After registering three years of losses since 2016, the Malaysian OGSE industry has returned to profitability in FY2019, data from OGSE100, an annual ranking and analysis of top 100 listed and privately-held oil and gas services and equipment (OGSE) companies in Malaysia, showed.
The OGSE industry in Malaysia recorded a profit before tax of RM1.1 billion in FY2019, up from a loss of RM1.4 billion in the previous financial year as a number of asset-heavy companies have completed their impairment exercises, the OGSE100 report showed.
The report, produced by industry development agency Malaysia Petroleum Resources Corporation, also observed ongoing efforts by industry players to reduce asset ownership in FY2019. Total fixed assets by OGSE100 companies fell 5.1% on year to RM112.7 billion in FY2019 from RM118.8 billion in the previous year.
Looking ahead towards FY2020 and FY2021, the report flagged a challenging year for OGSE players in FY2020 as global lockdown measures to contain the COVID-19 pandemic disrupted economic activities and grounded thousands of airplanes, leading to a destruction in demand for oil.
“We expect 2021 to be a slightly better year for the OGSE industry as major economies start to reopen, albeit with strict adherence to COVID-19 SOPs such as observing physical distancing and as countries like the UK, US, China, India and Malaysia have rolled out their vaccination campaigns,” Mohd Yazid Ja’afar, MPRC President and CEO said.
“Nevertheless, concerns about global demand for oil and gas in the medium term and its future in the global energy transition will still weigh on the OGSE sector as a whole. In fact, amid the global energy transition story, environment, social governance (ESG)-focused programmes are also likely to grow in significance for OGSE companies,” he added.
“It is important for OGSE companies to map out measures that will not only enable them to survive in the near term, but allow them to be in a position to thrive in the medium- to long-term.”
He also added that these measures should recognise that despite the energy transition, oil and gas will continue to be an important part of the energy mix.
“The challenge for OGSE industry is to be able to adapt to a changing investment landscape and also evolve in ways that ensure OGSE industry continues to play an important role in decarbonising the energy system,” he said.