Business in Oil and Gas...Good or Bad decision?

I read with interest two interesting news about two conglomerate in Malaysia. Two of which making totally opposite decision of their business venture. Sime Darby without further introduction have decided to move out from oil and gas business which they think too risky for them. I concur with that if they compare between fabrication and plantation. When people ask me this question which one they should buy if they have money, an offshore vessel or land for plantation? my answer is land because it is easy to manage, I admit you need knowledge but you really don't require someone with degree or doctorate to cut the fruit,unlike in o&g, and in plantation you are paying peanut compared to those working in o&g. I really like the quotes made by the current CEO of Sime Darby " we don't want to be in business where we are not in control". In reality o&g contractor always need to kaw tow with oil majors this is what he don't like, I cannot agree more. With the sale of its two fabrication yard in Johor, looks like Sime Darby now have more cash in hand. Good for Sime..it maybe a sad day for o&g industry in Malaysia because another GLC have decided to march out from the industry, they got potential actually but because of the blunder and shoddy work of few bad employer they got no choice but to move out.

The other news that catch my eyes today is the announcement made by Puncak Niaga to enter into o&g business by acquiring shares in Global Offshore Malaysia. It is a good move because I will do the same if I have plenty of money. Further to that potentially they will acquire 100% share from Global Offshore in the near future.That I think not that smart, why? because service like that require years of experience to be developed. Global Offshore are known worldwide brand, why Puncak want to take full control if they can be benefited from technical relationship with Global Offshore globally besides locally we have seasoned players like Sapura/TLO, Alam/Swiber, PBJV etc to challenge them. Buying of DLB 264 from Global is another not so smart move, that pipelay barge is 40 years old...she still can perform no doubt about it ...but you know well enough the oil majors are not so keen to charter old barge, that is the criteria in their technical evaluation, why on earth they choose DLB 264 if they can have brand new barge from TLO, Alam and PBJV why take risk.. cheap..maybe, but safety and delay is important point when they charter a pipe lay barge. I hope I am making wrong observation, otherwise we will hear another public company move out from o&g business in few years time. O&G looks attractive but not so when you are in it. It is no doubt TS Rozali well connected, but that is not justify for this business, how to execute it without fail is the paramount point to be considered. Frankly, this is not concession business, GOOD LUCK Puncak O&G!

Container Ship In Port Klang

I am reading with great interest of a Bangladeshi Flag container ship which is under detention in Port Klang. It is reported that there were 15 crews onboard including the Captain, and according the report the crew hasn't receive their salary for the last one year. They are like prisoners onboard, low on food and no air-cond which I believe due to no fuel supply from the owner. The ship was detained after the court order been brought to them because of an accident that was happened in 2009 at North Port.

The Star managed to communicate with the shore personnel of the shipowning company. His answer rather amusing blaming North Port of the incident and blaming the current shipping economy for having less job. He did not really understand the whole situation, whether the ship on standby, detain or not chartered the crew salary has nothing to do with it!!! they are human being looking after owner's property worth million of dollars, how could you give such answer. Crew are not slave they are decent and honorable gentleman who are risking their life to bring our needs. So to the owner please give better answer next time..otherwise this business is not for you. I really hope our authority gives stern warning to this type of ship owners.

Coal is Cool

For the last couple of days, I have been looking at a business proposal for coal transportation. It is interesting even though I have been doing few coal business plan last two years. There are few informations that I almost forgot and this exercise require me to revisit my informations. Among the pertinent point that I wish to highlight are:

• how Malaysia over the past few years reducing dependency on petroleum products for power generation. Currently this have been reduce from around 70% to 50% total electricity capacity. the gap have been taken by coal power generation.
• currently Peninsular Malaysia has 5 IPPs that using coal as fuel for power generation. these IPPs generate 7200 Mw of electricity.
• The total coal use for power generation stood at 19 million tonne per annum. It is to increase steadily and APEC in 2006 forecast that Malaysia would require around 34 tonne of coal by 2030.
• Malaysia coal are imported from Australia, Indonesia, South Africa and now also looking at China and Vietnam.

In shipping perspective, I can say potentially coal industry can benefit ship owner in Malaysia if we can take part in coal transportation. There are such players but their numbers are still small because our ship owner only interested to venture into less risk less headache industry such as O&G where vessel secured on time charter contract. I confidently can see that this industry will be here and stay for a very very long period. Let see how I can move from here!

Malaysia Shipping Report

Saturday, May 14, 2011- I am browsing the net looking for some shipping data. I came across below articles and would like to share with my blog reader.

PRLog (Press Release) – Nov 08, 2010 – At the end of August 2010, it was reported that Singaporean shipping company Marco Polo Marine (MPM) was further expanding its coal shipping role in South East Asia having signed a US$15.5mn deal to transport Indonesian coal to Malaysia. South East Asian nations are diversifying their power sectors, with many increasing their use of coal, which is fuelling demand for the shipment of this commodity. The contract would see the company shipping coal from Indonesia to West Malaysia from September 2010 for a two-year period. The new contract further highlights MPM's role in the South East Asia dry bulk sector, with the company building up its fleet of tugs and barges in order to ship coal throughout the region. We believe that MPM's latest contract, to transport coal between Indonesia and Malaysia, is part of Malaysia's strategy to diversify its power sector. According to BMI power data, gas dominates Malaysia's power sector. Our forecasts for 2010 suggest that gas will account for 59% of the country's electricity generation. Malaysia, however, has been decreasing its reliance on gas for its electricity supply -- in 2000, gas was contributing 76.2% to the country's electricity generation, and coal has been filling the gap. In 2010 we forecast that coal will contribute 28.1% to the nation's electricity generation, up from 9.1% in 2000. BMI expects coal shipments to continue to play a major role in South East Asia's dry bulk shipping sector as nations try to diversify their power sectors away from a reliance on one form of energy.

Going into 2011, BMI took the view that the Malaysian business cycle -- and consequently its effects on the local ports and shipping sector -- will be more pronounced than we had originally expected. On the upside, and based on a strong export performance, we have consistently raised our estimate for GDP growth in 2010, to 6.4% (was 4.9%). On the downside, however, on the back of concerns about a 'double dip' global recession in 2011, and specifically a slowdown in China, we have reduced the forecast for Malaysia in that year to 3.4%. Looking forward across a four-year forecast horizon, we still expect GDP to grow by a respectable annual average of 4.7%. Political factors may affect this outlook, however. Throughout 2010, the opposition Democratic Action party (DAP) has shown growing strength in a series of by-elections and appears to be mounting a serious challenge to the ruling Barisan Nasional (BN). In BMI's view BN may lose its two thirds congressional majority in the next general elections, which are due to be held by 2013 at the latest. Therefore political risk could be on the rise.

After a very vigorous recovery in 2010, with throughput rising by 24.7%, for 2011 we expect a slowdown in cargo volume growth at Port of Klang (POK). We are projecting much more moderate growth of 5.4% to 180.99mn tonnes. These two years of expansion will have comfortably wiped out the losses of globalrecession dominated 2009, when POK volume dropped by 9.6%. At the Port of Tanjung Pelepas (POTP), we see 2011's volume gaining by 5.8% to 118.6mn tonnes, a slowdown on 2010's 17.9% gain.

The Port of Klang is expected to see 5.8% container handling growth to 9.709mn TEUs in 2011, a marked slowdown on the 25.5% growth experienced in 2009. The Port of Tanjung Pelepas will see growth of 6.2% to 6.891mn TEUs in 2011.

In real terms, we expect Malaysia's total trade (imports + exports) to grow by 3.0% in 2011, a slowdown on the 12.5% leap forward achieved in 2010. During the recession of 2009 total trade had contracted by 11.3% in real terms. In nominal terms, in 2011, we predict that imports will edge forward by 4.3% to US$239.6bn, while exports will gain slightly less, by 4.0% to US$262.7bn. Malaysia will therefore register a moderately-sized trade surplus: we expect it to continue doing so over the next five years, although it will narrow in size given the faster relative growth of imports.