KUALA LUMPUR: The local oil and gas (O&G) sector will get more push from the government this year amid rising exploration and production (E&P) activities.
Deputy International Trade and Industry Minister Dr Ong Kian Ming said the O&G sector, which falls under the under the mining and quarrying category, will be second in the limelight after electrical and electronics (E&E) industry to receive a greater push and attention in 2019 due to its potential growth.
“We are looking at US$60 to US$70 a barrel of oil price now and this is sufficient to revive some of the E&P activities that may have been deferred or stopped due to the low oil price of below US$40 a barrel recently.
“I am cautiously optimistic that the oil and gas industry will rebound and will have more activities. The ministry is always ready to discuss on how we can help the production and sharing contract (PSCs) companies to improve their economic production this year,” Ong said at a Chinese New Year do at the ministry here yesterday.
He said while not many companies had closed, a lot of them had scaled down their operations.
However, the ministry expected a lot of potential especially in the downstream projects and products, he said, referring to the Petronas’ Pengerang Integrated Complex (PIC) in Johor and related activities such as the Dialog Group Bhd’s deepwater terminal and other investments into the Pengerang project by other companies.
“These are big investments and in due time when it is ready to be announced, we will announce them so that people can see that it is an industry that we want to expand especially on downstream petrochemical products,” he added.
According to Malaysian Investment Development Authority (MIDA), there are over 3,500 O&G businesses in the country. They comprise international oil companies, independents, services and manufacturing companies which support the needs of the O&G value chain both domestically and regionally.
Many major global machinery and equipment (M&E) manufacturers have also set up bases in Malaysia to complement home-grown M&E companies, while other Malaysian oil and gas companies are focused on key strategic segments such as marine, drilling, engineering, fabrication, offshore installation, and operations and maintenance (O&M).
Mining investments in the mining sub-sector, comprising oil and gas exploration and quarrying other minerals, spearheaded the primary sector.
Fuelled by natural gas extraction activities, this sub-sector contributed 94.3 per cent of total investments of the primary sector in 2017 with a total of 32 projects approved, with investments of RM11.7 billion.
Domestic investments amounted to RM7.3 billion (62.4 per cent) while foreign investments totalled RM4.4 billion (37.6 per cent), while a total of 243 potential jobs are expected to be created.
Manufacturers are now focusing on providing services to the assets which are approaching their end of design life.
Of the 12 projects approved in 2017 (total investment of RM731.7 million), six were expansion or diversification projects, with some focusing on refurbishment and upgrading activities.
Domestic investments contributed RM593 million (81 per cent), while foreign investments totalled RM138.5 million (19 per cent). These projects are expected to generate a total of 2,527 employment opportunities.
The petroleum products including petrochemicals industry have benefitted from the overall drop of oil prices over the past few years.
The industry is expected to have grown moderately in 2018, as companies responded to stabilising oil prices and continuing access to low cost of feedstock.
It is also an industry that has attracted the greatest level of Domestic Direct Investment (DDI) in 2017, amounting to RM25.6 billion out of RM26 billion in approved investments across 10 projects that created 1,949 job opportunities.
Thus, in spite of the global trends in the O&G industry, it continues to play a significant role in the economic development of Malaysia.