KUALA LUMPUR: Gas Malaysia Bhd has teamed up with Sime Darby Offshore Engineering Sdn Bhd (SDOE), a wholly-owned indirect subsidiary of Sime Darby Bhd, to undertake a bio-compressed natural gas (BioCNG) distribution business. The BioCNG is extracted from palm oil mill effluent.

In a filing with Bursa Malaysia, Gas Malaysia (fundamental: 2.1; valuation: 1.1) said it signed a joint venture (JV) agreement yesterday with SDOE for the purpose.

The two companies have formed a JV company called Sime Darby Gas Malaysia Bio-CNG Sdn Bhd, in which SDOE holds a 51% stake and Gas Malaysia the remaining 49%.

“The board of directors of the JV company shall comprise at least five directors, of which three persons shall be nominated by SDOE and two persons nominated by Gas Malaysia,” said Gas Malaysia.

It added that the JV will serve as a platform for the group to supply natural gas to new customers currently not served by its existing pipeline.

“The parties seek to optimise the combined strengths of each partner in their respective fields.

“Gas Malaysia, with vast experience in the marketing and promotion of natural gas usage to the industrial, commercial and residential sectors in Peninsular Malaysia through pipeline distribution has the potential network and infrastructure to facilitate the proposed business activities of the joint venture,” said Gas Malaysia.

Gas Malaysia will fund its investment in the JV company through internal funds.

“This partnership is a much anticipated development as it is in line with one of Sime Darby’s strategic growth initiatives, which is to position SDOE as an integrated engineering service player in the BioCNG business,” said Sime Darby energy and utilities (non-China operations) division executive vice-president Alan Hamzah Sendut in a press statement.

SDOE is primarily involved in systems integration and marketing of products and services in the oil and gas and petrochemical industries.

This article first appeared in The Edge Financial Daily, on April 29, 2015.