Local OGSE firms need to diversify for survival, says MPRC


Malaysian oil and gas services and equipment (OGSE) companies are urged to become more diversified to remain competitive in the current volatile market.

While oil prices have risen since the beginning of the year, concerns about a supply glut and weakness in the global economy will keep prices on a tight leash — as evident from the general cautiousness of global oil companies and their continuous push for cost efficiencies.

“Even as the industry is seeing a gradual recovery in acti- vities, the oil price uncertainty is a clear reminder to OGSE players to stay focused and become more competitive,” Malaysia Petroleum Resources Corp (MPRC) deputy CEO Mohd Yazid Ja’afar said in a statement yesterday.

“Companies that turn to innovation, hone niche technologies to gain economic advantages, employ and retain skilled talent, and embrace diversification in particular to the downstream segment are in a better position to undertake new growth ventures in Malaysia and beyond,” he added.

The latest MPRC100 — a list of top 100 OGSE companies in Malaysia that are ranked based on their annual revenues — revealed that local OGSE sector recorded a total revenue of RM68.1 billion for the financial year 2017 (FY17).

It was 1.1% lower against FY16 revenue of RM68.8 billion. Profit before tax of the MPRC100 companies also registered a decline at RM9.4 million, largely due to asset impairment charges undertaken by asset-heavy companies.

Mohd Yazid said the year 2017 saw a concerted effort by non-US producers to cut output to seek the rebalance of the oil market.

“These cuts helped to underpin the oil market, lifting prices to US$60 (RM244.32) a barrel at the end of the year, and thus marking the highest close since 2013. Advances in oil prices also saw the announcement of several new projects by oil majors throughout the year.

“However, oil is still subject to market volatility. Even as the industry sees a gradual reco-very in activities, uncertainties over oil prices in the past few years are a clear reminder to OGSE players of the need to stay focused and push ahead with reforms to improve operational efficiencies,” he said in the report.

According to Mohd Yazid, Malaysian OGSE players fared better than their counterparts in 2017, owing to contributions from domestic activities in both upstream and downstream segments.

In comparison to the top 20 OGSE companies in Asean, Malaysian OGSE firms registered an average revenue growth of 12%. Other regional players showed an average revenue decline of 14%, mostly due to OGSE companies listed in Singapore and Vietnam.

MISC Bhd topped the MPRC100 FY17 ranking, edging the previous year’s top-ranked company, Sapura Energy Bhd to second place, while Dialog Group Bhd maintained its third spot.