Broker: UOB Kay Hian
Date: 30 October 2024
Malaysia Oil & Gas Sector: New Initiatives and Market Leaders
The Malaysian oil and gas sector is witnessing transformative developments with Petronas spearheading initiatives that drive efficiency and innovation. The newly launched Integrated Well Continuity Services (IWCS) contracts and the Hydraulic Workover Unit (HWU) Academy are setting a new benchmark for collaboration and resource optimization within the industry. This overview highlights Petronas’ role and strategic adjustments, alongside the impacts on major listed contractors such as Velesto Energy and Sapura Energy.
IWCS Contracts and the Push for Efficiency
Petronas has redefined its contracting strategy with the IWCS model, the third iteration of the industry collaboration initiative, building on its Integrated Idle Wells Restoration (IIWR) and Integrated Well Services (IWS) programs. IWCS addresses rising operational costs and volatile market conditions by emphasizing job continuity, cost control, and margin preservation.
Strategic Changes and Contractor Participation
The IWCS initiative brings together 34 panel contractors, tasked with fulfilling four main packages and 13 sub-packages, covering integrated well interventions, workovers, production enhancement, and subsea interventions. The roster of contractors includes Deleum, Uzma, and Velesto Energy, among others. IWCS is expected to maintain the consistency of operations, sustaining resource efficiency while advancing cost-management tactics critical in the fluctuating oil and gas market.
Hydraulic Workover Unit (HWU) Academy: A Skills Development Push
Petronas’ HWU Academy, expected to launch in 2025, is poised to strengthen Malaysia’s oil and gas talent pool. This academy will focus on the skills required for hydraulic workovers, a vital component of production enhancement and resource maximization. Industry stakeholders like Velesto Energy and Uzma are anticipated participants, which will enable a more skilled workforce to meet the demands of Malaysia’s evolving energy sector.
Key Players and Market Impact
Velesto Energy: Leveraging Contract Wins for Growth
Velesto Energy, one of the prominent players in the Malaysian oil and gas service sector, has positioned itself as a beneficiary of the IWCS contracts. Known for its work in the hydraulic workover and production enhancement fields, Velesto is expected to benefit significantly from Petronas’ new strategies.
- Rig Utilization: Despite previous delays in project allocation due to Petros-Petronas discussions, Velesto’s flagship rig, Naga 3, has maintained utilization by securing interim contracts outside Malaysia. Notably, a recent short-term contract in Vietnam ensures continuity until its next periodic survey.
- Future Prospects: With the IWCS and HWU Academy in place, Velesto is well-positioned to capitalize on an anticipated increase in well-intervention activities as Malaysia continues to prioritize energy security.
Sapura Energy: Strategic Realignment Amid Market Shifts
Sapura Energy has similarly benefited from the new IWCS structure. Its focus on integrated subsea interventions aligns with the needs of Malaysia’s offshore industry, reinforcing its standing as a leading contractor within Petronas’ supply chain.
- Operational Challenges and Adaptation: The IWCS program arrives as Sapura faces operational hurdles, including rig idleness. However, the integration within the IWCS framework may provide Sapura the stability required to navigate these challenges, as it pursues opportunities to improve asset utilization rates.
- Competitive Edge: With the IWCS and the expected government support for energy transition strategies, Sapura aims to enhance its service offerings in response to Malaysia’s growing emphasis on cost-efficient and sustainable oil production methods.
Long-Term Outlook for Malaysia’s Oil & Gas Sector
Malaysia remains committed to its role as a regional energy hub, with an increased focus on carbon capture, utilization, and storage (CCUS) technologies. The upcoming National CCUS Policy, slated for November 2024, is anticipated to foster innovation and attract investment, aiming to create over 200,000 jobs across the energy sector by 2050. Petronas, designated as the champion for CCUS, has already initiated three offshore CCUS platforms, underscoring Malaysia’s strategic vision for a sustainable and diversified energy landscape.
