KUALA LUMPUR: Malaysian oil and gas service and equipment (OGSE) providers, which have long relied on contracts from Petroliam Nasional Bhd (PETRONAS), are being asked to venture abroad and “compete with the top”.
They should also venture into renewable energy and relook their business models or risk falling behind, said Economy Minister Datuk Seri Rafizi Ramli.
In a mid-term review of the sector’s blueprint, he noted that the OGSE industry is at a critical juncture, facing competing pressures of financial viability, geopolitics and energy transition.
Hence, he is asking OGSE companies not to be complacent.
“We have paid the price in the last 10 to 15 years for being complacent, especially for OGSE players, where complacency is death,” Rafizi said.
“That’s why my plea to you is that we really need to take the bull by the horns and accept that we can no longer be stuck in our old ways.”
The industry, comprising 2,894 players, contributed RM39.4bil to gross domestic product in 2023 or 2.2% of the national total and employed 123,288 individuals, with total salaries and wages of RM6.8bil.
Despite this, Rafizi highlighted that the OGSE sector’s approved investments dropped from RM3.3bil in 2019 to RM363mil in 2022 – an 89% decline.
To create a resilient OGSE industry, he outlined two key strategies – expanding into renewable energy and scaling up local firms into regional champions.
Rafizi stressed that OGSE firms have the skills to move beyond traditional oil and gas work.
“They can install solar, manufacture batteries, fabricate machines – everything needed for the energy transition,” he said.
“This is a win-win. OGSE players can diversify their revenue and Malaysia can accelerate its energy transition without building manpower and talent from scratch.”
He added that since the launch of the National Energy Transition Roadmap, foreign interest in the country’s sustainable energy sector – particularly from Japan –has surged.
However, he noted that there is a supply mismatch.
“We don’t have enough local players positioned to capture these opportunities,” he said.
“To bridge this gap, under the mid-term review, we will aggressively push our ‘growth beyond OGSE’ flagship. By 2030, we aim to have 10 OGSE companies successfully expanding into the renewable energy space,” Rafizi said.
The second priority, he said, is to scale up OGSE players to compete regionally.
“Our industry is fragmented – 80% of OGSE firms are small and medium enterprises (SMEs) that lack the economies of scale and network to expand overseas,” he said.
He highlighted that leading OGSE firms in South-East Asia have strong global presence and it directly correlates with higher revenues.
“To replicate this, we have curated the regional champions programme, aiming to create five additional regional champions by 2030,” he said.
To qualify, companies must have at least RM50mil in annual revenue, a positive pre-tax profit record over five years, and have no legal issues, Rafizi said.
“The idea is to identify opportunities and support dealmaking – whether through mergers and acquisitions, management buyouts, or joint ventures,” he explained, adding that the goal is to boost export revenues to at least 50%.
Under these initiatives, he said, the Malaysia Petroleum Resources Corp (MPRC) will act as a commercial adviser while the government provides policy support.
“We need industry players to roll up their sleeves – facilitate deals, open doors beyond PETRONAS and Malaysia,” he said.
“It is only with a government network that Malaysia can go knocking on the doors of the biggest and best multinational companies.”
Against this backdrop, four early adopters – Cekap Teknikal Services Sdn Bhd, EPIC Bhd, Emerging EPC Sdn Bhd and Essem Group Sdn Bhd, have submitted letters of intent to MPRC, marking their commitment to expanding beyond the country under the regional champions programme.
Rafizi said the government’s focus is not on direct financial aid but on strategic collaboration to help OGSE firms break into international markets.
“We are not looking at financial aid because companies that want to do this must have the appetite for expansion and the ability to withstand the initial cash burn,” he said.
However, he acknowledged that venturing abroad independently carries high risks, especially for SMEs and this is where MPRC plays a crucial role.
“To be fair to them, if they were to do it on their own and just burn their cash, the risk would be too much. That’s why the MPRC will work hand in hand with them, using the weight of the government to open doors and slot them into overseas opportunities,” he explained.
Meanwhile, MPRC president and chief executive officer Mohd Yazid Ja’afar noted that the OGSE industry is in a rebuilding phase following the 2014 oil price crash and the Covid-19 pandemic.
At the same time, he said it faces both opportunities and challenges driven by the energy transition, evolving domestic and international policies, free trade agreements and increasing sustainability requirements.
“These factors signalled the need to review the current pathway of the OGSE industry to ensure it remains aligned with national priorities and successfully adapts to the changing oil and gas and energy landscape,” he said.
However, as the industry reaches the midpoint of the National OGSE Industry Blueprint launched in April 2021, he emphasised that the sector’s core objectives remain unchanged – addressing structural challenges by improving access to finance, bridging the talent gap, accelerating research and development (R&D) and technology adoption, reducing industry fragmentation and expanding the international presence of OGSE companies.
MPRC senior vice-president and head of operations Mustafa Akbar Reza, who oversees the implementation of the blueprint, said the national OGSE industry blueprint has been refreshed with 26 new initiatives under the mid-term review, including seven flagship initiatives aimed at strengthening the sector.
He highlighted that “strategic partnerships” will be a game changer in the industry’s growth, signaling a shift away from consolidation toward meaningful collaborations.
By fostering these partnerships, he said the goal is to help OGSE firms scale up, tap into new markets and enhance their competitiveness on a global stage.
Mustafa Akbar outlined the revised targets under the blueprint, which include increasing the OGSE industry’s gross domestic product contribution to RM50bil and developing at least 20 companies valued at RM1bil or more.
Additionally, he said the industry aims to boost R&D expenditure to at least 5% of total revenue and ensure that 50% of SMEs report sustainability practices.
