Industry players have said there is a need for the highly fragmented 3,700 O&G service companies and eight fabrication yards in the country to amalgamate to emerge stronger to compete with the best in the Asean region. Notably, the call came from among the biggest players in the industry.
UMW Oil & Gas president Rohaizad Darus reportedly agreed with Petronas president and group ceo Wan Zulkiflee Wan Ariffin’s exhortation for the fragmented and congested market to consolidate imminently.
“This is especially important with the incoming implementation of the Asean Economic Community as the market will be more competitive and there will be more foreign entities coming to our shores,” said Rohaizad said. Comparing the fact that Malaysia has 3,700 O&G service providers to only 700 in Norway, Wan Zulkiflee said: “We are encouraging consolidation. I know it is painful but this is the way to go ... the industry will be more efficient.”
He also noted that there are too many fabrication yards and that it was a matter of time before some would drop out or consolidate. Rohaizad said correspondingly, Malaysian entities need to be bigger and stronger if they want to branch out and attract foreign investors by improving their balance sheets and reducing their borrowings. He noted that the current low oil price environment was conducive for consolidation and numerous smaller players wanted to merge now as a matter of survival as contracts have dried up.
Reports also quoted another top source as being upbeat on consolidation prospects due to weak oil prices. “This is the best time for consolidation as prices of companies will be cheaper and shareholders will be desperate,” he said. “The key to this is the financier’s response to non-performing loans and how they react to them. For instance, if weak companies which can’t service their loans are introduced to stronger companies, it would provide the weak firm a platform to consolidate via swapped shares or be forced to merge.”
Copyright © 2024. All rights reserved. Seatrade, a trading name of Informa Markets (UK) Limited. Add Seatrade Maritime News to your Google News feed.
