Industry Structure

• The overall oil and gas industry is segmented into upstream, midstream and downstream sectors.

• Supporting services comprise a diverse range of services that facilitate operations and to support oil and gas companies and contractors in the upstream, mid-stream and downstream sectors of the oil and gas industry. They include, among many others, drilling, geological studies, extraction, fabrication, marine transportation, hook-up and commissioning services, platform maintenance and manpower supply.

• The marine transportation and support services cover the transportation of personnel, equipment and supplies as well as extracted oil and gas, and refined petroleum products over water. Marine transportation and support services are used in the upstream, midstream and downstream sectors of the oil and gas industry.

• EA Technique Group operates within the marine transportation and support services segment where their customers operate primarily in the upstream and downstream segments of the oil and gas industry. This includes the following:

• The provision of product tankers to transport refined petroleum products.

• The provision of offshore support vessels (OSV) through the use of fast crew boat for the transportation of personnel.

• The provision of port marine services through the use of tugboats for towing and mooring of vessels and other floating structures within port areas.

• Within the oil and gas industry, a small proportion of the Group's activities is also involved in the provision of floating storage unit (FSU), and liquefied petroleum gas (LPG) tankers.

Overview

• Marine transportation for the oil and gas industry is primarily focussed on tankers and offshore support vessels (OSV).

• Tankers are used for transportation of oil and gas from one location to another.

• OSV on the other hand is used for the transportation of goods and people, as well as to support a wide range of offshore activities including the following:

• towage, positioning and mooring of structures and barges;

• installation, maintenance and repair of structures including rigs, platforms, FPSO, mooring systems, pipelines and subsea structures;

• hook-up and commissioning;

• operation of exploration, appraisal, development and production facilities;

• seismic surveys and subsea works.

• Other marine vessels whose primary functions are not transportation include floating storage unit (FSU), floating production storage and offloading (FPSO), mobile offshore production unit (MOPU) and drillship.

Product Tankers

• Typically, tankers are used to transport bulk oil and gas comprising crude oil, refined petroleum products, Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG).



• There are essentially two types of product tankers:

• Clean petroleum product (CPP) tankers are designed to carry refined petroleum products such as jet fuel, gasoline and naphtha.

• Dirty petroleum product (DPP) tankers refer to vessels that are designed to carry heavy fuel oils or sometimes also crude oil.

Offshore Support Vessels

• OSV play an important role in supporting offshore oil and gas activities in upstream exploration, appraisal, development and production activities, as well as midstream activity of pipeline transportation of hydrocarbons. The types of OSV commonly used are listed in the diagram below:



Note: Crew boats are used by E.A. Technique Group. Tugboats are used by E.A. Technique Group to provide port marine services.

Port Marine Services

• Port marine services are conducted to ensure safe and expeditious flow of traffic as vessels approached the berth. Towage, pilotage and mooring services are the main marine services conducted at ports. Harbour tugs are used for the provision of towing services at port. They are used to move vessels within the port areas due to crowding and the shallower water depth in port areas.

Oil and Gas Reserves and Production

• Growth in hydrocarbon reserves and production indicates a continuing effort in carrying out exploration, appraisal, development and production activities, which should provide opportunities for offshore oil and gas supporting service providers including the marine transportation and support services segment.

Oil and Gas Reserves in Malaysia
	1 Jan 2010	1 Jan 2011	1 Jan 2012	1 Jan 2013	1 Jan 2014	AAGR 2010-14 (%)
Total Reserves	20.6	20.9	21.3^	22.2^	22.6	2.4
- Crude Oil and Condensates	5.8	5.9	6.0	5.9	5.8	0.0
- Natural Gas	14.8	15.0	15.4	16.4	16.8	2.8

^ Total does not add-up due to rounding;
Note:	All units in billion barrels of oil equivalent (BOE), except for percentages.
(Source: PETRONAS)

 

Investment in Exploration, Development and Production of Oil and Gas

• The level of investment made in the upstream sector is one of the factors used to assess the demand for, among others, the marine transportation and support services sectors. This is because part of the investment is channelled to the engagement of services rendered by supporting services providers.

* Based on 9 months period;
Note:	AAGR between March 2007 and March 2011.
(Source: PETRONAS)

 

Oil and Gas Fields in Malaysia

• The number of oil and gas fields in Malaysia has a direct bearing on demand for marine transportation and support services. A high number of operating oil and gas fields would mean a sustainable level of hydrocarbons would need to be refined and processed. This would create demand for refined products to be transported and shipped to various locations. Similarly, OSV are required to service the needs of rigs, platforms and other offshore structures, therefore any increases in operational oil and gas fields would mean a higher demand for OSV.

Note:	AAGR between March 2007 and March 2011.
(Source: PETRONAS)

 

Recent Oil and Gas Discoveries in Malaysia

• Recent discoveries of oil and gas in Malaysia are positive developments for the industry. Development work to bring these fields into production would result in an increase in demand for, among others, marine transportation and support services.

Production Sharing Contract (PSC) and Risk Service Contract (RSC)

• PSC and RSC contractors and operators are target customers of offshore oil and gas supporting services providers. As such, a growth in the number of PSC and RSC in operation and the award of new PSC and RSC indicates an expanding potential customer base for offshore oil and gas supporting services providers.

Exports of Oil and Gas Products

• External demand, via exports, for oil and gas products would also have an impact on the demand for upstream activities, which in turn would affect the demand for offshore oil and gas supporting services.

Export Value of Selected Oil and Gas Products
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
Petroleum Crude Oils and Crude Oils Obtained from Bituminous Minerals
Export Value	25.6	31.0	33.4	32.3	32.2	5.9
Refined Petroleum Products
Export Value	19.4	25.5	33.0	47.6	61.3	33.3
Residual Petroleum Products & Related Materials
Export Value	1.0	1.6	1.3	2.2	2.1	20.7
Natural Gas (Whether or Not Liquefied)
Export Value	31.2	38.7	52.0	55.5	59.2	17.4
Liquefied Propane and Butane
Export Value	1.8	1.7	2.3	1.2	0.9	-16.0
Petroleum Gases & Other Gaseous Hydrocarbons
Export Value	2.7	3.2	3.5	3.8	4.1	11.3

Note:	All units in RM billion except percentages;
	Propane and butane are LPG.
(Source: Department of Statistics Malaysia)

Number of Selected Ships Registered in Malaysia

• Growth in the number of vessels registered in Malaysia provides an indication on the demand and supply for vessel chartering services.

Number of Selected Vessels Registered in Malaysia
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
Oil Tankers (1)	205	193	209	215	206	0.1
LNG and LPG Carriers	47	45	43	41	40	-4.0
Chemical / Product Tankers	52	51	66	63	53	0.5
OSV	218	207	251	249	256	4.1
Tugboats	966	904	1,042	1,077	1,058	2.3

Note:

(1)	While the majority are for crude oil tankers, some product tankers are also registered under this category
(Source: Ministry of Transport Malaysia)

 

Domestic Shipping Licence

• Licences from the Domestic Shipping Licensing Board are required for the shipping of goods, unless exempted. Listed below are statistics on the number of domestic shipping licences issued to Malaysian and foreign registered vessels for selected types of cargo that are common in the oil and gas industry:

Licences Issued by the Domestic Shipping Licensing Board for Selected Types of Cargo to Malaysian and Foreign Registered Vessels
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
Petroleum / Diesel
Malaysian Registered	195	200	214	211	204	1.1
Foreign Registered	370	470	542	686	731	18.6
Towing Services
Malaysian Registered	507	547	587	622	634	5.7
Foreign Registered	590	578	496	601	561	-1.3
Exploration Work Equipment
Malaysian Registered	100	153	161	172	191	17.6
Foreign Registered	417	557	585	902	908	21.5

(Source: Ministry of Transport Malaysia)

• Between 2009 and 2013, the number of licences issued to Malaysian and foreign registered vessels for the selected types of cargo above, with the exception of foreign registered towing services vessels, has registered growth in terms of AAGR. The consistent growth in the number of domestic shipping licences indicates a robust marine transportation segment servicing the oil and gas industry in Malaysia.

 

Ships Reporting under STRAITREP

• The Mandatory Ship Reporting System in the Straits of Malacca and Singapore (STRAITREP) was proposed by Indonesia, Malaysia and Singapore. Masters of vessels passing by the Straits of Malacca and Singapore are required to report to the relevant authorities.

Selected Ships Reporting under STRAITREP
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
VLCC / Deep Draft	4,221	4,333	4,539	4,732	4,825	3.4
Tanker Vessel	16,398	16,247	16,233	17,345	18,296	2.8
LNG and LPG Carrier	3,330	3,579	3,830	4,014	4,248	6.3
Tug / Tow	598	545	414	529	563	-0.8

(Source: Marine Department of Malaysia)

• Between 2009 and 2013, the number of selected ships reporting under STRAITREP has increased, with the exception of tug/tow boat. The continuing growth indicates increasing demand for such ships in the Straits of Malacca and Singapore.

Liquid Bulk Cargo Throughput at Malaysian Ports

• Liquid bulk cargo includes crude oil, petroleum (including clean and dirty products), LNG, LPG, crude palm oil, palm oil-based products, and chemicals in liquid form. As such, the following statistics on liquid bulk cargo throughput Malaysian ports are used to assess the demand dependencies for liquid bulk carriers such as petroleum tankers (including CPP tankers) and LPG tankers, as well as provision of port marine services focusing on towage of vessels in and out of ports.

Liquid Bulk Cargo Throughput at Malaysian Ports
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
Foreign Trade	55.1	58.4	60.4	46.9	48.8	-3.0
Local Trade	17.3	17.1	19.0	19.6	20.3	4.1

Note:	All units are in million freight weight tonnes (FWT) except percentages.
(Source: Ministry of Transport Malaysia)

Selected Oil and Gas Products Loaded and Unloaded at Malaysian Ports

• The loading and unloading of petroleum and fuel oil provides an indication of the demand for product tankers for transportation purposes as well as provision of port marine services focusing on towage of vessels in and out of ports.

Petroleum and Fuel Oil Loaded and Unloaded at Malaysian Ports
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
Petroleum and Fuel Oil
Loaded	11.7	11.4	10.5	10.2	11.3	-0.9
unloaded	18.0	15.4	17.9	19.3	19.1	1.5
Total	29.7	26.8	28.4	29.5	30.4	0.6

Note:	All units are in million FWT except percentages.
(Source: Ministry of Transport Malaysia)

Number of Ships Calling by Ports

• E.A. Technique Group's port marine services, particularly towing services, are focused at the following ports in Malaysia:

• Northport in Klang, Selangor, which is a bulk and containerised goods port;

• Sungai Udang Port in Malacca, which is mainly an oil and gas port;

• Kertih Port in Terengganu, which is mainly an oil and gas terminal.

• The number of ships calling in various ports in Malaysia will provide an indication on the demand for port marine services particularly for towage.

Number of Ships Calling by Selected Ports
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
All Ports in Malaysia	60,393	63,942	64,607	66,848	62,669	0.9
Klang	15,356	17,910	18,117	17,808	16,724	2.2

Notes:

(1)	Northport is categorised under Klang Port which also include Westport
(2)	There are no separate statistics for Sungai Udang and Kertih Port as they are private ports
(Source: Ministry of Transport Malaysia)

Oil Refineries in Malaysia

• Growth in the capacity of oil refineries in Malaysia will have a direct and positive flow-on effect on demand for product tankers.

• Growth in the capacity of oil refineries in Malaysia is mainly derived from Refinery and Petrochemical Integrated Development (RAPID) developed by PETRONAS, is part of the Pengerang Integrated Petroleum Complex (PIPC). Upon commencement of operation, capacity of RAPID will represent 56% of existing capacity. As such, RAPID coming on-stream would be the main drivers of growth.

Production of Refined Petroleum Products

• The level and growth of the output of refined petroleum products have a direct impact on the demand for product and LPG tankers as they all will need to be transported to various ports in Malaysia as well as overseas. The overall growth in sales value of manufactured refined petroleum products between 2009 and 2013 would provide a strong support base for product and LPG tankers.

(Source: Department of Statistics Malaysia)

Consumption Of Automotive Fuel

• As E.A. Technique Group's product tanker operations are focused on the carriage of refined petroleum products including automotive fuel in Malaysia, demand for their product tankers is dependent on the consumption of automotive fuel in Malaysia.

Retail Sales of Automotive Fuel
	2009	2010	2011	2012	2013	AAGR 2009-13 (%)
Sales Value	16.4	17.0	19.9	21.5	23.6	9.6

Note:	All units in RM billion except percentages
(Source: Department of Statistics Malaysia)

• Demand for OSV is primarily dependent on the level of activities associated with the offshore upstream and midstream sectors of the oil and gas industry, which includes exploration, appraisal, development, product and pipelines. Such demand dependencies would include, among others:

• Oil and gas reserves and production;

• Investment in exploration, development and production;

• Operational oil and gas fields;

• Oil and gas discoveries;

• Production sharing and risk service contracts;

• Exports of oil and gas products.

• As Malaysia's oil and gas industry is mainly offshore, the above demand dependency factors would have direct relevance to the OSV sector.

Market Size

a) Product Tankers

• As at October 2014, the market size for product tankers registered in Malaysia that carry third party products was estimated at 65 product tankers (Source: Vital Factor Consulting).

b) Towing Services

• In 2013, the market size for towing services in Malaysia based on number of licences issued by Domestic Shipping Licensing Board for the provision of towing services was approximately 1,200 licences (Source: Ministry of Transport Malaysia).

Market Share

a) Product Tankers

• As at October 2014, E.A. Technique Group had an estimated market share of 8% of product tankers registered in Malaysia based on the number of vessels owned and operated by the Group (Source: Vital Factor Consulting).

• As at October 2014, E.A. Technique Group's market share based on contracted product tankers was estimated at 8% (Source: Vital Factor Consulting).

• As at October 2014, there were an estimated 25 operators of locally registered product tankers. The top four operators of locally registered product tankers accounted for approximately half the market share of product tankers in Malaysia based on the number of product tankers registered in Malaysia, of which E.A. Technique Group is one of these top four operators (Source: Vital Factor Consulting).

b) Towing Services

• As at October 2014, E.A. Technique Group had an estimated market share of 2% of towing services in Malaysia based on the number of tugboats and mooring boats used for towing, that are owned and operated by the Group (Source: Vital Factor Consulting).

The prospects and outlook of the marine transportation and support services in the longer term are expected to be favourable based on the following factors:

External Factors

• Global Economic Conditions

• Market Price of Petroleum

• Future Petroleum Prices

Internal Factors

• Production of Oil and Gas Products

• Exploration and Production Spending

• Economic Transformation Programme (ETP)

• Development of Oil and Gas Hub in Southern Johor

• Global Economic Slowdown

• Pirate Attacks

• Oil Spill from Tankers

• Sustained Fall in Market Price of Hydrocarbons

• Depletion of Hydrocarbon Reserves

• Liberalisation of the Cabotage Policy

• Implementation of Goods and Services Tax

Providers of marine transportation and support services operate within a competitive environment where there are a large number of operators. While there are many factors affecting business operations, some factors that are critical to the long-term sustainability and growth of businesses within the segment are as follows:

• PETRONAS Licensing and Registration

• Compliance with International Standards

• Good Health, Safety and Environment (HSE) Management Track Record

• Effective Management of Fleet of Vessels

• Established Track Record and Market Reputation

• Strong Financial Position