KUALA LUMPUR (April 27): Diversify, upskill or consolidate — these are among the key goals of the National Oil and Gas Services and Equipment (OGSE) Industry Blueprint 2021-2030 launched by the government today to chart a new course for local oil and gas (O&G) services equipment companies.

The 10-year blueprint, spearheaded by Malaysian Petroleum Resources Corp (MPRC), underlines several goals for the OGSE industry in terms of export value, technological developments as well as the threshold for diversification into adjacent sectors, such as renewable energy.

“These initiatives encompass sector-wide recommendations on structural challenges confronting industry players, as well as recommendations to address challenges that are unique to the Malaysian OGSE segments,” Mohd Yazid Ja’afar, MPRC's president and chief executive officer (CEO), said.

Malaysia’s OGSE sector, which houses 1,500 active companies, contributed RM65.1 billion in revenue in 2019. Exports made up 32% of total revenue that year.

The sector has long been dragged by structural issues, including financing gaps, high reliance on Petroliam Nasional Bhd (Petronas) contracts as well as an oversaturated industry that warrants industry consolidation.

Details are scarce but industry players will certainly keep an eye on some of the upcoming measures, including customised incentives to encourage industry consolidation, orchestration of consortiums with seed financing facilitation, as well as export grants and tax breaks.

Among the long-term goals set in the industry blueprint include the need to have the OGSE sector contribute RM40 billion to RM50 billion in annual gross domestic product (GDP) contribution from RM20 billion to RM40 billion currently.

The blueprint also aims to see 25% of total revenue derived outside of the O&G sector — such as renewables and other power sectors — by 2030, as well as to triple OGSE patents from just 36 patents filed over the last five years.

The blueprint, said Mohd Yazid, underlines a clear strategy across three phases — for the industry to pivot from being survival into growth mode; to grow the companies' capabilities and capacity by tapping into technology; and to expand into international waters.

Also underlined is the set-up of an Energy Export Fund to support the upfront costs for local firms to venture overseas — including export tender bidding, preparation and submission for overseas projects, market reports, feasibility studies, the initial set-up of foreign offices and logistics support.

Other measures to be introduced include those of talent retention and encouragement for research and development (R&D).

The blueprint includes the input and participation of seven ministries and nine government agencies, including the likes of Petronas, Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC), as well as a number of industry associations.

“We do have the buy-in from Petronas,” said Mohd Yazid. “Petronas was involved from the beginning as it was part of the technical committee and endorsed by them, and five of the initiatives are spearheaded by Petronas.”

On financing, among the initiatives to be introduced include a special growth facility for OGSE companies to move into adjacent sectors, such as renewable energy, with the support of development banks like Bank Pembangunan Malaysia Bhd (BPMB).

Also launched today was the OGSE Development Grant, which is targeted to accelerate innovation in high-technology and environmentally sustainable solutions.

The grant scheme underlines RM25 million from the government across five years from 2021 to 2025, which will be implemented as a matching fund on a 70:30 basis, with a cap of RM250,000 for each company.

“We look at options, not limited to only conventional financial institutions, but also venture capital and other ways [for companies] to raise funds,” said Mohd Yazid.

“We also encourage the industry to explore ESG (environmental, social and governance) elements. Once the industry complies with ESG requirements, it will open up new funding opportunities,” he said.

Interestingly, the blueprint does not underline an oil price assumption. “We do not want to be too hung up on oil prices, but rather think about the possibility of growing beyond the traditional O&G space,” said Mohd Yazid.