Petronas has pledged to spend over RM 300 billion (USD 91.65 billion) over a period of five years on capex projects, including an RM 80 billion (USD 24.46 billion) downstream development in Pengerang. The president of the Malaysian Oil and Gas Engineering Council (MOGEC), Rashid Sidek, discusses the potential opportunities this poses for Malaysian engineering firms and their evolution as an association since they were founded in 1999.
The needs of the industry have changed since the association was founded in 1999, and so has the name of your association, Malaysian Oil & Gas Engineering Council, (from Consultant). Why did the association see the need to change its name and is this a reflection of a change in your focus?
MOGEC was established in 1999 by six design service engineering consultants serving the upstream oil and gas industry. However, there has been a change of focus over the years. Although it was started by engineering consultants who then were serving the upstream sector, we now cover a much wider scope of activity and have recognized that, in order to move forward as an association, we need to become a conglomerate of all the engineering companies in the oil and gas sector. We now have members from the upstream, downstream and midstream sectors as well as companies involved in front end design, feasibility studies and even companies who specialize in one component of a much larger spectrum.
With the oil and gas industry being so prominent in the economy of Malaysia, and with our new role within the industry, we believe the name should reflect this change.
You were appointed president recently, in July 2013. What initiatives are you taking to promote its members and support the development of the Malaysian oil and gas industry internationally?
I have looked to grow membership and increase the activity of the council. We now have at least one activity per month and, since my appointment, we have held four large networking sessions, which were attended by over 100 of our members. On top of this we have started to engage with government organizations, such as MPRC (Malaysia Petroleum Resources Cooperation), CIDB (Construction Industry Development Board), SIRIM (Standards and Industrial Research Institute of Malaysia), MPC (Malaysian Productivity Corporation) as well as open up a dialogue with universities in the country.
It is very important for the future of the oil and gas industry here in Malaysia that we source new engineering talents. We are already stretched in terms of demand and this cannot continue without the sector feeling the consequences. On behalf on the council, I have been exploring how this industry and universities can work together to produce employable graduates. We don’t just require new talent for our own market here in Malaysia, but we need to add to the numbers in order for Malaysian engineering firms to be competitive abroad.
I keep telling young engineering graduates to be patient in this industry. Typically, a single project in the oil and gas industry will last 24 to 36 months, so if you have been in the industry for 15 years the chances are that you have only been involved with five or six projects. The learning cycle for an engineer in the oil and gas industry is relatively longer and makes the issue that much more pressing.
Petronas’ CEO, Tan Sri Shamsul Azhar Abbas, recently announced that the company moved from fixed allocation of contracts for local firms to open bidding rounds. At the same time various political leaders, for example Sabah and Sarawak leaders, demand more protectionist measures, creating more jobs for local companies. With the mission of representing the Malaysian engineering industry what is your opinion on this matter?
Looking to the future Malaysian protectionism can’t last forever and at some point we will have to measure ourselves against the international market. Having said that, protectionism is important if delivered in the correct way. If it were not in place now, Malaysian small and medium sized companies would be pushed out of the market before they can fully establish themselves as international players. By creating a protected environment for Malaysian companies it gives them a chance to grow to a point where they can compete with or complement larger international companies both here and abroad.
There is a need to strike a balance between supporting the growth and development of Malaysian companies and allowing free market competition to drive economic growth. I believe an open dialogue needs to occur between the clients and the contractors (vice-versa) as well as with both parties and the government. In turn, the government can then provide specific and relevant support and come to an optimal solution for all.
In 2010 we interviewed your predecessor, Rozali Ahmad, who mainly discussed upstream activities in Malaysia. He also told us that Petronas works mainly with international partners when it comes to their downstream activity. With the Pengerang development in Southern Jahor, RAPID, how is this set to change?
The downstream sector was very quiet for a number of years in Malaysia, particularly between 2000 – 2010. However, in 2011 it all started to pick up. One reason for this is that the downstream facilities are now that much older and are starting to reach the end of their design life. Revamping and rejuvenation work is required in addition to their routine operation and maintenance.
When Petronas started talking about RAPID, the industry became excited, however, we were still not sure if it was going to go ahead until July of this year when Petronas started awarding major contracts. It will be interesting to see how this new development in the Southern Peninsula will develop. I am sure there will be challenges, predominantly due to the sheer number of resources required to get the job done.
The contracts being awarded by Petronas are huge and they have estimated that the total cost of the project is in the region of USD 20 billion. Not many Malaysian companies have the technical ability and experience to comply with the strict requirements set by Petronas, as well as cope with the initial outlay and commercial risks associated with such a large undertaking.
How would you position Malaysia’s service provider industry compared to your neighbors inSingapore or Indonesia for example?
Many countries wants to be a hub for the oil and gas industry and we are no different. In order to achieve this we must create a clear and open dialogue amongst all the oil and gas stakeholders in Malaysia, including the universities, the government, the clients and the contractors.
Secondly, we need to start developing relevant technologies of our own. This may be difficult initially due to economies of scale and acceptance by the IOCs and NOCs will be a challenge. However, this will change in time with perseverance. A final point is that we also need to take advantage of the fact that Petronas is all over the world and we can work with them as a stepping-stone to penetrate international markets.
If we do this there is no reason why Malaysia is not able to be the oil and gas hub that can serve the Asia Pacific Region and beyond.