KUALA LUMPUR: Malaysia appears able to leverage on the oil and gas (O&G) players who are coping with the “new normal” of low crude price environment by improving cost and operational efficiency.
Industry specialists agree that Malaysia has what it takes to attract O&G majors to relocate their regional base here.
Malaysia Rating Corp Bhd (MARC) felt more players would shift their regional base to Malaysia, joining the few United States and European majors that had decided to do so recently.
US-based McDermott International, France’s Technip and Oslo-listed Subsea 7 announced they were relocating to Malaysia from Singapore in the face of rising costs and declining revenue.
MARC O&G ratings assistant vice-president Sharidan Salleh said Malaysia was an ideal choice, given its cost advantage and availability of vast O&G activities.
However, other factors could also determine the pace of relocation, such as the availability of technical expertise and business efficiency.
“On the government’s side, Malaysia is providing various incentives, including investment and income tax incentives, to strengthen its status as a regional O&G hub.
“We believe companies relocating to Malaysia will benefit from cost advantage given the lower domestic labour cost, availability of capacity to expand and lower rental cost compared with Singapore.”
Sharidan added that Malaysia had well-established O&G infrastructures developed through a long period of production activities since the early 1970s.
“O&G industrial areas were developed in tandem with ports to provide connectivity, for example Kerteh and Kemaman in Terengganu, and Bintulu and Miri in Sarawak. Therefore the country is well-positioned to cater to the O&G multinational companies.”
Malaysia is said to be cheaper than Singapore in many areas and made even cheaper by the decline in the ringgit.
“Singapore, despite having no O&G resources, is one of the top three refining centres in the world. However, Malaysia is increasingly competing with Singapore in the region’s oil, gas and petrochemicals markets, seizing opportunities,” Financial Times reported recently.