What new initiatives is UMW Oil & Gas Corporation involved in?
DARUS: UWM is involved both onshore and offshore. The new initiative that we’re looking at right now is to expand our capabilities offshore. We already have 2 jack-up rigs and 1 semi-submersible rig. We are adding additional assets, such as the new jack-up rig we purchased about a month ago. We are looking at additional assets that will complement existing assets in the offshore sector. We’re also in the process of setting up our UMW-INSTEP Drilling Academy, in collaboration with INSTEP, a Petronas training institute. This academy will provide training for operational people, from roughnecks to drillers. Besides providing a continuous supply of trained skilled personnels to UMW to cater for our expansion, it will also provide these people to the drilling industry in general.
What kind of investment does this represent in total?
DARUS: In total, we have already spent over $220m on the new jack-up and we’re looking at spending an equivalent amount more in the next few years.
What is the overall business mix for UMW Oil & Gas? Which lines are showing the most growth potential?
DARUS: At present, we have 5 divisions. The main one is drilling operations; followed by oilfield services, which involves coating and threading, as well as oilfield products, which is involved in warehousing and trading of fittings, pipes, and so on. We also do fabrication. Finally, we have oil country tubular goods, which we manufacture drill pipe and casing as well as line pipes. Of these 5, we are looking at rationalizing the business to focus more on offshore drillings. At present we have already looked at adding more assets, expanding our market share, as well as adding more resources in terms of technical and non-technical personnel.
In 2011, overall group revenue was RM13.5bn ($4.4bn) and profit before tax RM1.4bn ($458m). What is the oil & gas divisions’ contribution to the top and bottom line? What are your projections for 2012?
DARUS: At present, oil and gas only contributes quite a small portion of the business operations. In terms of revenue, the contribution is less than 10%. Moving forward, we envision the oil and gas division to be one of the core contributors to the overall group, after automotive. In 2012, after what we have done to rationalize the business and to recover from losses of last year, we believe we should be in the black this year. However, it is too premature for me to say and I am, of course, bound by the stock exchange rules not to announce the forecast profit. However, I believe we should be in the black this year and it’s going to be quite a comfortable margin.
What role will the energy sector play in Malaysia’s future?
DARUS: I do believe that energy is going to play a very important role in the future, just as it did in the past years. If you look at the history of Malaysia over the last 10 years, energy has contributed a lot to the country’s revenue. Recently, the move by the government to enhance the energy sector and to produce more shows the commitment of the government to the further development of the energy sector, as well to ensuring there is safe sustainability of our oil production. Malaysia used to be a net oil importer, then became a net oil exporter, then back to net importer. Now I think it is about time for us to become a net exporter again.
How would you describe the current climate for energy sector investment in Malaysia and the region?
DARUS: I believe that it is very timely to make investment into this sector in Malaysia right now due to the government emphasis on the ETP, the Economic Transformation Programme, as well as Petronas’ focus on developing more oilfields and reinvigorating existing oilfields in Malaysia.
I do believe the oil sector is one of the most bullish in the region right now, especially after the high oil price in 2008. Since then, the governments in this region, especially in ASEAN, have looked at oil production more from a security of supply perspective rather than from an economic perspective. Even if the price of oil goes down, the governments in this region will continue to produce oil and gas to ensure safe sustainability and to ensure there is enough supply for the country.
What impact has the current global economic situation had on energy sector investment?
DARUS: When you look at the current world economic situation, there may be some gloomy side to it. But if you look at the history over the past 10 years, oil has always been there, has always been needed, and has always been in demand. Whenever the economy contracted, there is always an upside coming up in next few years. So I do believe, regardless to what happens in the world economy, there will be a time when it will recover and there will be a time when oil will be in high demand again. The trick is for everybody to ensure that when the time comes, you are ready to deliver. In order to deliver you need to put infrastructure in place today. You need to start development today so that you can produce in 3 to 4 years’ time.
Are regional energy companies a good buy?
DARUS: In general, the oil and gas sector is always there. Regardless of whatever happens oil is still needed. Oil still has to be produced, regardless of the economic conditions. Secondly, I do believe the oil sector is one of the most bullish in the region right now, especially after the high oil price in 2008. Since then, the governments in this region, especially in ASEAN, have looked at oil production more from a security of supply perspective rather than from an economic perspective. Even if the price of oil goes down, the governments in this region will continue to produce oil and gas to ensure safe sustainability and to ensure there is enough supply for the country. Therefore, any company like us, who are operating in this region, not only in Malaysia, but also covering ASEAN and Asia-Pacific countries, will be a good buy.