O&G SERVICES AND EQUIPMENT SECTOR LIKELY TO REBOUND

But concerns over demand, global energy transition to weigh on industry

MALAYSIA’S oil and gas services and equipment (OGSE) industry is expected to rebound this year after two years of setbacks due to the Covid-19 pandemic.

The sector previously returned to profitability in 2019 after registering three years of losses since 2016, according to OGSE100.

The OGSE100, previously known as MPRC100, is a list of 100 OGSE public-listed and privately-held companies in Malaysia ranked based on revenue.

It highlights the growth of these companies and provides a point of reference to the industry, potential investors and stakeholders.

Malaysia Petroleum Resources Corporation (MPRC) president and chief executive officer Mohd Yazid Ja’afar said the agency expected this year to be slightly better for the industry as major economies started to reopen, albeit with strict adherence to the Covid-19 standard operating procedures and the ongoing vaccination rollout.

Nevertheless, Yazid said concerns about global demand for oil and gas in the medium term and its future in the global energy transition would weigh on the entire sector.

“Amid the global energy transition story, environment, social governance-focused programmes are likely to grow in significance for OGSE companies,” he said yesterday.

The domestic OGSE industry recorded a pre-tax profit of RM1.1 billion in 2019, up from a loss of RM1.4 billion in the previous financial year as a number of assetheavy companies had completed their impairment exercises, the OGSE100 report showed.

The report, produced by industry development agency MPRC, also observed the ongoing efforts by industry players to reduce asset ownership in financial year 2019.

“Total fixed assets by OGSE100 companies fell 5.1 per cent to RM112.7 billion in financial year 2019 from RM118.8 billion in the previous year,” it said.

Looking ahead towards financial years 2020 and 2021, the report flagged a challenging year for OGSE players as global lockdown measures to contain the pandemic had disrupted economic activities and grounded aeroplanes, leading to destruction in demand for oil.

Yazid said OGSE companies needed to identify measures that would not only enable them to survive in the near term but also allow them to be in a position to thrive in the medium to long term.

The measures should recognise that despite the energy transition, oil and gas would continue to be a crucial part of the energy mix.

“The challenge for the OGSE industry is adapting to a changing investment landscape and evolving in ways that ensure the OGSE industry continues to play a crucial role in decarbonising the energy system,” he added.

Total fixed assets by OGSE100 companies fell 5.1 per cent to RM112.7 billion in financial year 2019 from RM118.8 billion in the previous year.