up [with] some of the bigger corporations, listed companies which then give them the muscles to go, to work with them to grow. But in the meantime, collaborate. On another point, Malaysian companies somehow are rather averse to working with each other. I don’t know why it seems to be that way.

Consider the Japanese companies. They are always working closely together. They team up when there is a job. Even the Koreans do this, though they ‘hate’ each other. Malaysian companies find it very difficult to work together. They are suspicious [of each other]

I think for us to grow to the next step, we must all be open-minded.

Malaysia’s O&G sector must take the critical step of change, producing a competitive model involving upscaling competence and assets, technology and solutions

by Hafidz Baharom photos by Saiful Hizam Mansor Focus Malaysia 14 December 2013

LACK OF COLLABORATION STYMIES MALAYSIA’S GROWTH IN O&G

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Photo courtesy of Focus Malaysia

Abdul Rashid: The cultural work ethic can work for you or it can work against you. What Mac said is correct. It appears to be a Malaysian culture of not trying to form partnerships.

But slowly, when companies are exposed to the international market, they do see the need to team up. For Malaysian companies, you need to have the size, you need the mass. Which is why, in my opinion, yes, size does matter in some ways. For example, how can you create technology with, say, just three units (workforce)?

Dr Shahreen: It is a challenge. Our finding is that the Koreans and the Japanese work very closely together. Somehow Malaysian companies tend to work separately. Unfortunately, our non-interventionist attitude of letting the market work on its own doesn’t help. Hence, in MPRC, we brought 15 companies together. Here was a platform for them to find out what each other is doing and they really started to talk to one another. Existing platform is not enough to instigate (this type of collaboration). We hope more companies will participate in venturing out together, meeting and understanding one another better. There needs to be a lot more communication to understand one another. This is among the things we found out among the big players in Malaysia that have gone international. Local companies which have ventured internationally, came to us and said: “Hey, can you guys help to identify who else has been in this market from Malaysia” because for them their business is to do the work, but they do not know who else from Malaysia has the experience.

So we are trying to find, for example, how many companies from Malaysia have gone to Indonesia. So instead of many companies running around, we have a list of companies that one can talk to. This information sharing has to happen as well (in order to enable the collaborative network). Prior to this, there is no entity doing this. We are trying to break the ice and see and celebrate all these small successes. We can do one or two to make it happen and then people start seeing there is a value in doing this, and hopefully grow. But I think this persistence to keep on pushing is the way to make this happen.

Abdul Rashid: We have to talk together. Also, we need to talk to understand the way they (global organisations) set up the bidding process. Sometimes, in the bidding process, they invite small local Malaysian companies, and of course, by doing that these companies would have to compete with each other.

What they say to local companies is as if “You go and find the multinational or global company to work and bring them here”. This, perhaps, is why the competitive atmosphere surfaced in

the first place. I don’t know how we can resolve that. It is number one. We need to look at it, we have to talk to the clients and see how we can do (it), how best we can approach this.

Nan Yusri: The move by the government and other parties has drawn interest from global companies that want to work in Malaysia. They are looking for partners. They want to collaborate with partners in Malaysia.

Again, it comes once again to the processes. We do have this dream in which we want to be a regional hub and all that, but somehow or rather somebody needs to look at the process from the dream to the formation of the entities.

Like any other company, we have a vision and a mission statement. We also have plans on how you can achieve that. Let me give you an example, not from one but a few of our partners who were looking to set up some facilities in Malaysia. Compared with our neighbouring countries, these companies articulated their experience when dealing with the equivalent of our Malaysian Investment Development Authority (Mida). Interestingly, within two hours they know everything from A to Z on whatever you have and whatever you need when venturing to other countries.

The person sitting at the counter is able to provide step-by-step guidance on the types of grant, incentives available and so on. But when they meet up with the Malaysian government agencies over here (they had a different experience). Let’s say you are setting up a chemical company. What do you need to do? What are the incentives that you will be getting? In one situation, a company was asked (by the government officer) if the chemical plant was for agriculture or for oil and gas. If it’s for oil and gas, the officer mentioned that they only handle agriculture (-related queries)!

All this already takes up (at least) one working day. You then meet another government agency, go there for oil and gas. There you are asked if this is your own intellectual property (IP) or shared IP. You are then waved onwards to move to another counter. This process needs to be improved. When people want to invest, they want it (solution) fast. They want to know exactly what they are going to get and we need to look deeply (at) how we can improve that.

Azhar: I think MPRC is doing a great job in promoting Malaysia. But I just want to add that we (ProEight) have yet to actually receive a single sen from government grants.

We need things fast because of innovation (costs). From our perspective, I would think we were given the runaround. We eventually did it on our own.

In the end we said enough is enough. We (just) don’t have the time. We got our (own) financing and moved forward. Luckily for us, since we’ve reached a certain stage, when the banks (began) supporting us.

That’s the main reason why we were able to move far. While the government wants to do everything, when it comes to the implementation, it is a different thing.

For SMEs, the main problem is always finance. We can’t move [without financial support]. We cannot go to private companies [for funds]. Sourcing funding from the government is also very difficult.

Mac: I still come back to the same point. I think, to become a Malaysian player in a global scenario, we need to have human resources, backing from financial institutions and [have] the government’s participation. These are the three things [we need].

Unfortunately, most of the time, as Azhar said, it is hard to get access to funds. So, as a startup you will really have trouble getting access to funds and you cannot even think about going to the next step. How then do you nurture companies like ours?

While as a listed entity, we have some experts, but it is still not enough expertise to go abroad.

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Photo courtesy of Focus Malaysia

For me, there are two segments to consider. First is the SME question. How do we help them?

Next is listed companies. Without sufficient expertise, how do we make the government understand the oil and gas industry? It is going to be difficult.

I once had a one-to-one dialogue with Bank Negara, telling it about several issues (facing the local oil and gas sector). I suggested that the financial institutions should look at supporting Malaysian products, as Malaysian [oil and gas] companies contribute 5-6% to the national GDP.

However, Bank Negara declined to intervene as it is not allowed to influence financial institutions.

We are not heading anywhere (in resolving) these issues. This is exactly what we faced. I requested that Bank Negara have a dialogue and include the financial institutions, so that we in the industry can talk to them [the banks].This will help the financial institutions to ‘dialogue’ with us too and discuss policy.

How do we make government agencies understand all this? We need this to be in place so we can grow [steadily].

I see that in Japan and China today, the banks are very involved with their oil and

gas companies. Even the other Asean banks, as long as you do a job they will throw a lot of money at you. Sadly, we do not do it here. We need to address this issue.

Syed Feizal: Yes. Rather than addressing things in a fragmented manner and dealing with different agencies, there should be a champion of the good brain, dissemination of information and trying to get all the relevant bodies coming on the same page.

I think where perhaps MPRC is doing a good job, is actively involved and take a step further in helping us. I think you are in a good position to understand all the issues and try to get everybody on the same page.

There are things in which Malaysia is ahead, we are number one in deep water hubs.

It’s all about marketing, so marketing is about positioning. I think the more you are known, in terms of oil and gas on the global map, then you will especially find opportunities for the SMEs or for the bigger players to penetrate into those markets.

Dr Shahreen: I think there is a clear need to become a hub and this is an opportunity and we should not waste it. But it clearly requires cooperation from all sides to make it happen. MPRC will

always be the facilitator, crystallising initiatives but of course, ultimately, it is not about this alone.

Arriving and becoming a hub ... but for sustaining it in the long run, it must be a more sustaining initiative. I am so happy to hear that there are actually many people looking at it and saying we can realise this. Government agencies are always meeting up to address those issues and we do see that leadership needs to be there. These points are noted. Again, I always believe that it is not a single party, single agency or single entity which must attend to this. It has to involve everyone ... to move this plan ahead.

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OTC

HOUSTON

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GIFTGlobal Incentives

For TradingGIFT

INFO SECTION

OTC

HOUSTON

2014

GIFT

The Global Incentives For Trading (GIFT) programme was

launched by Malaysia Petroleum Resources Corporation

(MPRC) and Labuan Financial Services Authority (LFSA) in

2011 to attract international and domestic companies trading

in petroleum and petroleum-related products to locate their

regional operations in Malaysia.

Under the Economic Transformation Programme (ETP), petroleum

storage and trading was identified as one of the Entry Point Projects

(EPPs) which can contribute significantly to the oil and gas industry

value chain. In line with the goals of the ETP, MPRC created GIFT

together with Labuan Financial Services Authority (LFSA) as its first

product aimed specifically at developing and strengthening Malaysia’s

oil and gas value chain.

The programme began in 2011 with five inaugural members, comprising

Vitol, PETRONAS Trading Corporation, DIALOG, YTL Power Trading

and BB Energy. Since then, GIFT has successfully expanded to 20

members as of 2013.

Malaysia offers a wide range of competitive advantages spanning

its strategic location, vast land banks, world-class infrastructure and

facilities, excellent banking and financial services, a business-friendly

investment climate and a highly skilled workforce. With all these

competitive advantages in place, GIFT was created to further develop

and grow the oil and gas industry with the ultimate goal of transforming

Malaysia into a regional O&G hub by 2017.In

fo S

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(G

IFT

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GIFT offers petroleum trading companies a unique value proposition

to enhance their competitive edge. Companies in GIFT can:

• Use Malaysia as their base to expand and access growing markets

in Asia Pacific such as China, India and Southeast Asia.

• Participate as long-term investors in the expanding upstream and

downstream segments of the oil and gas industry in Malaysia.

• Benefit from a cost-efficient business environment compared with

other countries in the region, giving companies the flexibility to

expand and enhance their scale of operations.

• Access world-class infrastructure facilities such as storage tank

farms, deep-water jetties, roads, refinery complexes, warehousing

and bunkering.

• Recruit from a wide pool of skilled professionals and a highly-

educated, multi-lingual technical workforce.

• Leverage on excellent local and international banking and financial

services network.

• Receive support from an investor-friendly government and

government policies.

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Sabah

Sarawak

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441 Discovered Oil and Gas Field

Gas: 266Oil: 175 Eligibility

RequirementsKey

Incentives

Types ofEligible

Products

Companies that participate in the GIFT programme must register under the Labuan International

Commodity Trading Company (LITC). LITC-status companies can trade in petroleum, petroleum-

related products and selected commodities, including minerals and carbon credits.

• Utilise modern, well-equipped infrastructure and support services

including high-speed broadband networks; highly interconnected

air, road, sea and train networks; excellent logistics and educational

facilities, colleges and institutions of higher learning.

• Balance work with a quality lifestyle, featuring abundant choices

of accommodation, entertainment, dining, healthcare, sports and

recreation.

Info

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Fo

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• Bank Negara Malaysia

• Construction Industry Development Board (CIDB)

• Dewan Bandaraya Kuala Lumpur (DBKL)

• Greater Stavanger Economic Development

• Innovation Norway

• Institute of Materials (IMM)

• International Conference & Exhibition Professionals (ICEP)

• InvestKL

• Johor Petroleum Development Corporation (JPDC)

• Johor State Government

• Labuan Corporation

• Labuan Financial Services Authority

• Labuan International Business Financial Centre

• Lembaga Hasil Dalam Negeri (LHDN)

• Majlis Amanah Rakyat (MARA)

• Majlis Profesor Negara

• Malaysia External Trade Development Corporation (MATRADE)

• Malaysian Industry-Government Group for High Technology (MIGHT)

• Malaysian Investment Development Authority (MIDA)

• Malaysian Offshore Contractors Association (MOCA)

• Malaysian Offshore Vessels Owners’ Association (MOSVA)

• Malaysian Technology Development Corporation (MTDC)

• Ministry of Education (MOE)

• Ministry of Finance (MOF)

• Ministry of Human Resource (MOHR)

• Ministry of International Trade and Industry (MITI)

• Ministry of Science, Technology & Innovation (MOSTI)

• Multimedia Development Corporation (MDEC)

• PETRONAS

• Prime Minister’s Department

• Sabah State Government

• Scottish Development International (SDI)

• Selangor State Investment Centre (SSIC)

• Sipitang Oil & Gas Development Corporation (SOGDC)

• SIRIM Berhad

• SME Corporation Malaysia

• Society of Petroleum Engineers (SPE)

• Suruhanjaya Syarikat Malaysia (SSM)

• Talent Corporation Malaysia Bhd (TalentCorp)

• The Association of Malaysian Oil & Gas Engineering Council (MOGEC)

• The Economic Planning Unit (EPU)

• The Malaysian Oil & Gas Services Council (MOGSC)

• The Performance Management & Delivery Unit (PEMANDU)

• UK Trade & Investment

• Unit Peneraju Agenda Bumiputera (TERAJU)

ACKNOWLEDGEMENTSMPRC would like to acknowledge the support of the following organisations for their time and contribution in our various engagements which in turn has brought us one step closer in fulfilling our mandates in 2013.

Copyright © 2014

Malaysia Petroleum Resources Corporation (MPRC)

All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner.

Disclaimer: While every reasonable care has been taken in preparing this document, MPRC cannot be held responsible for any inaccuracies. All information and specifications are current at the time of preparation and are subject to change as may be required.

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VISION

MISSION

Position Malaysia as the NUMBER ONE OIL AND GAS SERVICESAND MANUFACTURING HUB in the Asia Pacific region

TO CREATEa dynamic and progressive oil and gas services industry in Malaysia where companies can compete and grow

TO PROMOTEmore vitality in the oil and gas industry via joint-ventures, collaboration, strategic partnerships and alliances

TO ENCOURAGEclose cooperation among industry, government and society so that the oil and gas industry in Malaysia anchors the future prosperity of the country

TO ENHANCE AND STRENGTHENour oil and gas human capital to achieve international recognition and demand

TO ENSUREa high level of integrity, commitment and professionalism in earning the trust of those with, and for whom, we work

Malaysia Petroleum Resources Corporation

Suite 20-11, Level 20, G Tower,199 Jalan Tun Razak,50400, Kuala Lumpur, Malaysia.

tel +603 2858 8555fax +603 2858 8599email information@mprc.gov.my web www.mprc.gov.my